BeanCounterBlues

A participant wants to pay cash for a primary residence that he will live in. He has executed a purchase agreement. For other personal / financial reasons, he wants to not have any mortgage payment. He has enough personal non - 401k plan funds that he can fund the minimum required down payment required by the lender. In order to not have a mortgage payment at all however, he needs to borrow from his 401k account to purchase the home. The plan document requires that loans be made only if they otherwise meet the safe harbor hardship rules. My thinking is that because he has personal funds that exceed the minimum down payment required by the lender, that under the terms of the plan, the loan cannot be approved. Or can it be taken into account that this person has valid reasons that he does not want to have any mortgage payment obligation. Thanks for any thoughts.

I recently had a client e file the final 5500 SF for a terminated 401k plan. This was a 2011 short plan year filing (on 2011 forms). Part I, line B "the final report..." was properly checked. EOY partic / assets = zero. Part VII Plan Terminations questions properly completed. The DOL rejected the filing on the basis that "criteria for termination have not been met" error code P 215 SF. The notice of rejection advisement was provided to me, by the software vendor. I called the EFAST toll free help desk and confirmed that the filing status is "filing received" which I understand to be the highest level of acceptance in the EFAST II system. I checked the public disclosure website and the filing looks fine as well. I contacted my software vendor and they informed me they have had this happen several times. EG a terminated filing that appears in all respects proper, is notified to the software vendor as "rejected." But - the DOL web posting and "filing received" status is what appears to be in the DOL's systems. The software vendor has recommended not taking any further action and to just assume the rejection notification by DOL to software vendor was an unexplainable error. I hesitantly-tend to agree, because the public disclosure website and "filing received" status seem to indicate everything is fine. However - I am a little leery of the software vendor's recommendation to "do nothing." I realize checking the amended box and having the client re-e-file is probably not a good thing to do (eg amend it and see if the DOL actually will issue an acceptance to the software vendor). Has anyone else been faced w/ this and if so what action did you take (if you are willing to share). Thank you for any thoughts.

I thought it was pretty clear too, however is contradictory to what I heard from a noted expert at a seminar. Wondering if anyone out there heard the same thing I did. This same commentator stated that there is conflicting information between Form instructions and published IRS Q&A's on certain issues. Thanks for your comments.

This may be a dumb question but I haven't been able to find a specific answer. If a particpant is coded A, and I prepare (as TPA) the necessary notice, when the same participant is coded D after distribution - do I have to give that participant another notice? EG is the notice required anytime a participant is SSA-reported, even if that means a participant may receive more than one notice? I don't see what purpose it serves to give a second notice after the Code D (that doesn't matter however; my goal is to do what the law requires). Thanks for any input.

In the past, I understood that if a participant who otherwise would have been reportable as an A on the year's 8955 (Sch SSA in the past) - but was distributed prior to the filing of the 5500 and Sch SSA - did not actually have to be reported. I learned at a seminar this week that supposedly the cut off is now the prior year end. So if I'm analyzing the 2010 calendar plan year, and I have a Code A - but that person was fully distributed April 23, 2011 - in the past I would not have reported that person if the SSA was filed after April 23, 2011. The way I interpreted the comments from the seminar was that is no longer permissible - in my example, the person would be reported for 2010, as a code A, and then on the 2011 reporting, as a Code D. This seems like unnecessary work for IRS, SSA, and the plan sponsor and practitioner. My concern is doing it right though (not the amount of work it requires). I'm curious if anyone else has heard what I heard (about the 12/31/ cut off) and / or what approach other practitioners plan to take regarding this issue. Thank you.

I have another question about this as well (heard recently there's no known 5558 release date, and to my knowledge no extension filing is reqired for the 8955 due to the January 2012 relief). I overheard at a seminar this week that the IRS will accept the January 2011 version of 5558 - which if you search on the web is pretty easily find-able. However, the 5558 posted on the IRS website is the old one (2008 or 2009 I think; can't remember). If you view the January 2011 version online, the one that I was able to locate has "DRAFT" stamped across it. I had a Nov 2010 year end that I recently filed an extension for - and I used the January 2011 version off my software vendor's system, which at the time I printed it - was not stamped "DRAFT." My software vendor has since issued an update that does stamp DRAFT across the top of the form. If one wants to file 5558's now - what would be the recommended form to use? The old 2009 version that is posted on the IRS website? Or the January 2011 (but it would be stamped "draft") version as suggested by the speaker in the seminar I attended? Just curious as to everyone's thoughts are.

