2005 5500ez - To B or not to B (schedule B, that is)

[himt4]

2005 5500ez instructions say...

"Effective for calendar plan year 2005, filers of Form 5500-EZ will not be required to file any schedules or attachments (including the Schedule B (Form 5500)). Filers, however, will be required to collect and retain completed and signed Schedules B and P, if applicable."

I also saw a reference to an Asspa asap that stated.. "Also, IRS sources have confirmed to ASPPA that filing a Form 5500-EZ without a Schedule P will nonetheless start the statute of limitation running on the plan filing."

So it seems that one does not have to file the B and P anymore. However, sometimes you guys and gals out there come up with compelling reasons why you think it should be filed anyway.

So what are you people doing with your clients? Are you having them file the B & P with the EZ? If yes, then why?

[Jim Norman]

So what are you people doing with your clients? Are you having them file the B & P with the EZ? If yes, then why?

Why voluntarily provide more information than is required?

[SoCalActuary]

This has the opportunity for some small evil. TPA's will hire an actuary to do several years of schedule B

at a time, to achieve the results desired for past years. No disclosure of actuarial assumptions will be required,

so the actuary looking back can achieve more flexibility to correct prior information if needed.

This looks like a free ride to cheat.

[Effen]

I am appalled that you would suggest that an actuary would do such a thing. I agree that it is ripe for abuse, but in order to accomplish what you suggest, you would need to back date the signatures on the Sch. Bs, which would be a clear violation of our Standards.

Just because the Sch. B's are not going to be submitted, doesn't mean that I won't have a signed copy, with attachments, in my files.

If the amounts are worthwhile for the IRS, there are lots of ways to determine if something was done timely and the fact that you don't need to actually file a Sch. B, won't provide any additional incentive for a "good" actuary to take that job from the TPA. Plenty of bad actuaries out there already who will sign anything if the price is right.

P.S. The IRS got hammered pretty hard on this at the EA meetings, for just the reason you suggested. Maybe they realize they will need a revenue generator 5 years from now so they are setting up their ducks for a large scale audit program once they start seeing some abuse.

[rcline46]

Did you all miss that 'filers are required to collect and retain Schedules B and P..'? They still have to be done, and sent to the client. The only difference is the originals no longer have to be forwarded to the EBSA. It will be far easier to send them in than to confuse the client.

[himt4]

Yes, rcline46's answer is the kind I am fishing for. Will TPA's tell their client's to file the B & P, either because of rcline46's reason or some other? What are you other's doing?

One other reason we were thinking here is that technically if a client is a control group then he is supposed to file 5500 instead of 5500ez, even if he is the only participant and has no employees. I would imagine that often the TPA does not know about the client's control group status and does a 5500ez. By filing the B and P, if it turns out the client should have filed a 5500, he would only get in trouble for that and not for not filing a B, P etc.

[Jim Norman]

It certainly opens the door for abuse. As a TPA I can't imagine queuing up and dealing with several years valuations at once, way too difficult and time consuming. With the exception of attaching the signed B to the filing copy of the EZ, we won't change anything.

But there are all kinds. I was once brought in to look at a DB plan that had been "administered" by the client's bookkeeper. As it was explained to me, each year they contributed the corporate profit to the plan, whatever it was, sometimes 0, sometimes 6 figures. The bookkeeper did the 5500 and even attached a Sch B she prepared. The signature section was blank. The Funding Standard Account section was all blank except she had typed across the top "N/A - all cash". No, IRS had not audited either.

[Mike Preston]

The 5500EZ instructions require the maintenance of the Schedule B in the file of the person responsible for filing and that the general rules on record retention apply. But what do they say the penalty is for non-compliance? Has the non-preparation of the Schedule B been relegated to the "no harm, no foul" category when, upon audit, it is discovered that none have been prepared and they are all prepared contemporaneously?

[Bird]

We will also be submitting them, since they have to be done anyway. Perhaps if they had never been required, our approach might be different, but it just seems easiest to prepare them and send them in, just as we've always done.

