Calculating Nets G/L for Schedule H

[MBCarey]

Can anyone give me any ideas as to how to calculate unrealized and unrealized gains and losses on individual brokerage accounts other than going thru each account and analyzing the buying & selling activity.

I have about 10 participant directed o/s brokerage accounts in a plan and in order to calculate Line Item b(4)(A) and (B) and Item b(5)B, I have been going thru each set of statements and preparing a spread sheet with beg. bal, sales, purchases, ending balance to come up with this number.

Is there an easier way?

[E as in ERISA]

Can't you just report the aggregate gain/loss from the accounts on one line? Or do you have unusual investments in the account? See the instructions on Schedule H for how to report participant directed investments and the related income.

[MBCarey]

I am reporting on one line, but I am trying to find an easier way to come up with that number then going thru each participants acccount. There does not seem to be any statement from these brokers that give the totals.

[Guest LKHartnett]

I guess my question is, why would you be completing a Schedule H if the plan has fewer than 100 participants?

If your answer is, "only 10 participants have brokeraged accounts, but there are more than 100 in the plan as a whole," I would answer, "ugh."

But . . . Is this not information the auditors might have already calculated? Do you have access to the audit workpapers? That might be a resource. The auditors may even voluntarily provide you with that particular piece of information. I have had luck that way before.

[MBCarey]

There are over 160 employees. The majority of the assets are held at ING and then there are these brokerage accounts that about 10-12 of the shareholders have their money in. "Ugh" is a good word.

How would the auditors provide this number, since I am not sure they would even see the plan until the 5500 is complete and even if they did, I don't think they would track the g/l on the individual accounts.

[Guest pensionadmin]

Check out Katherine's suggestion above. The new Sch H rules allow you to aggregate all participant directed accounts in the "other assets" line and the income can be aggregated on line 2C as "Other income". That way you don't have to figure out realized/unrealized gain/losses. Do a search here under "Schedule H and participant directed brokerage accounts" and you'll find more information on this.

[Guest LKHartnett]

My experience with auditors has always been the reverse . . . they do their work before I do mine, and I don't even mess with the financial piece of the large plan 5500 until after an audit is done. Invariably an auditor will come in and change your financial data anyway, so don't waste your time.

Certain financial information on the Schedule H has to tie out with corporate tax returns. Furthermore, they have to go through the financial information with a fine toothed comb.

They have to put together the financial reports that accompany the 5500 to DOL, so I'm sure they have already spent a lot of time on the financial data . . . why should you.

I don't know what your relationship with the client and the auditor is, but perhaps you might want to get the client's approval to contact the auditor so that your Schedule H agrees with the results of the audit. In fact, such a cooperative approach will serve to butter the bread.

[E as in ERISA]

NOTE: The auditors should not be "putting together" the financial information for the audited report. They should be reviewing the financial statements put together by the client.

[MBCarey]

Katherine, thanks for your post. This is the first 5500 I have done for a large plan in over 8 years so I guess I am fuzzy. After reading your post, I do remember working with the auditor to put together the financial information prior to the 5500 being done.

Also, I did not realize that the income could be aggregated on Line 2c of the Schedule H.

This plan has never had to be audited in the past because the participant count was not over 100. However, in 2001, this plan was merged with another plan which brought the participant count over 100 so in 2002, the plan will need a Schedule H and an audit. I am not sure how the auditors will deal with the brokerage accounts, but I am sure going to find out.

Thanks for all your suggestions. Any other advice is appreciated.

[Guest LKHartnett]

Let me clarify the "put together" language.

The auditors create a multi-page summary report from their audit of the plan. This report accompanies the 5500 to the DOL. The financial summaries in the report should tie out to the Schedule H, and pieces of that should tie out to the corporate tax return.

That is why I never complete the Schedule H independent of auditors, but rather in cooperation with them. Generally, they are spending a substantial amount of time combing through the financials and I am grateful to not have to spin my wheels on that piece. That is their area of expertise. Mine is compliance and testing, and I am sure they are grateful to me that they don't have to count participants and do coverage testing.

[MBCarey]

Please bear with me while I continue to understand these pieces.

Wouldn't the auditors still have to go thru the individual's brokerage statements to determine income/loss? Is this something they would normally do with outside brokerage accounts?

This particular plan has never had an audit.

[Guest LKHartnett]

Yes indeed. They reconcile the financial information and make sure everything ties out, and that includes realized and unrealized gains and losses.

If this is a first-time audit, maybe you want to introduce yourself to the auditors and see if you can discuss their procedures with you. If your reasoning is that you would like to coordinate your efforts, I am sure they will be happy to share what they will be doing. After all, you're not asking them to hand over trade secrets . . .

I've seen instances where TPAs and auditors get a sort of adversarial thing going, or there's absolutely no communication so that efforts are duplicated and information doesn't jibe, and it's a real shame, because you're both there for the same reason - to serve the client.