5500-SF - #9a (Plan Characteristics)

[Guest KristenE]

This is a 401(k) Profit Sharing Plan that only has salary deferrals - no employer discretionary contribution. I am having a discussion with the owner of my firm regarding answering this question with the code for Profit Sharing feature (2E), even though there has never been a profit sharing discretionary contribution. In the past, I have always listed this code, even if it was just a plan the only had salary deferrals. My boss is of the opinion that you would only list this code if there had been profit sharing contributions. (I have been out of the field for 15 years, so thought I would post the question here.)

And what about if the plan has the language for a matching contribution, but one has never been made? This would pertain to code 2K which applies to 401(m) arrangements (but not Qnecs/Qmacs).

Thanks for your help, I came back into the field in February of this year, and feel a lot like Rip Van Winkle after being out of the field for so long.

[John Feldt ERPA CPC QPA]

I view a "plan characteristic" as "plan" + "feature".

The "plan" is the written instrument that the sponsor of the plan adopts.

The "features" of the plan include anything that would be available under the terms of the plan.

Thus, if the document allows a discretionary match and a discretionary PS, but has never used those features, I would still enter codes 2E and 2K.

Similarly, if the document allows only deferrals (does not allow a discretionary PS or match). I would not use either codes 2E or 2K.

edit: typo

[GMK]

agreed

[BG5150]

me three

[Bird]

Generally, I agree; if it's a feature in the document it should be listed. But we permit optional matching contributions in virtually all of our plans, yet rarely use that feature. Speaking for the ones that I handle, I can't swear that I have entered that code on every single one...

[BG5150]

Has anyone ever got and gruff from an auditor (gov't or CPA) that a code was wrong or missing?

[Tom Poje]

recall, if plan has a match feature and never used it, and plan uses prior year testing, it is not permitted to use 3% prior year the first year it actually makes a match.

just by that fact, i would say you should include the feature even if not used.

[ESOP Guy]

Has anyone ever got and gruff from an auditor (gov't or CPA) that a code was wrong or missing?

No

I can say that about a large number of sections of a 5500.

[John Feldt ERPA CPC QPA]

Same here. These code responses are very insignificant for 5500 filing purposes.

However, unlike the voluntary 401(k) questionnaire where plan sponsors could simply mark any answer they wanted (just to finish the request without getting audited), the Form 5500 has this statement:

Under penalties of perjury and other penalties set forth in the instructions, I declare that I have examined this return/report, including accompanying schedules, statements and attachments, as well as the electronic version of this return/report if it is being filed electronically, and to the best of my knowledge and belief, it is true, correct and complete.

If, upon examination/audit, the government agent begins to think that the Form 5500 questions were just filled in with something, anything, just to get the filing done, then you've likely got more trouble, not just a short closing comment made by the auditor to end the exam. So, it is best to get the best/correct answer in all questions at all times.

[BG5150]

If, upon examination/audit, the government agent begins to think that the Form 5500 questions were just filled in with something, anything, just to get the filing done, then you've likely got more trouble, not just a short closing comment made by the auditor to end the exam. So, it is best to get the best/correct answer in all questions at all times.

In this case, it's a matter of "I didn't think we needed to put code 2K" I don't think an auditor is really going to make a big stink about it.

[Bird]

If, upon examination/audit, the government agent begins to think that the Form 5500 questions were just filled in with something, anything, just to get the filing done, then you've likely got more trouble, not just a short closing comment made by the auditor to end the exam. So, it is best to get the best/correct answer in all questions at all times.

I don't disagree; it's best to be accurate. And I'm not sure why I'm so flip about this when we're so anal about everything else...I guess I think it's more of a statistical database kind of thing.

[Guest KristenE]

Thank to everyone for their replies. I also do not think it is that big of a deal, but do agree that getting the little things correct builds the foundation for getting the bigger stuff right. Kristen ;-)

[Guest Janiele]

Agreed, if the Plan has the feature in the Plan Document (whether or not it is used) should be disclosed on the 5500