Who should files the 5500s when almost everyone is dead?

Here's a fun one for a Friday morning.  A deferred vested 401(k) participant (from a job decades ago) was recently contacted by a service provider who told him that he is responsible for filing the 5500 for the plan.  The company no longer exists.  He was never in plan administration or an owner of the company, but the service provider says that because all of the owners are now dead and he is the only participant left with an account balance, he is somehow responsible for signing and filing annual returns.  It seems to me that that can't possibly be right, and that the responsibility for terminating the plan and filing the final returns more properly falls on the shoulders of the service provider.

Any thoughts on this one?

Not an expert on this but this sounds like an orphan plan. 

https://www.irs.gov/retirement-plans/plan-sponsor/fixing-common-plan-mistakes-using-epcrs-to-terminate-an-orphan-plan

So I think neither the service provider nor the participant are responsible.   I am not sure who goes to court to get someone appointed and what that costs but that seems to be the route to a solution. 

More

https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/abandoned-plans

Thanks.  Yes, I agree that this is an abandoned plan, but given the small amounts that were in play, the participant isn't interested in paying us to help him navigate that program.  (Nor should he.)  

I should have also mentioned in the original post that he subsequently took a distribution of his account.  The service provider is still trying to get him to sign off on the final return (and I believe also some delinquent returns from previous years).  At this point, I can't think of any reason he should do that.

Without disagreeing with the several observations that the individual described likely is not responsible as the plan’s administrator (and without condoning the service provider’s conduct), it might not follow that the service provider has a responsibility.

A service provider’s agreement might provide no obligation to file a Form 5500 report.

Further, even if a service provider might volunteer, it might lack authority to file a Form 5500 report.  And absent a Federal court proceeding, a service provider might be ineligible to obtain authority to file a Form 5500 report.

I agree with Peter.   I don't see how it is the service provider's job.   

I am not of the opinion it is the person with the last balance in the plan's job either. 

and if no filings are made, what are the ramifications? the plan sponsor no longer exists so there is no responsible party to go after. not filings 5500's does not DQ the plan and taint the distribution paid to last man standing. I would just walk away and let it go.

In my experience:

If an abandoned-plan investigation is open, EBSA people look at all years’ Form 5500 reports to find names of anyone who was described as acting for the plan’s administrator or sponsor, and anyone EBSA might assert had some role as an officer, quasi-officer, or some other control of the administrator or the sponsor.  Sometimes, they also search public-records databases, and commercial databases.

Sometimes, EBSA can be assertive.  Among other abandoned-plans cases I handled, in one EBSA asserted that a former assistant vice-president who had ended all associations with the employer many years before EBSA’s contact (and also years before the employer/administrator’s business failure and abandoning of the plan) was responsible to administer her former employer’s plan.  Even after we showed EBSA proof of her resignations from all possible roles with the former employer, EBSA persisted.  They guessed (correctly) that their target would learn that the expense of paying me to fight the Labor department would be much more than the expense of paying me to work the final administration.  The recordkeeper and the trustee, also motivated to get rid of the abandoned plan, never questioned that my client lacked authority to instruct them.

That sad story told, one imagines EBSA is unlikely to open such an investigation if no participant or beneficiary has complained about being unable to get a distribution.

Seems like now would be a great time for a rollover!!!!

(Actually, last December, but we're not time travelers.)

On 7/9/2021 at 3:07 PM, Peter Gulia said:

In my experience:

If an abandoned-plan investigation is open, EBSA people look at all years’ Form 5500 reports to find names of anyone who was described as acting for the plan’s administrator or sponsor, and anyone EBSA might assert had some role as an officer, quasi-officer, or some other control of the administrator or the sponsor.  Sometimes, they also search public-records databases, and commercial databases.

Sometimes, EBSA can be assertive.  Among other abandoned-plans cases I handled, in one EBSA asserted that a former assistant vice-president who had ended all associations with the employer many years before EBSA’s contact (and also years before the employer/administrator’s business failure and abandoning of the plan) was responsible to administer her former employer’s plan.  Even after we showed EBSA proof of her resignations from all possible roles with the former employer, EBSA persisted.  They guessed (correctly) that their target would learn that the expense of paying me to fight the Labor department would be much more than the expense of paying me to work the final administration.  The recordkeeper and the trustee, also motivated to get rid of the abandoned plan, never questioned that my client lacked authority to instruct them.

That sad story told, one imagines EBSA is unlikely to open such an investigation if no participant or beneficiary has complained about being unable to get a distribution.

I agree with everything said here, although I'll note that the EBSA does sometimes establish national projects involving orphaned plans where they specifically target them regardless of participant complaints.

Anecdote:  I had an IRS agent tell me that my client (a former officer of a defunct company) should just sign off on everything.  As long as there was a determination letter for the plan, there was absolutely no chance of any liability or any additional expense.

Alas, he declined to provide that to me in writing.

Among those projects, EBSA sometimes investigates service providers.  Why look one plan at a time when a service provider might have hundreds or thousands of abandoned plans?

EBSA has investigation powers regarding a service provider even if the service provider is no target in the investigation.

Even if a service provider carefully arranged all its services to be perfectly nondiscretionary and nonfiduciary, EBSA might assert that a service provider’s receipt of compensation, even indirect compensation, could not have been proper (and instead was a nonexempt prohibited transaction) if the service provider knew the plan’s administrator or other responsible plan fiduciary was not acting.

But those potential pressures do not, by themselves, impose on a service provider a duty or obligation to administer an abandoned plan.

A service provider might want written procedures for how it provides or ends services, and keeps records about, an abandoned plan.

Thank you all for the input.  You have persuaded me that this may not be a service provider responsibility, but I still see no basis to place this responsibility on the shoulders of the last man standing.  

When (before 2006) I was inside counsel for a retirement-services provider, my client suffered many investigations about abandoned plans.  The volume was enough to require internal business reporting and monitoring systems.

Not once did EBSA question or criticize that the service provider had not filed a Form 5500 report.

Not once did EBSA suggest that the service provider was responsible to cause someone to file a Form 5500 report.