De minimis balances for final 5500

2 separate one-person calendar year plans terminated and distributed assets in 2025.

Both plans received interest/dividends at the last moment that were not able to be distributed by 12/31/25 and ended up with balances.

• Plan 1 was $0.50.
• Plan 2 was $3,500.00.

Both plans managed to zero out by 1/31/26.

Both plans have asked to incorporate those amounts into 2025 distributions with the following implications:

• Form 1099-R's would be amended
• 2025 Form 5500 would be Final

I think we can live with doing that for Plan 1, but Plan 2 is more questionable. We are more comfortable with a 2026 Final 5500 but the client was promised (by the Advisor) that would not be necessary.

Just looking for thoughts on whether there is a de minimis for this situation of when to combine it for prior year?

The Instructions for a Form 5500 report generally allow a plan’s administrator (see I.R.C. § 414(g)) to report financial information on a cash, modified-cash, or accrual basis of accounting for recognition of transactions (if the administrator uses one method consistently).

If an administrator reports with accruals, it might recognize a dividend receivable (for the amount, if any, not paid to the plan’s trust by December 31) and a distribution payable as at December 31, 2025 (for the follow-on increment of the final distribution not paid until January).

Consider that a plan’s administrator, not a nondiscretionary service provider, decides the method of accounting.

Likewise, the administrator decides how accounting principles apply to a set of facts.

Even if an administrator made all preceding years’ reports on the cash-receipts-and-disbursements method of accounting, an administrator in its discretion might find that accrual accounting fits for an intended plan-termination year and facts like those you describe.

If an administrator lacks enough knowledge about generally accepted accounting principles, it might seek a certified public accountant’s advice (even if that professional will not audit, review, compile, or assemble any financial statements or other report).

This is not advice to anyone.

Peter lays out the basis for arguing that the plans were closed out in 2025, and makes it clear that this is solely the plan's fiduciaries' (read client's) decision.

I expect most practitioners would say don't sweat the $0.50 for Plan 1 and writing off the $0.50 with no adjustment to the 1099R, most would say it is really pushing it where the amount is $3,500 that was not closed out until 31 days after the end of the plan year. 

From the perspective of a service provider, I would explain to the client that it is their decision to make and their fiduciary responsibility and accountability for the consequences of their decision (unless you are a 3(16) provider). I would let the client know I disagree with the Advisor and I only would be willing to prepare a final filing for 2026 along with a 1099R for the residual payment.  If the client chooses to follow the Advisor's "promise", then the Advisor can help the client find someone who is willing to close out everything for 2025.

The plans are closing so there is no future work for you on those plans.  If your relationship with the client is ongoing, keep in mind that if the client chooses to follow the Advisor's advice over yours, that says something about the relative value of your relationship to the client.  This is also true about any relationship you may have with the Advisor.

A few further observations:

A service provider’s agreement might provide the accounting method the service provider uses in assembling information into a draft Form 5500 report for the plan administrator’s review. If the agreement specifies cash accounting, a service provider might decline to provide service on a different method. Or, a service provider might offer accrual accounting for an extra fee.

Paul I describes a mainstream outlook about a relationship between an adviser and an advisee. But some professionals have a more nuanced outlook, recognizing that one’s client might have its own sensible reason for not following advice. Some don’t object to a client’s informed choice, if the resulting act or failure to act is not a crime.

If a service provider’s relationship with a referral source is more important than the relationship with the plan’s sponsor/administrator, a service provider might suggest alternative accounting treatments as a way to appease a referral source.

A payer’s Form 1099-R report is on what was paid in the year reported on. Even if Plan 2’s administrator assumes a distribution payable in Plan 2’s Form 5500 report on 2025, Plan 2’s payer would report the $3,500.00 on a 2026 Form 1099-R report.

This is not advice to anyone.