New 401(k) Plan for Old Plan after asset transfer

Potential client started up a typical 401(k) plan with safe-harbor match and profit sharing as of 1/1/2012. Plan number: 001.

In 2015 they moved their money to John Hancock and got a new document with an effective date of 1/1/15 and when 5500-SF forms were done for 2015 there was a final one for 2015 under 001 showing assets transferred to a new plan (002) and a first one for 002. Plan 001 listed an asset transfer and not payouts and question 13a on whether there was a resolution to terminate the plan was answered 'no'.

Questions:

1) Is this proper?

2) Would there be an issue with the mandatory waiting period after terminating a 401(k) plan?

3) How would you proceed? Amend 2015 filing for 001 and continue filing under 001 or go ahead with 2016 filing under 002?

I'm not sure why some people believe changing service providers is the termination of a "plan" and setting up a new one - which is what they did here.  The plan is plan 001.  Using 002 is probably incorrect.  Labeling the change as an "asset out" and an "asset in" combination was wrong.  I'd amend and go forth with 001 and the *only* plan....

If there is no evidence of any intent to terminate 001, or to establish a new plan and merge 001 into 002, I would amend the filings which are incorrect.  Should check the new document, however, and make sure it doesn't purport to identify the plan as 002, but even if that happened I would fix that rather than concede that there was a new plan established.

I wouldn't be shocked if you don't start getting letters asking why you stopped filing the 002 Form 5500 however, 

The people who "believe" this are those who know just enough about ERISA and plan administration to be dangerous, but have not been trained properly.

15 minutes ago, ESOP Guy said:

I wouldn't be shocked if you don't start getting letters asking why you stopped filing the 002 Form 5500 however, 

That seems inevitable for 002 - possibly when IRS allows time to build up penalties - so what about amending the 2015 filing for 002 with all numbers as 0 and marked as both a first and final filing? Though then we get to the PPA restatement which would have been done for 002 but not 001.

Amend the 2015 filing to show it's the same plan and is 001. The name and other facts, e.g. address will be the same. There may be follow-up from DOL and/or IRS regarding what happened to 002, but if you respond timely to inquiries with explanation you can't be hit with penalties. You filed.

Similar situation but with an insurance contract plan.  The sponsor filed Form 5500 disclosing the contribution which was necessary to fund the plan for the first year.  For reasons not relevant to this discussion however, the plan was not "funded."

We recommended that the sponsor file an amended return with "0" in all the relevant boxes along with a letter on the sponsor's letterhead explaining what happened.  Since this was a one-off for our law firm, we never heard back from the client so I assume that that did the trick.

On 7/15/2017 at 6:05 PM, JamesK said:

.  Since this was a one-off for our law firm, we never heard back from the client so I assume that that did the trick.

The easiest way to know if they did what you recommended is go to the EFAST 2 website run by the DOL and look up the Form 5500 for this plan. 

https://www.efast.dol.gov/welcome.html

In the upper left hand corner is a search function.  If you know the plan's EIN or name you should be able to find and see the Form 5500 as they are public filings.