Plan sponsor decides to rollover the assets with no paperwork

Hi

Helping a friend with a problem on a DB plan for a client of theirs.

One lifer DBP, slightly overfunded.

Decides to rollover all the assets into an IRA with no paperwork for termination and distribution election form. Not married.

Slightly overfunded as well.

How can this be corrected, assuming the plan sponsor wants out help? It is over 2.5M in assets, may be 50k or so overfunded which should have been rolled over into the existing DC plan under QRP rules.

I have not dealt with this in many years (sometimes luck can be on our side, rarely in this biz).

Over or under the 415 limit? If under it's easier as you can allocate the excess assets in the termination paperwork if the plan already doesn't do it. If over the 415 limit, you have a bigger problem with the assets rolled to the IRA and another operational error from the Plan.

Pretty sure it can be corrected by the proper amendments and termination documentation as well as filling out the distribution paperwork after the fact. 

What I'm not sure about is if this can be self corrected or needs VCP.

Over 415. I am trying to find out if could be SCP.

Not sure when the rollover was done but I am thinking, if within 60 days, roll back to the plan account and do the proper termination. I think this is kosher.

But if over 60 days, not sure what can be done and how.

Does the 60 days matter?  This would be correction of an ineligible rollover contribution, so he has until next tax deadline to get it out with earnings to avoid the 6%.

1 hour ago, Bri said:

 

I think it may matter as the correction needs to be made asap especially with the 415 violation but again I do not know, was thinking out loud. Waiting until the year after with an event that may disqualify the plan is a very risky proposition. in my opinion. Get it fixed asap would be my approach/recommendation.

Still no clear indication on what to do.

I am of course suggesting an ERISA attorney at this time, given the 2m+ assets but also curious myself to see if anyone had to deal with this before and had a good and quick solution to this issue.

I agree with the ERISA counsel suggestion. 

I think a VCP with the following "should" be acceptable but have not tried -

1 - Amend Plan to properly terminate and reallocate up to 415 limit if not already in document.

2 - Get proper distribution and election paperwork signed off on.

3 - Return assets (and earnings) in excess of 415 limit from IRA to Plan as excess IRA contribution.

4 - Deal with excess assets above 415 though some combination of fees (if allowable), reversion, and/or QPR.