Schedule C needed for change in Enrolled Actuary?

[Guest HarveyC]

Does a Schedule C need to be filed with the 5500 in each of these cases:

1. A different Enrolled Actuary (EA) within the same firm signs the Schedule B this year vs. last year, either because prior EA is unavailable (due to vacation etc) or case loads are reshuffled within firm. Prior EA is still at firm.

2. The EA that signed Sch B last year leaves firm. The Sch B this year is being signed by another EA within the firm.

Thanks.

[david rigby]

Link to 5500 instructions: http://www.dol.gov/EBSA/PDF/2002-5500inst.pdf

See bottom of page 7 and continuing to top of page 8.

My understanding is:

1. Yes

2. Yes

[Blinky the 3-eyed Fish]

I am not sure I agree, maybe if based on common sense alone. Also, there is the blurb on page 31 where it specifically states where the service provider is an entity, you report the change in entity, but not a change in individual. While an enrolled actuary is an individual, I would argue he/she is operating under an entity as an employee of that entity.

[david rigby]

It is my understanding that the EA is always always always an individual.

I agree that it should not matter for a change within an organization, but that is not consistent with prior comments from IRS/DOL.

From Gray Book 1992-36:

"36. Must a change in enrolled actuary resulting from reassignment of cases within the same firm (both EAs have the same employer ID number) be reported on form 5500? Must the plan sponsor notify the prior EA of this change?

ANSWER:

Under ERISA, the enrolled actuary must be an individual person (i.e., not a service provider as is often the case for accountants). Therefore, if the person who signs a Schedule B is not the same person who signed the prior year's form, that constitutes a change from the DOL's perspective even though both actuaries are employed by the same firm and there probably was not a formal "termination of the appointment" of the first actuary. Accordingly, in order to avoid a possible rejection of the 5500 (for being incomplete), item 28© should be answered "yes", Part III of Schedule C should be completed and the "former" actuary should be notified accordingly."

© Enrolled Actuaries Meeting.

[Blinky the 3-eyed Fish]

I can see it now.

"Hey Bob, here's your termination notice. Sorry I spilled coffee on it."

"Thanks, Frank, I will be more careful with yours next year."

I knew I was in trouble when I tried to apply common sense.

[Guest HarveyC]

The instructions for Form 5500 were changed subsequent to the 1992 Gray Book entry. ERISA regulation section 901.2 says in part “Where a corporation, partnership, or other entity is engaged to provide actuarial services, such services may be provided on its behalf only by an enrolled actuary who is an employee, partner or consultant”. Since agreements are typically made in the name of a firm, it is my opinion (hope) that there is no change in actuary as long as the signing actuary is an employee of that firm.

[maverick]

Here's what Sungard Corbel's 2002 "The 5500 Filing Guide for Plan Year 2002" pages VII-7 and VII-8) says:

"... For example, if the plan contracts with Smith, Jones and Day, LLP to perform the audit of the plan, the plan does not report a termination if one year Mary Smith performs the audit and the next year Jeff Jones from the same firm performs the audit. Some practitioners have speculated that the same principal does not apply to actuaries since the actuary (and not the firm) must list his/her enrolled actuary number of the Schedule B. However, we would recommend following the same principal for actuaries as one would do for accountants (i.e., if the actuary changes but not the firm, do not report the change as a termination). Generally, when there is a replacement of a plan's actuary with another actuary from the same firm, the decision is made by the actuarial firm and not the employer. Furthermore, the change generally is because of different work assignments or because of employment changes. Therefore, if there is a change in actuaries but the actuary is from the same firm, we would not report the change on the Schedule C."

The "5500 Preparer's Manual 2000 Plan Years" (Wegesin, Gucciardi, and Aska-Knox) says basically the same thing:

"... When the service provider is a legal entity such as a corporation, partnership, etc., report when the service provider (not the individual) has been terminated."

Maybe common sense will prevail after all.

[MGB]

The company that an enrolled actuary works for DOES NOT provide actuarial services to a plan. Only an individual actuary does.

ANY change in the EA signing the B must be treated as a change on the 5500.

The IRS has verified and restated this many times. (If you asked Holland today, I guarantee you will get this answer.)

The reference in the instructions to the "firm providing services" only applies to the auditors. A firm signs an audit report, not the individual accountant.

[Guest HarveyC]

The lack of agreement out there on this subject mirrors that within our firm.

MGB, do you have a phone number, e-mail address, or other contact info handy for JIm Holland?