Terminated plan - money remaining

Very unusual situation - we have a plan that was terminating PYE 06/30/19.  They moved money to checking account and paid everyone out.  Then without consulting us, instead of closing the account they kept it open and put in an additional $250 to cover bank fees.  They now have about $167 remaining.

Whereas we had planned to file a final 5500 for PYE 06/30/19 showing the plan terminated, they actually have no participants and a small bank balance remaining.  Technically, it seems we would have to have them clear out the account and file a final 5500 for PYE 06/30/20.

Any suggestions as to how you would handle this?

Are you sure this "checking account" is actually part of plan assets?

If they had assets 6/30/19 then a 5500 is required for the next PY; I would be surprised if anyone could suggest anything else that is viable.  On the other hand, if there was a zero balance at 6/30/19 but the employer deposited $250 AFTER that date I think you have a good argument that 6/30/19 is the final 5500 and none is due thereafter.  

What about the following... If the $250 was really to cover fees, maybe the 6/30/19 Form 5500 can show the $250 (or whatever amount on that date)  as a liability, then with zero net assets... so final filing.  Years ago, we showed final payment of fees after the plan year end as a liability on the Form 5500 with zero net assets, so final filing.  No problems... FWIW

chc93:  Is that how the 5500 rules work?  Zero assets NET of liabilities rather than zero assets NOT NET of liabilities?   

jpod... I haven't found specific instructions for "zero assets" being net or not net of liabilities yet.   I think "liabilities" cannot be benefit liabilities.  There is also that question on the 5500 that asks if all assets were distributed to participants... and if "yes", then whatever was left were not benefits (fees, in this case) and net assets were zero.  I think we only did this a couple of times in the past, and didn't get any feedback from IRS or DOL.

The current information on the IRS website only says "distributed all plan assets".

https://www.irs.gov/retirement-plans/plan-sponsors-make-errors-when-filing-their-final-return

With electronic filing, maybe would be best to not file as final even if assets left are for fees payable, and file as final in the next year.

3 hours ago, david rigby said:

Are you sure this "checking account" is actually part of plan assets?

Cynchbeast, although the account may have been titled in the name of the plan, david rigby may be on to something here. The employer could have paid these expenses directly, so maybe the deposit into plan was in error. ERISA 403c)(2)(A)(I) permits return of mistake of fact contributions within one year. And actually, if the plan was terminated and fully paid out before the $250 hit the account, was it really an account of the trust, even if so titled at that time?

16 hours ago, chc93 said:

What about the following... If the $250 was really to cover fees, maybe the 6/30/19 Form 5500 can show the $250 (or whatever amount on that date)  as a liability, then with zero net assets... so final filing.  Years ago, we showed final payment of fees after the plan year end as a liability on the Form 5500 with zero net assets, so final filing.  No problems... FWIW

We've done this...for the amount money involved, I say go for it.

I agree withthose who say you can file a final 5500.  The amount is too small to be overly concerned.  Bill them $167 for researching the issue.

I had a similar situation and billed the client.  The client loved the solution.  

My concern is the $250 deposit to the plan would have needed an allocation allowance in the plan document for contribution to the tax exempt trust.  Absent an allocation methodology, the $250 would be considered an invalid contribution needing to be returned.  Documentation regarding the plan expense becoming an employer expense when plan assets went to $0 would be necessary to disclose why the returned contribution is less than the original contribution, plus earnings/losses.

1 hour ago, CJ Allen said:

My concern is the $250 deposit to the plan would have needed an allocation allowance in the plan document for contribution to the tax exempt trust.  Absent an allocation methodology, the $250 would be considered an invalid contribution needing to be returned.  Documentation regarding the plan expense becoming an employer expense when plan assets went to $0 would be necessary to disclose why the returned contribution is less than the original contribution, plus earnings/losses.

Good point; I lost track of the original source of the extra money.  Allocation of contribution and allocation of gain/loss would be handled differently.  I think I'd still ignore it based on the amount involved but make an additional/different disclaimer about it not being quite right.