[david rigby]

I would recommend the form be filed, every year. In my experience, it is the plan sponsor who has the most difficulty locating copies. Locating originals won't be any easier, so expecting them to locate several years of Bs and/or Ps is asking for trouble.

[mwyatt]

I'll chime in to second the CYA theory of filing both the B and P. If Lawrence balks at extra paper, so be it. Don't see any compelling argument to not filing, regardless of instructions.

[Effen]

What protection will filing the form provide? What makes you think the IRS will even record the receipt of an unnecessary filing? Has the IRS said what they would do with these unrequired forms?

We seem to be ok with not filing the EZ if assets are less than 100K, why aren't you not willing to take the same approach if the assets are greater than 100K?

Besides, its the PA's choice to file our not. I suppose you can prepare the forms and send them to the PA with a letter detailing both options, but I'm still not sure what advantages there are in filing when you don't need to. If the IRS isn't asking, why should I should be telling (at least as it relates to a 5500).

[AndyH]

The 5500EZ instructions require the maintenance of the Schedule B in the file of the person responsible for filing and that the general rules on record retention apply

Beautiful. So if I understand correctly, the IRS requires that sponsors who are not required to file a particular form adhere to the instructions to such form?

Sponsors who must file never actually read the instructions; now even those that don't file are supposed to?

[Guest Carol the Writer]

My question is: Is the Form 5330 and payment of penalty still due if the filer had an accumulated funding deficiency for the applicable plan year. There is no mention in the exemption from the Schedules B and P of there being an exemption from this requirement. However, who is going to enforce it - the enrolled actuary? The "Plan Administrator" who has no clue, anyway? Thanks for any input!

[Effen]

The Plan Administrator always bears the ultimate responsibility for everything related to the Plan. That said, PA's generally don't file any form unless someone tells them to file it.

I fail to see how why you think that just because you don't need to file a 5500 means that all the PA's advisors will ignore other requirements. You still need to do all the same work you did before, you just don't need to file the form anymore. If you have a deficiency, the PA needs to file the 5330 and pay the excise tax. This has nothing to do with the 5500.

[mwyatt]

I guess I've been a belt and suspenders type of guy, as I've always filed the 5500EZ for our DB plans even at the beginning when assets were under $100k (never know when the client will remember about that 20 year old Keogh they forgot to mention).

Not quite sure what the rational was in eliminating the B from the IRS's standpoint - would be interesting to hear what other folks have heard at conferences (I can see the P going away - is the plan sponsor going to sue himself for trashing his own assets?). I'm planning on filing the Schedule B anyway so there is no question of preparation.

[Guest flogger]

I'm seeing a lot of harsh penalties being levied by the IRS right now--certainly a departure from their previous "kinder and gentler" approach. I guess we're no longer partners with treasury. That being said, our mantra has always been, with respect to audits, "don't give them anything they don't ask for."

We will prepare, sign and NOT send in the Sch B.

[Effen]

They are "kinder gentler" if you correct mistakes when you find them. They have lots of programs for self-correction. The more chances you have to self-correct, the harsher they will be when the catch you.

[himt4]

OK, so my understanding of the tally is 4 votes to file the B anyway and 3 to not.

Do file B - mwyatt, pax, bird, rcline46

Don't file B - flogger, effen, norman

I couldn't glean official votes from Socalactuary, Preston, AndyH, and carolthewriter but appreciate their comments. If any one else would like to make to make their vote, please chime in. After we have a staff meeting, I'll let you know how we leaned here.

[david rigby]

Don't "lean". Decide!

[SoCalActuary]

Sarcasm isn't actually a vote, I know.

In case there is any confusion, I vote that the form must be prepared and filed each year.

[himt4]

Ok, we decided that we will not change our letter to the client, and therefore instruct him/her to file the B & P along with the 5500ez.

With my and socal's vote it brings the tally to...6 votes to file the B anyway and 3 to not.

Do file B - mwyatt, pax, bird, rcline46, SoCalActuary, himt4

Don't file B - flogger, effen, norman

Thanks again for your contributions.