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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 — 10/23/08

Transfer of surplus funds by terminated welfare plan did not violate ERISA

If a trust sponsored by a multiemployer welfare plan is properly terminated and all claims are either paid or properly forfeited, the proposed subsequent transfer of surplus funds to a charity by the trustees of that trust is not a prohibited transaction involving either a party in interest or a fiduciary within the meaning of ERISA §406(a)(1)(d) or ERISA §406(b) , according to an EBSA advisory opinion. Similarly, the amendment of the trust to permit the transfer of the surplus assets to a charitable organization that is not a party in interest would not violate ERISA §403(d)(2).

The plan established the trust in 1975, combining two existing plans, a health plan and a plan that provided accidental death and dismemberment (AD&D) insurance. By 2004 the number of participating employers and plan participants had declined and the insurance provider for the health plan cancelled the coverage as uneconomical. The AD&D insurance was also terminated because the expense became disproportionate to the premiums and coverage. Therefore, all insurance contracts had been terminated and all liabilities of the plan had been satisfied.

The trust document precluded any participant from having any legal or equitable right in the corpus or income of the trust, and there was no equitable means to calculate a disbursement of the remaining assets to participants. Therefore, the trustees proposed to contribute the funds remaining in the trust to an educational foundation.

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