Does anyone have any updated thoughts on the "do you have to report someone who would have been Code A in 2009, but is paid out" before the January 2012 filing deadline. J. Wegesin stated during a conference that she would suggest just not reporting the person all. This was in Feb - March 2011 if I recall correctly. To me that seems the common sense way to go. She also caveated that was just her opinion, which I totally understand. However I don't want to end up w/ a bunch of non reporting penalties if an auditing agent says otherwise three years down the road if the plan gets audited. It seems better safe (eg report) than sorry, but this then requires a whole bunch of 8955's that seemingly I should be able to just skip and not charge the client for (at least in my practice). If anyone has heard anything updated on this subject or has any thoughts as to how they plan to handle, would be grateful to hear your opinions. Thanks!

Facts: Assume that 401k plan's annual fees paid by the plan assets are $10. $2.50 is the TPA's fee and $7.50 is the IQPA fee paid to the auditor. The plan document permits fees to be paid from plan assets and the plan fidcudiaries believe these are reasonable (amounts hypothetical) fees for the services rendered. In reality the fees are of course larger but I don't want to state the fee amount in a public forum. Assume that a new investment carrier can only handle paying one service provider from the assets. Assume that the investment provider will cut one check and one check only for fees (not negotiable). Assume that the plan sponsor wishes to stay w/ this investment carrier (eg I'm not looking for the suggestion of "find a carrier that can accoommodate you."). How the TPA proposes to handle the situation: TPA proposes to set up a "trust account" so-to-speak to house the check from the carrier. This account is in the FEIN# of the TPA (eg when I say "trust" account I don't mean the 401k plan trust). TPA will then forward $7.50 auditor's portion of the check to the auditor. TPA acts only as a paying agent. TPA will then transfer the TPA's portion to the TPA's general checking account as "fees earned" (kind of like how a lawyer handles IOLTA account). However due to the limitation of the carrier that they will only cut one check, the Schedule A produced by the carrier will reflect that 100% of the payment went to the TPA. The TPA will prepare the Form 5500 for the client to give to the auditor for the audit. The TPA will present Schedule A showing BOTH service providers and the amount each actually ends up w/. If Sch C reporting is necessary the same position will be taken on Sch C. The TPA will keep a paper trail of the transaction and will never put the auditor's funds into the TPA's general checking account. Question: Does anyone out there do this and is it common practice? Are there any pitfalls to the TPA of doing this? Are there any problems w/ the TPA's proposed method of handling the transactions as outlined above (especially "re configuring" Sch A data as presented by the carrier)? ***** Thank you for any assistance!

This is not an endorsement by me as to the encryption and security of the product I"m about to mention. I use LeapFile (was recommended by an author of an article on the subject in Journal of Accountancy). It's very easy to use and the customer service is very good, and it's inexpensive. Again - I am not a techie and I do not know how easy or difficult it is to compromise files encryped and sent with LeapFile. I'm only mentioning this in case you want to investigate it as a possible option for sending secure files.

I agree w/ MWYATT, all my 5500's from that year (three or so) that showed change in EIN got notices from IRS stating they couldn't find a filing. I wrote letters in each case politely stating that we had in fact filled out the EIN change spec correctly on the 5500, attached a complete copy of the 5500 so that IRS could "find" it and never heard from them again. Unless they plan to re contact me on all of them months / years later.

Based on amendeds I've filed under EFASTII I believe this is correct (you see only the latest amendment on the public disclosure site). Somewhere I read that the Ack ID should be included "if possible" - this info I'm thinking of was stated by DOL (website or something, I apologize I can't remember). The reason I remember this issue in general though is my software provider would NOT submit the e file if I did not include the Ack ID. EG to the software that was a "fatal" error. So maybe this is more a software issue but DOL does not require the Ack ID? Don't quote me on that as I'm going off (not always so perfect) memory.

I agree with the previous post. I advise the client in the instruction sheet I attach to the client's hard copy of the 5500 that it must be signed and dated and that the due date is Oct 15 (2010). For those that were done at the last minute and / or hard copy of Form mailed to them later, I stated in a letter that the date should be the date the e file was sent and I give them the specific date. That is the same date the client put the PIN into my computer (remotely via web conferencing where I was not looking at their input to meet the secrecy rules).

AICPA recently presented a lengthy and well written comment letter to IRS expressly requesting, among other things, that 5500 preparers be exempt from competency testing. I'm a CPA but agree it's ridiculous to make a 5500 only preparer be competent w/ respect to 1040's. IRS threw this program together too quickly w/ too little thought. It is aimed at eliminating the fraudulent preparer (mainly 1040's) that claim exemptions that don't exist, basing fees as a % of the refund and the list goes on. I fail to understand how a competency test (I prepare 1040's and 5500's and many other types of returns) will deter fraud. The whole system is aimed at unscrupulous preparers. If someone wants to commit fraud they are going to and a competency exam isn't going to make any difference. IRS has a public e mail address for comments on this subject (I have used to protest compentency testing for 5500 even though doesn't affect me). Not sure if still open or not. IRS needs to hear from everyone of us. If enough people make light of this IRS might listen.

