By Carol Buckmann
This is the time of year when our plan sponsors with extended 5500 filing deadlines have me on speed dial. It is always surprising to me how many vendors send out draft 5500’s with wrong answers, and how adversarial the relationship between some sponsors and the accountants doing their annual plan audits can get. Here are some tips from years of experience with October 5500 madness.
Always Start to Fill Out Your Questionnaires Early.
Maybe it’s too late for that for 2016 Forms, but it’s the best advice I can give for next year. If you don’t fill these out correctly, the Form 5500 will be incorrect, and some of the questions aren’t easy or intuitive. For example, if you have a 401k plan, the answer to the question how many participants are in the plan requires you to include those eligible but not contributing. Do you have a fidelity bond? That’s another question that confuses plan sponsors. It’s not the same as fiduciary liability insurance and if you don’t have one, you are in violation of Title 1 of ERISA. You won’t want to answer “no” to that one; just get the bond. And you may have terms in the questionnaire such as “highly compensated employee” or ”key employee” that you need to consult an adviser to understand.
Check Every Line of Your Vendor’s Draft.
Do the answers make sense? Read the instructions (available on line) and make sure the plan feature codes are correct. Does the plan have a committee as named fiduciary for administration? Vendor employees seem oblivious to this issue and mechanically fill in the Company’s name as plan administrator every time. Has your plan been involved in a merger or spinoff during the year? Is the contribution information correct? If you don’t understand an answer on the draft, ask the vendor and get items corrected if necessary.
Cooperate with Your Auditor to Get the Audit Finished on Time.
The more you understand about what the auditor has to do, the better prepared you will be to facilitate the audit by getting the auditor the needed information. Any issues identified by the auditor as problematic or possible government audit problems-such as late contributions, failure to make required minimum distributions or loans in default- can be fixed going forward; it is better if they are caught now. Be available to answer questions about qualification issues or bring in your attorney to answer the auditor’s questions. Every year I get questions whether the 5500 should be filed without the audit report or held until it is finished, but this shouldn’t be an issue. If the audit is a team effort, it can be completed on time.
Still Having Problems? Consider a New Auditor.
Auditors who specialize in employee benefit plan audits do a much better job and are not hard to find.