5500 Filing on new plan

[Guest MMorgan]

We established a new profit sharing plan for calendar year '97. Initially, the client was going to fund the plan but has since changed his mind. Since there are no assets, do we need to file a 5500-C for the '97 year? Should we file it will all zero's?

Thanks for your help.

[Guest Ray Williams]

What type of PLan? Is there a minimun funding standard? Does the client intend to fund the Plan in the future? Did you obtain a letter of determination from the IRS? Did you obtain an EIN for the trust? Any of the above may require a 5500 filing. You should check with the ERISA attorney for the client and have him/her make the final determination.

[LCARUSI]

I believe you have to file based on the following excerpt from the filing instructions for the 5500-5500C/R:

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Who must file?

Any administrator or sponsor of an employee benefit plan subject to ERISA must file information about each such plan every year (Code section 6058 and ERISA sections 104 and 4065).

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If you have a 1997 plan year, you have to file.

[Guest FredReilly]

There is a Revenue Ruling which holds that no plan exists where it is not funded by the time for filing the sponsor's income tax return (including extensions). This ruling is the one that indicates that a plan will not fail to be created merely due to requirement under state law that the trust corpus be funded prior to year end. I believe that no Form 5500 would be required. The previous postings, however, make a good point that if a Determination Letter was issued or if EIN's were secured for the trust, the IRS will be looking for a return and possibly will generate notices requesting same. You would need to be careful to make a timely response to avoid a penalty assessment. You would also have a problem filing a return with all zeroes. In my experience this would also be rejected since the IRS considers the lack of assets to indicate that the plan is not in existence.

Sorry, I don't have the cite on the Ruling for you. I will post it if I get a chance to look it up in the next couple of days.

[imchipbrown]

I had a client insist that she wanted a 401(k) for her employees. We installed it in year one, and no one deferred. To be on the safe side, I filed a 5500-C with all zeros.

Next year, people deferred. We filed a 5500-R. IRS came back stating that they wanted a 5500-C, since it was the first year! So, I'd file this year, but file a 5500-C next year. That is, unless you've missed your filing deadline already. Then you have to argue "No corpus, no plan".