We have a profit sharing and mp plan that terminated a couple of years ago and all assets were distributed. Just discovered some insurance company stock in the name of the plans as a result of demutualization. The accountant feels that we should file amended ( and late) 5500s back two years and a final showing the payments made once the 5 affected participants are paid out. I would be tempted to execute the payments and call it a day. Note: the final plan year just went through a succesful IRS audit. Any ideas

Do a Search of the Message Boards using "demutualization".

If you choose not to go through the full formalities, would you withhold on the payments? Is someone personally liable for not withholding? What would you say about rollovers? These are items to ponder. I am not necessarily arguing for a full resurrection of the plan.

It would only take a few hours to crank out a 5500, right? Why not do it?

The final 5500 filed would be an amended return, so no DFVC fees. Would the second one be due already? If so, you would need the DFVC program for the second year, but for small plans the fee is not terrible...

Perhapd knowing the dollar amount would help. For $500 bucks I wouldn't bother, for $50,000 I would (doubt it's that high for 5 people)...

The situation isn't as simple as the other posters have assumed. For example, if there was some turnover between the time of the receipt of the demutualization proceeds and the time of plan termination that would complicate things somewhat.

I was personally involved in a situation where an ongoing plan found an asset of well over $50,000 in value. It looked like cleaning up the situation correctly would have cost more than that, because of (1) the size of the plan population,(2) the high volume of turnover in the plan population, (3) the number of years (18, if I recall correctly) that this the asset had been "lost," (4) the huge appreciation in the asset during the interim (from approximately $100 to approximately $65,000), (5) the difficulty in trying to locate former participants that had been paid out many years ago, etc.

Fortunately, the corporate attorney whose client this was switched law firms, so I never found out what the client did to resolve this problem. I didn't see a good solution.

Was the stock issued before or after the plan was terminated? If the stock was issued after termination there is no plan to receive the assets, although the plan sponsor could divide the proceeds in a non discriminatory manner among all of the participants on the date of termination as a additonal distribution. If the FMV of the stock is small enough the er could just ignore the stock certificates existance on the grounds that it would cost more to allocate the distribution that the value of the shares.

Mbozek:

I seem to recall, but I'm not entirely certain, that the DOL has indicated that even if the plan has already been terminated, the demutualization proceeds should be treated as if they had been paid into the plan. At any rate, I'm pretty sure the DOL has espoused something about how to deal with this situation, although it may have been just some comments in a speech by a DOL official. At this point in time, my memory is too hazy to be sure.

I guess that would make them orphan assets without a fidiciary who would be responsible for them. I know sponsors who have refused to accept demutualization proceeds to avoid ERISA issues. There are plans to which the DOL position is absurd such as pre erisa plans and DB plans that terminated and paid out all plan obligations to plan participants prior to demutualization.