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Linda T. Fisher 5500 Consulting, LLC Newsletter
Keeping You Informed!
March 2012
Greetings!

We are now officially  entering the start of the 2011 Form 5500 season! As Spring enters, much earlier outside this year, benefit professionals, plan sponsors and insurance brokers are gearing up by collecting Schedule A's for their health and welfare filings. Auditors are starting to plan and work on 11k audits along with the others that are scheduled to be completed sooner. Our firm has even completed and submitted many 2011 filings already! Our motto every year, and I'm sure yours also, is to "get them done early" to avoid later stresses, whenever possible. 

 

This month's newsletter alerts you of continuing government initiatives that keep us all on our toes. The DOL is sending out more letters based on 2009 and 2010 Form 5500 filings and auditing plans that have those "red flags." See below for important news that you need to know.

 

We continue to provide Form 5500 related government updates in addition to providing helpful articles. We know that you likely have more responsibilities than just Form 5500 preparation, so to keep you in the loop, we are providing 5500 related guidance directly to you! Stay tuned each month to learn about:

  • Solutions to Common Errors;
  • Dept. of Labor and IRS Updates;
  • Specific Schedule Guidance; and 
  • Training Offerings!
Did you miss any prior Newsletter issues? 
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We Can Assist With Training for the 2011 Plan Year!


Save time by turning the training task to us!
 

We know that effective Form 5500 training is hard to find. We can train you or your team on a variety of Form 5500 topics. Whether you have an experienced team that just needs to brush-up on current changes since last year, or you have new Form 5500 preparers that need the full training package, let us know. 
 
Is Schedule C still an area of confusion? We can assist with training that will get you on the right track for very low cost.
 
Are you a Form 5500 reviewer, but don't have a good understanding of how the certain schedules should coordinate with others? 
 
You and your people deserve to know more!  Click for more about our training offers! 
In This Issue
Check your E-Mail for DOL Schedule C Notices
DOL Audit Trigger - Late Participant Contributions
DOL Has Less Tolerance for Late Audits
The Power of Kindness
Have You Received a DOL Notice About a Missing or Incomplete Schedule C?

ALERT!!  The DOL has begun to send out email notices to Plan Sponsors that did not have a Schedule C attached to their 2010 Form 5500 filing but reported investments in mutual funds. They gave us a year grace period, the 2009 plan year, so now Form 5500 preparers should have the expanded Schedule C figured out. I see so many retirement plan filings with either no Schedule C's or no indirect compensation reported. They unfortunately look just like they did before the major 2009 change, with direct compensation only. The DOL is finally taking steps to close this gap.

Bottom line - Indirect compensation needs to be reported for EVERY investment the plan holds; not just for the investments that you may have received clear Schedule C guidance for. 

How do you obtain this? Don't rely on each service provider to automatically provide a Schedule C-friendly report. First, you have to effectively ask for the indirect compensation information from all of the plan's investment managers. Effectively means:
  1. Obtaining all investment managers from an Investment Committee member or the lead financial advisor of the plan.
  2. Communicating a clear definition of all needs, including a form for each service provider to complete (in case they don't have their own), and 
  3. Preparing to answer any questions and clarify needs on a phone call for service providers that don't respond or just have a few questions. 

Give them a due date and follow-up with those that do not respond by your due date. 


For mutual funds, no information request is necessarily needed - you just need to confirm each fund has a prospectus with a published expense ratio - and you can report them on Schedule C, Line 1 as receiving only Eligible Indirect Compensation, assuming they did not receive any direct compensation, which is uncommon for a mutual fund.
 
The DOL Schedule C notices were sent to the signer of the filing, which may have been the third-party administrator if they submitted the filings on behalf of the Plan Sponsor. The DOL notices give only 15 days to respond and they recommend an amended filing be submitted if the original filing was not prepared correctly. Keep a look-out for these since there is not much time to respond. We expect them to send out more notices so continue to be on the look-out and of course, if you prepared your Schedule C's accurately, then no worries. 


