Sponsor's Agreement To Change In Funding Method

[Guest merlin]

A plan sponsor signifies his agreement to a change in funding method by marking the appropriate box of item 7 on Schedule R of Form 5500. The instructions for Form 5500EZ do not list Sch. R among the allowable schedules to be attached. Does this mean that a separate statement is required from a sponsor filing Form 5500EZ?

[david rigby]

Interesting. Just a guess: the R is part of the 5500, and the exemption that permits the sponsor to file the 5500EZ will also mean an exemption from any schedules not requried by the EZ.

[mwyatt]

Actually, I've had the plan sponsor cosign my attachment to the Schedule B outlining the change in funding method explicity stating that he is approving the change in the funding method. Language is to the effect that the sponsor is giving consent to the change in the funding method (further, I have language on my attachment to a Schedule B filed with a Form 5500 stating that the sponsor is approving the change in funding method by his signature to the Form 5500 coupled with the response to the item on Schedule R). I figure it can't hurt.

I'll post the language I use tomorrow when I get back to the office (my attachment is basically modeled on an attachment sample provided by Larry Deutsch at one of the EA meetings, so I can't claim authorship).

[Blinky the 3-eyed Fish]

Our office too prepares a separate attachment for plan administrator approval to change in funding method when filing a 5500-EZ, but we don't for a 5500 because of the Schedule R. But, mywatt's thought to provide a separate attachment even when filing a Sch R certainly can't hurt.

[mwyatt]

Hey Blink:

For the 5500, I have the following attachment language that I alone sign:

Attachment to Schedule B of 2002 Form 5500

Justification for a Change in Funding Method

Plan Sponsor: ABC Company

Plan Name: ABC Company Defined Benefit Pension Plan

EIN/PN: 12-3456789/001

Actuarial Certification:

I hereby certify that I have changed the funding method for the above plan in accordance with Section 3.XX of Revenue Procedure 2000-40. I further certify that the funding method that I have used has met the requirements of Sections 5 and 6 of Revenue Procedure 2000-40. As of January 1, XXXX, the actuarial cost method has been changed (fill in what happened here).

Note that Schedule R, Item 7 of the signed XXXX Form 5500 has been answered “Yes”. This response affirms that the Plan Sponsor has agreed to the aforementioned change in the Actuarial Cost Method.

____________________________________ __________________

Actuary's Name Date

Enrollment No. 02-1234

Now if this is for a Form 5500-EZ filer, I delete that last "Note" about Schedule R paragraph and add the following:

As the representative of the Plan Sponsor, I certify that this statement has been prepared in accordance with the requirements of Section 6.02 of Revenue Procedure 2000-40. I agree with the change in the funding method described above in the statement of the Enrolled Actuary. I also note that the xxxx Form 5500-EZ makes no provision for my approval of the funding method change. This signed statement indicates my agreement to the funding method change. This change in funding method is to take effect for the plan year beginning January 1, xxxx.

____________________________________ __________________

Sponsor's Name Date

for ABC Company

Maybe overkill, but I sure wouldn't want the IRS to disqualify my change to the funding method in future years upon audit, if there wasn't some filed representation with the 5500-EZ that the sponsor approved the change in funding method.

[david rigby]

Excellent! Thanks for sharing.

[mwyatt]

Glad to help (as others have helped me along the way via this board and other sites).