Bill Presson

Who's electronically signing the 5500 with the credentials and pin? You or the client? If you, then I think you need a signature for each filing. If the client, then I don't think you need anything additional.

Thread killer!

From IRS site: Taxpayers will have until Tuesday, April 17, to file their 2011 tax returns and pay any tax due because April 15 falls on a Sunday, and Emancipation Day, a holiday observed in the District of Columbia, falls this year on Monday, April 16. According to federal law, District of Columbia holidays impact tax deadlines in the same way that federal holidays do; therefore, all taxpayers will have two extra days to file this year. I can't see anything that specifically addresses this question though.

rcline46 and SheliaD are both right. PATA, they can't do what you outline in a SEP, because the rules don't allow it. They can certainly do what you outline in a DC plan exactly as SheilaD has proposed. They probably just don't want to pay for the document and admin.

No.

Got a response from Derrin. No such luck. The rules are there, even if not generally understood. Here's FAQ 4 from the DOL. I have highlighted the key sentence in red. Q4: Are all the fees and expenses charged against an investment fund and reflected in the value of the plan's investment, such as an investment fund's payments for legal services provided to the fund, fees paid to the fund's accountant, and expenses associated with SEC filing requirements, reportable indirect compensation for Schedule C purposes? No. The Schedule C Instructions provide a general rule that indirect compensation includes compensation received in connection with services rendered to the plan or a person's position with the plan. A person will be considered to receive indirect compensation for Schedule C reporting purposes if "the person's eligibility for a payment or the amount of the payment is based, in whole or in part, on [1] services that were rendered to the plan or [2] on a transaction or series of transactions with the plan." In the case of charges against an investment fund, reportable "indirect compensation" includes, for example, the fund's investment adviser asset-based investment management fee from the fund, fees related to purchases and sales of interests in the fund (including 12b-1 fees), brokerage commissions and fees charged in connection with purchases and sales of interests in the fund, fees for providing services to plan investors or plan participants such as communication and other shareholder services, and fees relating to the administration of the employee benefit plan such as recordkeeping services, Form 5500 filing and other compliance services. Amounts charged against the fund for other ordinary operating expenses, such as attorneys' fees, accountants' fees, printers' fees, are not reportable indirect compensation for Schedule C purposes. Also, brokerage costs associated with a broker-dealer effecting securities transactions within the portfolio of a mutual fund or for the portfolio of an investment fund that holds "plan assets" for ERISA purposes, should be treated for Schedule C purposes as an operating expense of the investment fund not reportable indirect compensation paid to a plan service provider or in connection with a transaction with the plan. Next, we present FAQ 6 from the DOL's second set: Q6: For purposes of reporting indirect compensation on Schedule C, must a limited partnership hedge fund that is not holding plan assets pursuant to the "less than 25% benefit plan investor exception" under section 3(42) of ERISA be treated as an investment fund? Yes. The 2009 Form 5500 instructions provide that persons who provide investment management services to investment funds in which plans invest are treated for Schedule C reporting purposes as indirectly providing investment management services to those investing plans. Thus, fees that are paid out of an investment fund's assets to the fund's investment adviser (or its affiliates) for managing the fund's investment portfolio are reportable indirect compensation for Schedule C purposes. The instructions are clear that "investment funds" for this purpose include registered investment companies (commonly referred to as mutual funds) that do not hold plan assets by reason of ERISA section 401(b). The Department's July 2008 FAQs in explaining this requirement drew a line between "investment funds" and entities that would be treated as "operating companies" under the Department's plan asset regulation at 29 C.F.R. § 2510.3-101 (Definition of "plan assets" – plan investments). See 2008 FAQ 7. In the Department's view other investment funds that do not hold "plan assets" are similarly subject to the Schedule C compensation reporting requirements. Thus, for instance, fees paid to persons for management of a real estate hedge fund that did not meet the requirements for being a real estate operating company under 29 C.F.R. § 2510.3-101 would be reportable Schedule C compensation, but property management fees paid to persons managing the underlying properties owned by the funds could be treated as ordinary operating expenses of the fund. See 2008 FAQ 4. Here's the key line from the instructions with an arrow pointing to the important language: (I can't post the picture he inserted, but the arrow pointed to the following) such as management fees paid by a mutual fund to its investment advisor This is exactly the DOL's position and why they are sending out the letters.

I just read that and came here to see if anyone else thought the same thing I did. Is there a curse word filter on this site?? I find it difficult to believe that this is an accurate interpretation. Edited to add: I emailed Derrin Watson to ask if he was serious or maybe he accidently released an April Fool's joke early. I also posted a question on the ASPPA LinkedIn site.

