amending a Schedule C

[K2retire]

At the time that we prepared the 5500 for a client, their record keeper did not provide the necessary information as to their own compensation to report on Schedule C. We indicated the information about the record keeper and that the information had not be provided. Of course, this prompted a DOL inquiry. This has made the record keeper much more interested in cooperating.

The client's attorney is suggesting that once the record keeper provides the information, we should file an amended 5500. I have two questions about that.

1. Is it really necessary? What was filed was accurate at the time of the filing.
2. Would the client need a new audit?

[Andy the Actuary]

3. Who pays cost of amending?

[My 2 cents]

It would seem fair to me that if the recipient of indirect compensation, who had failed to properly report the mandated information, but who has seen the light via DOL scrutiny, wants the 5500 revised badly enough, they should pay for revising the 5500 filing.

Why would the client need a new audit (was the absence of mandated information noted in the first audit)?

Why would the client's attorney think that an amended 5500 is necessary? The Schedule C properly reported the service provider's lack of mandated reporting. If that service provider continues to provide services to the plan, they will do better next year, right? Isn't dropping a dime through reporting on the Schedule Cs what the DOL wants? It is not the plan sponsor's responsibility or the plan administrator's responsibility to force the information out of the service providers, is it? They shouldn't need to refile to protect themselves.

[K2retire]

The absence of the mandated information was noted on the form before the first audit. So presumably that is OK.

I have no idea why the attorney thinks an amendment is necessary -- that's why I'm hoping to get some feedback about it NOT being necessary.

[Peter Gulia]

While I don't presume to give any advice, one can imagine as a possible reason for filing a revised Schedule C (and perhaps other aspects of a report) a desire to start the knowledge clock on ERISA section 413's statute of limitations for a breach or violation that the plaintiff could have discerned by reading the revised report.

[My 2 cents]

If a service provider did not provide the mandated information, does that imply any lack of diligence on the part of the plan fiduciaries? If so, they should have sought to drop the service provider as soon as it became clear that they were not appropriately forthcoming. Just because the service provider came out with the information does not mean that everything is fine. Are the expense charges reasonable?

Rather than worrying about the statute of limitations, the plan sponsor/administrator should be actively making sure that any potential issues concerning their fiduciary obligations are corrected.

[Peter Gulia]

Yes, of course, a responsible plan fiduciary must evaluate the service provider and its compensation; and should consider whether to disengage the provider, or to renegotiate the provider's arrangement. Further, a responsible plan fiduciary should consider whether to demand that the provider restore to the plan the provider's excessive or unapproved compensation.

In addition to doing those things, reporting updated information might help might a fiduciary's duty of communication.