Returned Checks for Terminated Plan (Re: Form 5500)

[metsfan026]

We have a Cash Balance Plan that terminated in 2023.  The bulk of the distributions were completed by 12/31/23, with a few finalized in 2024.

All of the 2023 distributions were reported on the 2023 Form 5500, but it turns out 3 checks get returned as undeposited and the money was back in the account as of 12/31/24 (it is the only money that is sitting there, totaling under $3k).  So how do we handle that in terms of the Form 5500:

1. Do we have to show it on the Form 5500?  The participants were sent 1099-R for the distributions in 2024 (for 2023) and it was already reported as distributed on the Form 5500?
2. If we do have to report it on the Form 5500, how is it shown as coming back into the Plan?  It's not really a contribution...
3. If a Form 5500 is required, is a Schedule SB also required?  Or is it just the SF at this point?

Thanks everyone.  This isn't a situation I've run into before.  The Plan is to have the money rolled into an IRA on the participant's behalf by 12/31/25, but trying to handle the '24 Form 5500 first.

[Lou S.]

I assume they were under $1,000 cash outs or they would have been rolled to IRA in the first place. I probably would not have put the money back in the plan but since 1099-Rs were issued are you now creating an after TAX basis in the plan for these participants? What happened with the tax withholding?

If you have a trust for 2025, presumably you have a filing requirement for 2025 and 2024 would not be your final return. If it's terminated in a prior year, it's not subject to the minimum funding rules and no SB would would be required.

And chance you can show it as a payable on the 2024 return and open savings accounts for them based on the 2024 1099-Rs or issue them cashiers check assuming you have good address you can send by registered mail?

[metsfan026]

9 minutes ago, Lou S. said:

I assume they were under $1,000 cash outs or they would have been rolled to IRA in the first place. I probably would not have put the money back in the plan but since 1099-Rs were issued are you now creating an after TAX basis in the plan for these participants? What happened with the tax withholding?

If you have a trust for 2025, presumably you have a filing requirement for 2025 and 2024 would not be your final return. If it's terminated in a prior year, it's not subject to the minimum funding rules and no SB would would be required.

And chance you can show it as a payable on the 2024 return and open savings accounts for them based on the 2024 1099-Rs or issue them cashiers check assuming you have good address you can send by registered mail?

 

 

For two it was under $1,000.  One person the checks went to the participant, as requested, they just never deposited it.

Yes, there is going to be a 2025 requirement, since this money is still there.  How do we show this money coming back into the Plan?  Or if this was the only money left at the end of '24 is there still a filing requirement?

So if the Plan was officially terminated in '23, for '24 there's no minimum funding requirement and therefore there is no 2024 Schedule SB required?    I just wanted to be sure.  So this question would be no (I just want to make sure):

[Lou S.]

https://www.irs.gov/pub/irs-drop/rr-25-15.pdf

The IRS issue guidance on uncashed checks in Revenue Ruling 25-2015 that may be helpful to you.

You can ask the actuary about question 11, but my understanding is that question would be answered as "no" and you would not attach a Schedule SB for the year following the termination where only payouts are being made.

 

[TheBoxMan]

Is this cash balance plan covered by the PBGC? If so, you cannot roll the money into an IRA for these participants. If this is a Standard Termination, then the money for the unpaid participants needs to be sent to the PBGC Missing Participant Program.