5500 for controlled group

[bzorc]

My firm has just completed a certified audit of a 401(k) plan adopted by 9 employers, who I will call A through I for simplicity sake. Based on ownership percentages, the following controlled groups exist:

Company A: No controlled group

Companies B and C are a controlled group

Companies D,E,F,G, and H are a controlled group

Company I: No controlled group

When we asked the TPA to send us a draft of the Form 5500 for the plan, we received 4 5500's; one for each group described above. Adding up the assets and income of each 5500 equals the amounts on our audit of the plan in whole.

I have never encountered this type of filing. Is it correct? I was expecting one 5500 with a controlled group designation, and am quite confused. The TPA said they filed 4 5500's for 1999, attached the audit to each filing, and did not get the returns rejected by the DOL. Incidently, I called the PWBA helpline and stumped them too!

Any help would be appreciated. Thanks much.

[Tom Poje]

guess I would be curious to see what others say, but filing 4 5500 sounds correct according to my reading of the 5500 preparers manual.

"If more than one employer participates in a plan or program of benefits in which the funds atrributable to each employer are available to pay benefits only for the employer's employees, each employer must file a separate form 5500 even if the plan is maintained by a controlled group.: (page 1-18, 2000 plan years)

[Guest Boilerburm]

Tom,

I see how your logic leads to your conclusion, but I am puzzled as to how this ties to Schedule T. Specifically, Line 1 of Schedule T state that "If this schedule is being filed to provide coverage information regarding the noncollectively bargained employees of an employer participating in a plan maintained by more than one employer, enter the name and EIN of the participating employer." Further, the instructions for Schedule T Line 1 state that "if a plan benefits the employees of more than one employer and any of the employers are not members of the same controlled group, file as follows: File separate Schedules T for each controlled group and each other employer that have noncollectively bargained employees benefitting under the plan, as if the portions of the plan benefiting each controlled group's employees and each other employer's employees constituted separate plans."

We had a situation similar to bzorc's, and filed one 5500 with separate Schedules T for each of the entities (i.e. one for the controlled group and one for the "unrelated" adopting employers. This seemed to be in line with the Schedule T instructions, as well as the definition of Multiple-Employer Plan on the Form 5500 Box A(3).

It seems (surprisingly?) that there is inconsistency in the instructions. Everything EXCEPT the paragraph you quoted, Tom, seems to support the way we did it last year. But then, there IS that paragraph . . .

[bzorc]

Here is the PWBA's take on this situation:

Per the 2000 Form 5500 instructions, page 13, under types of filers, the first paragraph reads:

A seperate Form 5500, with box A(2) checked, must be filed by each employer participating in a plan or program of benefits in which the funds attributable to each employer are available to pay benefits only for that employer's employees, even if the plan is maintained by a controlled group.

Therefore, since this is a 401(k) plan that only offers matching contributions, the funds are attributable to each employer, and are only available to pay benefits for that employer's employees (even though the funds are commingled within 9 mutual funds offered by the plan as investment options in an ERISA 404© plan), and the end result is that 9 Form 5500's should be filed for this plan. If each employer has less than 100 employees, then the plan is not subject to certified audit. If one employer is over, then the plan as a whole is subject to the audit requirements.

Any thoughts? Thanks.

[Tom Poje]

my take (and I am clueless anyway, so i wouldn't put a lot of weight on it)

...are only available to pay benefits for that employer's employees ...

now, when I have a controlled group, I have 1 'employer' with a bunch of employees.

and so it still seems to me, for example, company B and C are a controlled group, so one employer, so I file one 5500 (but I would assume 2 schedule Ts) for those two companies.

by this logic I am back to 4 5500 rather than 9.

...but what do I know. certainly not my area of expertiece.

[John A]

bzorc,

In the plan you describe, were there any forfeitures, or was all match 100% vested immediately? If the plan provided for forfeitures, how did the plan provide for forfeitures to be handled (were forfeitures for an employee of one employer used exclusively for that employer - either to reduce future contributions for that employer, or reallocated to employees of that employer, or were forfeitures shared by all employers)?

[bzorc]

Forfeitures reduce contributions, but, in a stroke of recordkeeping greatness, have never been reallocated. In my past experience, the forfeitures were attributable to a participant, and the contribution of the employer who had the forfeiture was reduced. Therefore, in my thinking, we still have benefits attributable to each employer.

FYI, the decision was made to go with the TPA, and allow 4 5500 filings, with the audit based on the plan assets as a whole, and footnote disclosure in the audit report as to the entities involved in the plan and that if you add up all 5500 assets (Schedule H and one Schedule I, interesting to see how DOL handles that one...) you get the assets on the audit report. We'll see what happens.