AICPA prepared an excellent and lengthy comment letter to IRS on this very subject (I am a CPA) and is requesting IRS exempt 5500 preparers from the requirement (amongst a lot of other comments). Makes zero sense for a 5500 only preparer to have to pass a 1040 competency exam, but right now those are the rules. Hopefully they will be changed. I feel for the 5500 community (as someone whose practice is mostly 5500).

Maybe DOL will just get a clue and let us register for and have the PIN - IRS doesn't care why s/ DOL???? IRS e file is walk in the park. Normally I wouldn't congratulate the IRS but on this one I do. And I don't want my name listed as "plan admin" on DOL website no matter what caveats they put on their website!

I've heard good things about Datair as well (I use their DC system but not their PR system, thinking about switching). I used Creative Solutions. Their tech support response time was very good, although they seemed somewhat poorly trained in the new e file rules, and the software was buggy (have been resolved) such as what you see on your screen is not what posts at DOL, thus had to amend - you really have to look at the DOL Public Disc website to make sure your filing posted as you think it should. Have heard (but not used) FT William is very good also.

I agree w/ below ground above. My Firm's policy is continuous follow up (I have some clients for whom I've requested the signed EGTRRA docs more than 30X eg I don't give up). However, every prototype doc / amendment I send to a client is accompanied by a letter that states that execution and legal review is the responsibility of the Plan Sponsor. I maintain a "copy" not the original. My services agreements state that the client is fully responsible for maintaining the original fully executed signed copy. I will not provide any services w/o the signed agreement. My annual transmittal letter (info letter that accompanies the 5500 and compliance testing report) has a section devoted to "known missing signatures" (eg those where I have not rec'd my signed copy). Does the TPA really want to be on the hook for penalties on audit? I sure don't. I give the client every opportunity to get it right w/ a huge amount of pestering and follow up. I don't see why the TPA would want to or should take on that liability. Does your malpractice coverage cover that when a governmental fine is levied?

And - anyone know anything about the idea that the 5558 is for 5500 but not for 8955? Have heard that the 5558 s/n/b relied upon as 8955 extension until IRS specifically states. Funny can't file the SSA but can't extend it either. Am sure there will be some relief just wondering if anyone has heard anything about the extension issue. Thnx.

I am looking for a confirmation of my understanding based on 2009 5500 changes. Have read through the Form 5500 instructions for 2009. Assume plan is unfunded and fully insured, over 100 lives, provides life, AD&D and disability insurance benefits. Appears Form 5500 (SF version not permitted) is required to be filed, w/ Schedule A attached. No IQPA requirement. File Sch C, D and G only if required based on the situation. Pretty much same as before. I just want to make sure I'm not missing something big, as I do very few of these. Appreciate any assistance.

I attended a webinar sponsored by a noted 5500 expert who stated it was the speaker's understanding that the code applies to any DIO not specifically to QDIO. This opinion is that of the speaker's interpretation, but thought this might be useful info for Board users.

ASPPA ASAP issue 10-19 addresses this - haven't researched myself (so don't rely on this) but seems to indicate EZ okay in this situation. Replied to suggest review issue 10-19 if you have access to......

Ultimately I agree w/ Peggy806 (check "no" as opposed to leaving it blank) from an intuitive sense. Can anyone think of harm that could come from checking the box "no?" EG any kind of audit flag by doing so? That'd be my biggest concern to not trigger an audit based on a response on the 5500. Has anyone called the DOL about this seeming mis- match in the instructions?

Bird's comment is seconded by a noted industry 5500 expert (not me, someone I took a seminar from) - if there's a default investment fund, that code is supposed to be used. It is not a code to indicate a QDIA.

Was 2008 the first year of the plan? If so it might be easier to just amend and re file 2008. Or - file 2009 w/ the "change of EIN" section filled out on the 5500. I've had situations where an incorrect ID# was used (bad info from client etc) and using the "change of EIN" section on the 5500 has solved the issue for me the couple times this has happened to me (w/o generating letters).

The Form 5500 SF (see page 15, second column) instructions state: "If this is a defined contribution pension plan, leave blank." Unfortunately - my 5500 software provider is automatically checking the box "NO" w/ no way to leave it blank. Ugh!