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5500 Preparer's Manual for 2012 Plan Years

5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.

CCH® PENSION AND BENEFITS — 3/13/08

Distributions from escrow account entitled to same qualified treatment as distributions directly from plan

Distributions from an escrow account, funded as the result of the settlement of a class action lawsuit brought by plan participants who had alleged that previous lump-sum distributions to them from the plan had been inaccurately calculated, would be treated as if they were distributions directly from the plan, according to an IRS private letter ruling. Such distributions would qualify for rollover treatment, and the 60-day rollover period would not commence until the additional distributions were received by each class member.

A company had terminated its defined benefit pension plan. The plan permitted participants to receive their accrued benefits in lump-sum distributions, and by the end of 2002, all plan assets had been distributed, with signed spousal consents where required. Subsequently, a class action was filed alleging that an erroneous interest rate had been used to calculate the lump-sum distributions. Pursuant to a settlement of the class action lawsuit, it was agreed that additional funds would be placed into an escrow account, from which the participants who had previously received lump-sum distributions would receive additional distributions within 30 days of a favorable letter ruling.

The ruling noted that any spousal consents previously obtained were consents to inaccurate distributions; consequently, new spousal consents would be necessary before distributions from the escrow account could be made.