Form 5500 Schedule I Line 4 Questions - Value to report

[mwyatt]

We have a client that recently filed their final 5500 on a terminated profit sharing plan. There was a security held by the plan that was in excess of 20% of the value of plan assets during the year. We answered question 4(i) as "Yes", but were stumped as to what value to put down as to the value of the asset. As all assets were distributed by the end of the year, and questions in line 3 all reference end of year values, we put down $0 (the value as of the end of the year) for the asset, since the instructions provide no guidance as to the value to put down (beginning of year, end of year, highest value during the year).

Client got a bounceback letter from the DOL on the question. Ended up with a supervisor on the phone who (basically a complete jerk) would not provide any guidance whatsoever as to the amount to put down for the question, whether beginning of year value or end of year value of security in question.

Besides being a little ticked that this guy wouldn't (or couldn't) provide an answer as to what to put down, what would you do in this situation?

1 - Terminated plan with all assets distributed by end of year

2 - Ongoing plan: beginning year value of security in question, end of year value, or highest value during the year (which would basically be an impossibility to reasonable track?).

[Archimage]

In your particular situation I would just put down the value of the assets before they were liquidated.

[Bird]

My reading of the question and instructions is that you are supposed to report the highest value. No, we don't track it, so I would report the highest known value. In your case, that would be the beginning of the year, since the end was $0.

A random number would provide just as much USEFUL information, but that's another issue.

[E as in ERISA]

I think that this is just one of those computer programming issues. Once you say "Yes" then the computer program will generate an error report until you put a number in the box. Zero is not considered a number. The guy at the DOL can't close it out until you give him a number. He's not trained to tell you what number you should give him. He's only trained to know that he needs a number....

[mwyatt]

Hey Katherine:

I know about DOL (I was only followink orders). I got bumped to a "supervisor" who must have come out of somebody's Motor Vehicle department. What a way to start the freakin' week! He obviously had no clue as to what to answer and basically accused me of being esoteric/belligerent when I asked him if this was an ongoing plan with a security over 20% throughout the year as to what value I should enter (BOY, EOY, highest, lowest, luckiest, unluckiest, random number generator). God knows what they do with this stuff...

And I won't even go in to the ongoing problem with DB plans filing for the year after the plan terminated...

[K-t-F]

sounds to me like it is that new math... "IRS math".... they dont consider "0" to be a number there, but then 0/0 = 100% which I guess is 100% of nothing

[Blinky the 3-eyed Fish]

but then 0/0 = 100%

If a math professor saw this statement, he would cry.

[mwyatt]

Hey Blink:

Actual cited fact from one Jim Holland (as in when you're reporting the asset to current liability percentage for a new plan on next year's Schedule B). The IRS is indeed all powerful...

[E as in ERISA]

Let me re-phrase that zero is not an entry (as opposed to not a number). Some computer programs automatically put in a zero until you enter a number (probably not as much anymore...). So a zero is not treated as an affirmative answer in some cases.

[Blinky the 3-eyed Fish]

I apologize in advance that this is so far off the topic.

Mwyatt, being he's an actuary, I can't imagine Jim Holland making the statement that 0/0 = 100%. I do understand that they clarified the 4a entry on the Sch B, but that was not to make a statement that 0/0 =100%, but rather to concede to an entry that is reasonable and that indicates no 412(m) charges are required.

[jquazza]

For all it's worth, the 5500 Preparer's Manual says t use the BOY value.

[mwyatt]

Hey Blink:

Actually JH is a pretty decent guy, but when faced with logic v. mathematical principals (ever try typing google /not the website/ into your software) he came up with the rational response. Look at the second year Schedule B with a plan based on participation; your liabilities and assets as of the beginning of the prior year are both "0". What do you enter for the prior year Asset v. Current Liability percentage?

[Blinky the 3-eyed Fish]

I enter 100% and did so even before the instructions clarified the response. That doesn't mean that 0/0 is 100% though, and it doesn't mean the Holland, whom I agree seems to be a "decent guy", says that 0/0 is 100%. It just is a logical answer to a indicate no 412(m) charges are calculated.

My whole point, and it's a moot point at that, is that 0/0 does not equal 100%.

Again, I apologize to everyone else reading this.

[mwyatt]

Hey Blink:

No apologies necessary. Not trying to say that JH is mathematically confused either - just when faced with 0/0 in that situation (and that was the specific situation in point of fact) he said to hold your nose and put down 100% .

[AndyH]

OK, this gives me a chance to vent about our "trained" help line officials. About two years ago I had a client get a DOL rejection letter about the Schedule B item alluded to here (first year of plan, enter last year's Funded Percentage). The program had defaulted to 0%. Actually, this client had two new plans with the same issue. I responded with a letter that there was no correct answer but that was rejected. Then the second plan got the same form letter.

I called DOL and after several transfers was told this question was a PBGC or IRS matter (I don't recall which) so I was told to call another number at that agency. I did that and was bounced around as usual. Finally I got sent to the person who was "handling" these inquiries, and he actually seemed to understand that "last year" didn't have a funded percentage. He told me he had a lot of these questions and that he "had a call into Washington".

I kind of wondered where he was in that case (India?), but anyways I gave him my phone number, address, etc and he assured me that I would get a call within 5 days. Never got a call. Never responded to either rejection letter. Never heard another word about it. Never answered 0% again.

Maybe "Washington" never returned this guy's call. But I wonder what the programming cost was to stop that flood of form letters.