Amended 5500

[Fred Payne]

In reviewing assets of new client of ours, forms 5500 for years 1999 through 2001 did not include some assets that had been held by a second custodian. (Client apparently thought the asset statements they received from this second custodian were for a 403(b) plan that had been frozen when they started up a 401(k).)

Do we just file amended 5500's for all these years, or is there a voluntary correction program we need to pursue?

Thanks.

[WDIK]

Are there any other issues tied in with this oversight?

1) Erroneous disclosure to participants. (Other than the SAR which is obviously incorrect because it is based on the 5500.)

2) Improper or incorrect allocations of contributions or earnings because of the second account being excluded.

3) Incorrect distributions amounts.

etc.

[Blinky the 3-eyed Fish]

Were any participants affected? It would have had to been pooled accounts (i.e. non-directed) with a participant receiving a distribution.

[Fred Payne]

The first custodian's account--the one for which assets have been reported--is a co-mingled pool and all gains and losses have been properly allocated. The second custodian's account--the one for which assets have NOT been reported on--are participant-directed accounts.

What other issues might exist?

#1. No known erroneous disclosures other than the SAR. I do need to determine if participants who had received a distribution from the second custodian were not provided with the proper tax notices.

#2. Concerning the assets not reported on the 5500, each particpant had participant-directed account and received statements for it. Thus, no problems with allocation of gains or losses.

#3. No incorrect distributions amounts per se. Some who requested distributions mibght not necessarily have received all of their account balance if they didn't receive a distribution from the second custodian. (I still have to sleuth this out.) They would, however, still continue to get statements on their individual accounts from the second custodians and presumably would know they still have assets there. I did see where at least two people who received distributions from the second custodians have not received distributions from the co-mingled account (and here again, they continue to receive statements to that affect.)

[WDIK]

Given the facts that -

a) this is a new client of yours;

b) your client was confused about the second account; and

c) whoever prepared the previous reports was either given bad information by the client or made an egregious oversight -

I would suspect that there is a high probability that other issues exist beyond the Form 5500 error that you still have not discovered yet. I would proceed with caution.