Partial Form 5500 - Large Plans

[Guest JHeller]

Is there a way to file a "partial" Form 5500 for a large plan if the client is non-responsive or the auditor has not yet returned the audit?

As I understand it, the opinion needs to be attached, so is there a way around this without incurring penalties?

In the past we could just send in a paper copy without it then amend when we received the opinion from the accountant.

[Tom Poje]

I've mentioned this a few times previously

on one of the webinars, or phone sessions, or whatever the DOL conducted early in the year in regards to efast2, they specifically mentioned that it would no longer be possible to send in the 5500 without the auditor attachment. such filings would no longer be considered to be filed timely.

the auditors know the due date for the forms as well. yeh, its hectic this time of year- we are waiting for a bunch to be finalized as well.

If the client is non-responsive, well, we've done the best we can about warning them about the penalties involved for late filings.

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by the way, make sure the attachment is not inadvertantly password protected.

Tell the auditors to check for the following on the pdf file they send. (I would never have known to check for this, at least the software we use gives a good desacription)

ERROR! The file is either corrupt or is password protected. The DOL will not accept password protected files. To check if the pdf is password protected open it in Adobe Reader, press ctrl+d, and then select the security tab on the pop-up window. If the 'Security Method' is anything other than 'No Security', then you will need to have the file's author remove the security settings (only the file's author can remove security settings). Once the security setting has been removed, re-attach the file.

[Guest Michael Scott]

I understand that it is not timely filed, but as a 5500 preparer, what should our answer/action be when client/auditor says to us "the audit won't be done"? Should we recommend 1) submit without the audit (and add a comment that audit isn't ready), or 2) don't file anything?

[Tom Poje]

I have no experience in that area.

the software we have gives a warning message if you run the verification indicating there is no attachment.

I haven't tried it, but I suspect efast2 will reject it if there is no attachment, so that is probably not an option.

if your attachment simply says 'the audit isn't ready', then what will the DOL do? again, no experience in trying that.

[Guest JHeller]

You could certainly attach a PDF with a message indicating the audit is not yet ready, but I think the main issue is will that be considered just as "late" as if we didn't send anything.

I don't understand why the auditors cannot get the Forms back in time, in the first place.

[PensionPro]

Just asking. What happens if someone accidentally attaches the 2008 audit report instead of the 2009?

[Tom Poje]

the DOL will look for every possibility, including coming out here to see if there was a discussion about doing that.

In all seriousness though, as far as I can tell, there are limited checks, its not a 'bar code' that is read by the system, so who would know until it is actually looked (e.g. if under audit) and its entirely possible to actually make a mistake like that...I think.

[austin3515]

Are we saying that filing the 5500 without the attachemnt is not even considered filed? I would have thought it would be filing error, which is considered filed.

[Bill Presson]

Here's what Janice Wegesin says:

Audit Not Ready: Should You File?

I get this question a lot. If you were my client, I’d recommend you file by October 15 (or whatever extended due date applies), including an attachment that explains that the audit is not yet ready and that an amended filing will be submitted as soon as the audit can be attached.

Also see information included in the DOL’s own FAQs regarding EFAST2 Electronic Filing System. The FAQs are posted at www.efast.dol.gov.

Q25: Will the EFAST2 system still receive my filing if I do not attach the IQPA report with my Form 5500 annual return/report when it is required?

The EFAST2 system will receive your filing, but submitting the annual return/report without the required IQPA report is an incomplete filing, and the incomplete filing may be subject to further review, correspondence, rejection, and assessment of civil penalties. Also, if you do not submit the required IQPA report, you must still correctly answer the IQPA questions on Schedule H, line 3. This means you must leave lines 3a and 3b blank because the IQPA report is not attached and must also leave line 3d blank because the reason the IQPA reports is not attached (i.e., was not completed on time) is not a reason listed in any of the available check boxes. You should still complete line 3c if you can identify the plan’s IQPA.

Please note that failing to include the required IQPA report and leaving parts of line 3 blank, however, will result in the system status indicating that there is an error with your filing because, as noted above, submitting your annual return/report without a required IQPA report is an incomplete filing, and the incomplete filing may be subject to further review, correspondence, rejection, and assessment of civil penalties. Thus, if you find it necessary to file a Form 5500 without the required IQPA report, you must correct that error as soon as possible.