Avoid DOL Audits by Being Aware of Common Trigger: Delinquent Participant Contributions
One of the most common red flags for a 401(k) plan is when participant contributions that are withheld from paychecks, are not deposited soon enough.

 

Confusion exists because the regulations require an employer to deposit participant contributions on the "earliest date the employer can reasonably segregate the contributions from its general assets, but in no event later than the 15th business day of the month following the month in which the employer withheld the contributions from employee's paycheck." 

 

Many employers and TPA's have erroneously interpreted the regulation to permit them to have until the 15th business day of the following month to deposit the participant contributions, even if they could have segregated the funds sooner. This is not the case and the DOL continues to devote significant resources to enforcing the rule regarding the timing of 401(k) deposits.

Beginning with the 2003 Form 5500, information on delinquent participant contributions reported on Schedule H, Line 4a were no longer required to be reported on Line 4d or Schedule G. This simplified reporting, but does not change the fact that all delinquent participant contributions required to be reported on Line 4a, are nonexempt prohibited transactions, UNLESS they satisfy the DOL Voluntary Fiduciary Correction Program, (VFCP) requirements and conditions of PTE 2002-51.  

 

How does the DOL find out about late deposits? Auditors are required to check the timing of all participant contributions and report "late contributions" within the audit notes and supplemental schedules. 

If the employer corrects the late deposit of participant contributions by filing under the VFCP and complying with the requirements of Prohibited Transaction Exemption 2002-51, the employer does not have to pay the prohibited transaction excise tax. The DOL can then compare all Line 4a "Yes" responses with the VFCP filings to confirm whether the Plan Sponsor came forward and reimbursed all affected participants' with lost earnings for each late contribution deposited. 

 

To provide more clarity on these reporting requirements, there is a series of FAQ's on this topic: Click Here.
DOL Has Less Tolerance for Delayed Audits  
 

 

Prior to the start of electronic filing submissions with the 2009 plan year, when an audit was not finalized by the due date, the  strategy would be to send in the filing without the audit, to avoid late penalties. Once the audit was completed, which could have been months or even a year later, it was then sent in as an amended filing. For 2008 plan years  and prior, when an audit was not attached to the paper filing, it would take the DOL about 6 - 9 months to send a "where is your audit" letter. Then, if they didn't receive a response within two months, a second letter would be sent with more urgency followed by a third letter with a very large penalty. 
 
Now with EFAST2, the missing audit is realized much sooner by the DOL and typically a notice is issued in just a few months. That gives the Plan Sponsor only 45 days, after the notice is sent, to provide the completed Auditor's Report by submitting it with an amended filing. If they can't meet the due date,  a large penalty will be charged. So there is a much lower tolerance for delayed audits. 
 
Stay on top of the auditor's schedule so the various target dates do not get pushed back and ultimately result in a late audit. 
                The Power of Kindness

 Here is a short video that will brighten your day. It provides numerous ways on how we can bring more kindness into our world everyday. Give someone a compliment, do a favor without being asked, surprise a friend with a flower to brighten their week, or just give a co-worker, neighbor, child, friend or spouse, a smile.

The Power of Kindness by Mac Anderson
The Power of Kindness by Mac Anderson
We would love to hear from you! Your comments and questions regarding this newsletter and future topics are important to us!
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Sincerely,
 

Linda Fisher
Linda T. Fisher 5500 Consulting, LLC
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Our Mission
Linda T. Fisher, owner of Linda T. Fisher 5500 Consulting, LLC  has prepared and managed Form 5500 filings for 17 years and serves as a technical resource for fellow employee benefit plan professionals and plan sponsors that prepare their own filings. 
 
She is fully aware that as employee benefit laws change, plan sponsors become confused about their filing requirements. 
 
Our mission is to educate all those involved with Form 5500 preparation and review. We do this through our preparation services, offering training programs for both preparers and reviewers, along with 'as needed' coaching.