This is a general reply to all, thanks, (and nothing taken as a knock, I may be inclined to go on the cheap and risky side on my own personal affairs, but not in the professional work role), and yes, I've come around to the "correct" definition our government has set for "active" participants as it applies to the 5500 form and the audit waiver exemption. So to the lesser question, for an organization just getting to the 120 or so participant mark and out of the audit waiver status, what should one expect to pay for such a service? Couple of items: 1. The TPA firm I run is owned by a CPA firm so I've seen both sides. I've seen audits done for as little as $7k and they generally aren't really worth much. Most of the audits our firm does (and the ones I've seen on the plans that we do the recordkeeping) run in the $12k+ range. 2. Assuming you didn't hit 120 on the first day of the current plan year, take a look at the terminated participants with small balances and see if your plan allows/requires you to force them out of the plan. Many times you can avoid an audit just by eliminating these participants. Good luck.

I'm not certain. The only contract that we have is a retainer agreement, but the contract is with the plan sponsor/administrator. Also, let's say we do have a contract or arrangement with the plan. Wouldn't legal services constitute indirect compensation (from the plan sponsor) under the final regulation? So the law firm would then have to disclose? Plan sponsor payments do not count as indirect compensation. From the rules: It also applies to providers of other specified services who receive either "indirect compensation'' (generally from sources other than the plan or plan sponsor) or certain types of payments from affiliates and subcontractors. Also, I've been told from other attys that they would never sign an agreement directly with the plan because they might then have to sue the sponsor.

Legal services are covered, but it only counts if you are going to receive any indirect compensation from the plan. All the attorney's that I know get paid by the employer and not by the plan, so I don't think it will apply.

Based on the info provided, $44k seems quite high to me. There may still be extenuating circumstances (like whether they charge separately for distributions/loans, how many payrolls they process, does that cost include the custodial fees, etc.), so don't take this as a final indictment of their fee. Still don't have an answer on additional revenue sharing available and what happens to it. Frankly, it would be much closer to what I've seen if the numbers WERE reversed.

GMK, I read that opposite of what you do. rcline46 raises the main point: how many participants? If there are 10 participants, you're probably being overcharged. If there are 1000, you're probably getting a good deal. For our TPA services, we bill on a base + per participant fee. The assets in the plan really don't make a difference in the amount of work we do, so we don't charge an asset based fee. And we pass through 100% of the revenue sharing in excess of what's used to pay the custodial fee. The question on what the financial consultant does is also critical. Bottom line is that I don't think there is enough information provided by the op to determine if the numbers are in line.

Thank you guys. Do you happen to know the IRS form that forbids having another plan? If we can run the 401k & SEP concurrently, that would be ideal, very good, wonderful. No one seems to really have an answer for me on this. One guy I called said they can't exist in the same plan year. The ERISA book, according to the helpful friendly poster before, said that there is no ERISA exclusivity rule. Now I have this IRS piece. If the government rules don't forbid it, that'll be great. The IRS Form 5305-SEP is the form that prohibits it. If you use that form to establish the SEP and the 401(k) still exists, you would be in violation. However many mutual fund and brokerage companies have developed and gotten approved their own Form 5305. They are usually a bit more flexible. But the only way to know would be to call fund companies until you find one with a form that would work. Why not just amend the existing 401(k) and stop allowing deferrals? Just run it as a profit sharing plan.

Really nice post. I've known Christopher for more than 10 years. Believe it or not, not everyone posts here. And that's okay.

The key here is the type of insurance. shERPA is right on the difference in the limits. But universal life is considered to be term insurance so it falls under the 25% limit and you only use the cost of insurance.

We had a client get a notice as well. We're just going to file an amended return instead of argue about it.

Thanks everyone.

We have a plan that has failed the compensation ratio test. They exclude various items (bonus, overtime, etc.) and have always passed previously. However this year, the NHCE group got quite a bit more in bonuses than in prior years. So now the differential is about 5% instead of 3% or less. I cannot find anywhere an outline of what to do to fix this. Do we just amend to include pieces of comp until we pass? If so, what happens to the ACP/ADP tests? Are they rerun? Is there an issue that now comp is included that the participants couldn't defer on? Thanks for any help.

The thing that I've always loved about these regs is how the DOL & IRS think bankers have time to just sit around all day taking calls from plan sponsors to analyze potential loans that they'll never get. Brilliant government thought.

This had to be a difficult thing to write!! (not intended as an insult to the colleague above with the same name!)

We use Cash Balance Actuaries and they've done a very good job for us. http://www.cashbalanceactuaries.com/

How about a SEP? Of course. That resolves all the issues and they're always free.

We use Penchecks. The broker cuts the gross check to them and they make the distribution, tax withholding, 1099, etc. Full disclosure: I have no financial interest in Penchecks, but I have known the guys that run it for a lot of years.

Interesting. I've never done that before and was unaware of the use. Guess necessity IS the mother of invention. Thanks.

Whether you can or not, why would you? I assume there are no deferrals or matching contributions in the davis bacon plan, correct?