ADP failure refund for takeover plan

[leighl]

Can someone give me more details about calculating refunds for a takeover plan when the prior provider will not provide earnings information for HCE subject to refund?  I know there is a provision that the refunds can be calculated on the time the assets were deposited to the new recordkeeper and projected to an annual rate.  I'm just having trouble finding the source.  Thank you.

[BG5150]

The refunds need to be determined using a reasonable approach.  If you cannot get the earnings for a period, I would think its reasonable to go about it the way you suggest.

Do you have an EOY report for the previous year?  The HCE will have a balance.  The HCE will have a converted Balance.  The HCE has a yearly contribution.  Subtract what was put in with new r/k and you have what he put in before.  (This ignores any BOY rec'ables).  Earnings are Converted balance (-) contribs (-) BOY.

The prior r/k would HAVE to provide information for the plan to file its 5500.  That would include a detailed report of the plans holdings by account.  And they have to do it within a reasonable amount of time after the end of the PY.  Maybe two months?  Month and a half?  I forget the actual timing, but there is a date this must be provided by.

 

[leighl]

I am actually talking about instances when the asset information would be provided after the March 15th deadline, so earnings would have to be calculated somehow in order to avoid the penalty tax.  I actually thought there was something in the regulations allowing for projection of earnings.  You are correct that we would have the conversion assets, but we would not necessarily have the beginning year/end of prior year asset balance by participant.

[BG5150]

Shouldn't your client have a 2015 report showing those closing balances?

[BG5150]

If not, come up with something reasonable and go from there.  What's teh worst that can happen?  You are off by a little bit and you have to do another, tiny refund with a negligible 5330 penalty.

I read in the 5500 "green book" (Wegesin?) that the trust has only a limited amount of time to furnish all the records to do a 5500.  We are probably past that.  I could make a case that if there are additional penalties because of incorrect earnings,t he old r/k should pay them because they did not timely provide the reports.

[ESOP Guy]

So are you saying the HCE doesn't have his statements from 2016? (Or 2015 it isn't clear which year you are actually talking about)  But if you had those you can compute the earnings it seems like.