[Tom Poje]

this sounds like that part in The Hobbit, when Bilbo and Gollum (DOLlum?) are playing the riddle game and all Bilbo can do is mutter "Time...Time" (short for "I need more time")

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so the DOL Q and A seems to say yes you can file without the attachment, it won't be rejected, but its sort of like being filed on florescent paper because the filing status will indicate such, and you still may be subject to whatever penalties are involved (because ultimately, it still is considered to be a late or incomplete filing). but i guess a partial filing is better than no filing.

[GMK]

I don't understand why the auditors cannot get the Forms back in time, in the first place.

First, I'd check if the plan administrator/sponsor asked the auditor how much time the auditor would need to complete the audit after receiving all the information, and if the PA provided all the necessary information timely.

There may be lazy auditors who don't make meeting plan filing deadlines a priority, but I haven't met them (quite the opposite). (No, I'm not an auditor.)

[R. Butler]

We have a similar issue.

I am a little leary about Ms. Wesgin's response in the EFAST era. I am concerned that filing an incomplete 5500, would just hasten a Department of Labor notice and reduce the amount of time that you have to file under DFVC. When we filed by mail you had a little lag time and generally the initial late filing notices came from the IRS and not the DOL. Will we get IRS notices in the electronic filing era or are they just going to come quicker from the DOL?

A little twist to the same question. Can we buy time by filing the incomplete 5500, but knowing that it will be incomplete go ahead and send the 5500 & DFVC filing fee now. If the DOL sends a quick notice, will plan sponsor be covered since they attempted to use DFVC? My bigger concern is that the plan sponsor gets tagged for something more than the DFVC fee.

Thanks in advance for any guidance.

[Tom Poje]

but its the DOLs own Q and A (not Janice) that says

Thus, if you find it necessary to file a Form 5500 without the required IQPA report, you must correct that error as soon as possible.

That looks to me like they opened a small window (though again, the same Q and A does indicate penalties MAY apply.

[Guest emtee]

We have a client that filed a short plan year final return that should have had an audit. They refused to get a CPA audit due to "financial problems" We prepared a 5500 for them without opinion information or financials attached. The return received a staus of Filing Error. It has been 4 months since they filed the return and have not heard a peep from the DOL or IRS.

[R. Butler]

but its the DOLs own Q and A (not Janice) that says

Thus, if you find it necessary to file a Form 5500 without the required IQPA report, you must correct that error as soon as possible.

That looks to me like they opened a small window (though again, the same Q and A does indicate penalties MAY apply.

Unless I'm mireading it the DOL is not telling you to file an incomplete report, Janice recommends that. Janice then goes on to site a Q&A which for some reason instructs you on how to do it, but tells you that such a filing is incomplete.

My question is still does submitting an incomplete filing really help you if the DOL immediately gives you notice that the filing is incomplete? Haven't you elminated the DFVC option?

[austin3515]

Is the take home from the FAQ that the DOL would rather have SOME (indeedn MOST) ifnormation rather than no information at all? After all, they have never penalized for late filing of the auditor's report in the past (assuming it was filed before the really nasty nasty letters)- why would they start now?

[Andy the Actuary]

We have a client that filed a short plan year final return that should have had an audit. They refused to get a CPA audit due to "financial problems" We prepared a 5500 for them without opinion information or financials attached. The return received a staus of Filing Error. It has been 4 months since they filed the return and have not heard a peep from the DOL or IRS.

4 months = 10 seconds in government time. While clock is ticking, penalties technically are accumulating. Odds are less than trivial that "they" will detect this filing omission. You may want to review the written materials you've provided the client in this matter to ensure you have adequately informed him of the exposure and attendant risks.

[austin3515]

I should say that before I heard it was a commonplace recommendation to file without the auditors report, I recommended against it, because after all, clients are signing "under penalty of perjury" that the return is COMPLETE and accurate. I was never able to reconcile this recommendation with that fact, but the DOL clearly doesn't seem to feel this is an issue (if they did, I don't think they would have written their recommendations that way).

But I do agree wholeheartedly that if you go this route, make sure it doesn't burn you if things don't go as expected!!

[R. Butler]

Is the take home from the FAQ that the DOL would rather have SOME (indeedn MOST) ifnormation rather than no information at all? After all, they have never penalized for late filing of the auditor's report in the past (assuming it was filed before the really nasty nasty letters)- why would they start now?

We had a plan two years ago that was penalized for late filing of the audit. The audit was months late, not weeks, but they would have probably have been better off to wait on the audit & then file under DFVC.

[Guest emtee]

Corbel is having a Web Seminar today that may cover this topic. At the very least I expect this very question to be asked.