Rotation of Internal Actuaries- Schedule C termination?

[AndyH]

Recently someone in my office attended a 5500 preparers seminar and the speaker said that the DOL's position is that for Form 5500 Schedule C purposes a rotation of actuaries within an actuarial firm is a reportable termination.

Upon further checking this is a subject of a Gray Book Q&A 1992-36 which says essentially the same thing.

We've never done this and are considering changing policy. Can anybody add anything to this, either pro or con? Is there any justification for not reporting a change in actuary within the same firm as a termination?

[david rigby]

To the best of my knowledge, the IRS has been consistent in this area. However, the reporting is not really common sense. Does not fit the concept of "termination of services" for which the reporting was created.

[WDIK]

I'm sure you already know this, but I'll bring it up as part of the dialouge.

The instructions for Form 5500 state the following with regard to termination of accountants and enrolled actuaries:

"In case the servcie provider is not an individual (i.e., when the accountant is a legal entity such as a corporation, partnership, etc.), report when the service provider (not the individual) has been terminated."

From this it looks like what it boils down to is how the service provider is defined. Is it an individual or another legal entity.

(Edited for typos)

[AndyH]

Thanks for the comments.

WDIK, the gray book Q&A indicated that the actuary is a person, not a service provider, under ERISA. Thus the need to report on Schedule C.

My concerns are that it could be another point or two towards an audit, plus it does not look good, plus perhaps it should be disclosed by the auditor, although I'm not sure of the latter. Plus it is another needless hassle that it probably widely ignored.

[Blinky the 3-eyed Fish]

Prior discussion on this

http://benefitslink.com/boards/index.php?showtopic=20993&hl=

[AndyH]

Thanks, Blinky.

[MGB]

WDIK,

Jim Holland, Marty Pippins, etc., at the IRS will tell you:

Actuarial services are NOT provided by a service provider. They are provided by an Enrolled Actuary (it is the EA that signs the Schedule B). Audit services are not provided by an auditor, they are provided by an audit firm, the service provider (the audit firm signs the audit report, not the auditor).

The language you are referring to only applies to auditors, not actuarial services.

[WDIK]

Thanks MGB et al. Hopefully I should be able to remember this until the next time the topic comes up.

[david rigby]

You can also remember that Jim Holland is giving the "IRS position". That does not mean it is the sensible one. Many examples where this issue is ignored.

[AndyH]

Well, some unnamed SCIFI character (who was not the first actuary) might find the IRS/DOL/ERISA line of reasoning quite illogical.

If the firm has discretion to rotate actuaries without generating concern from the client, then the firm is the service provider of actuarial services and such rotation should not be considered a termination. As pax implied. But then again, the firm has no legal position, and may not even need to be licensed. Maybe that is the real issue.

As usual MGB's comments are well taken and that's the stance I'll advocate.

Thanks all.