Schedule H

[Guest Lex]

We are preparing a 5500 for a large plan. The auditor wants us to lump realized and unrealized gains/losses from registered investment companies into one line- line 2b(10).

We have the realized gains on 2(B)(4) and the unrealized on 2(B) (5)(B). On 2(B)(10) we have capital gains/dividends.

How have you seen it prepared/reported?

[BeckyMiller]

I agree with the auditor. If you look at the Form 5500 instructions to line b(10), it says to compute it in the same manner as for b(6)-(9). The instructions for those lines say to aggregate all types on income or expense, gain or loss associated with those investment types on this line.

[Guest Lex]

In that case, under what circumstances would you put information in line 2(B)(4)?

[BeckyMiller]

2(B)(4) is for direct ownership of assets (stocks, bonds, real estate, etc.), as opposed to indirect ownership through some pooling technique - pooled separate accounts, CCT, MTIA, mutual funds. I realize that mutual funds seem different from these other vehicles as they are traded.

If you have been doing 5500's for a long time, you will have noticed how the trend in reporting is to allow more and more reporting at the entity level (CCT, MTIA, etc.) and less detail at the plan level. (I have been doing 5500's for so long, that I did plan reporting before there even was a 5500!)

Hope that helps.

[TPApril]

Now that it is many years later, dividends from mutual funds are no longer included in line 2b(10), but separated out and reported on its own line entry under 2b(2). My question then is where do capital gains distributions from mutual funds fit in - with dividends on 2b(2) or realized gains on 2b(10)?

Same question for interest/dividends that come from Money Market Funds?

[Guest Dell]

Capital gain distributions from mutual funds are not considered dividends, and simply end up in 2b(10).

You will find varying practice for MM Funds. Technically, they are registered investment companies, not m/m accounts like at a bank; so the dividends would be treated as dividends just like any other mutual fund. It's not an income tax issue, nor a 990 issue, so I go with the technically correct dividend treatment. I've confirmed this w/ DOL and it's how I treat them. Others simply treat as interest, also treating the investment as interest bearing cash; and in the big picture, it really doesn't matter much.

[Tom Poje]

we just had one plan which moved from one asset house to another, and buried the gains/loss from that sale under 2(B)(4), though of course if the auditors ask we change it I have no problem complying with their wishes. The old asset house had included a 'schedule H' report which showed this as well.