Client Prepared Plan 5500's for 6 years -- had 260 eligible-no audit

[CharlesLeggette]

Received a call from CFO of a client with 300 employees, 260 eligible,40 deferring...CFO filed 5500's 2009-2014 -- thought that plan did not need an audit.

Hired a new CPA who asked about copies of audits. Nada!

Frankly, I've never had anything but late audits...with no meaningful consequences.

4 questions:

Is this similar to a DFVC event [since I was always told that the DOL considers a failure to attach the audit as a non-filing]?

Can they get just one massive audit that covers all years and just refile the 2014 5500 + 2009-2014 audit attached, as an amended 2014 return, with DFVC and amended return boxes checked? -- or--

Must they refile every separate 5500 and have separate audits, year by year?

Does the CFO need to commit hari-kari, kamikaze or "It's a Good Life" type action???

Thanks in advance.

[Lou S.]

I have no direct experience in this happening but...

Was a 5500 filed or 5500-SF for the years in question? If 5500, you can probably file an amended return for each year with an audit and no DFVC. If SF, then same answer but with DFVC since not filing the correct form is probably considered not filing at all or "willful neglect".

I do not believe you can get by with one "mega audit"; each year will need it's own audit. Though the statute of limitations may have expired on some years and you may be able to get away with not auditing those, just the open years.

Hari Kari for CFO seems a bit extreme but I suspect this may cut into his annual bonus, if any. Unless they are getting Federal Bailout money in which case he'll probably get a raise. Might also be a good time to see if the Plan Document is up to date or if they need a VCP for late amender.

[Tom Poje]

I'm more curious how in the world, if the participant count was greater than 100, it could be filed electronically without bells and whistles going off over a period of 6 years

[CharlesLeggette]

Yes, Tom, darn good question. I just emailed them and asked if they had filed 5500-SFs or 5500's -- but you must remember they have been using 40 instead of 260 as the part count so no bells and whistles would have gone off.

[chc93]

I've always wondered about this. Plan audit supposed to review plan assets? So if only 40 participants have plan assets, why is an audit needed if participants eligible to defer but decide not to and therefore don't have any plan assets required to be in the "participant count" for a plan audit?

[Tom Poje]

one of the great injustices is the large plan requirement is based on a 'body count' not on a '# of bodies with a balance'.

arguably, since every thing else has gone up, why has a large plan remained at 100 forever?

Charles, I'm going to guess the plan has always been filed as a 'small' plan, even if using the form 5500 rather than 5500-SF. that clearly raises some interesting issues!

[CharlesLeggette]

OK, here's the approach I plan to use:

1 – if they filed 5500’s and they incorrectly put the BOY and EOY Participant counts at 40+- and there was no indication that the count should have been 250+-, then no error would have been raised by the EFAST filing system even though a 5500-SF[small Plan] should have been filed.

2 – I was advised to call the Office of the Chief Accountant of the DOL and anonymously discuss the situation. I was advised that they have the only authority to do any kind of waiver or permit any kind of settlement in such a case as this.

3 – Amended 5500’s would need to be filed with the correct head counts and an audit attached under the standard procedure. This is subject to negotiation with the Chief Accountant’s office. I am told they are quite reasonable. There is some remote possibility that they would only require “bookend” audits. It is also possible that they will consider one or some of the filing years as beyond the statute of limitations and therefore no filing needed.

4 – Amended 5500’s shouldn’t be too hard to file using EFAST as the only thing that would change would be the headcounts and the box[es] checked regarding the audit and the plan size.

5 – EFAST amended returns are easy as to file one you just check the page one box that says “Amended Return”.

6 - There is some question regarding whether this should be a DFVC filing.My view is that we can skate on that for the moment. These are corrected filings and since we're going over 100 lives, part of the correction is the audit.

Any comments?

[Bill Presson]

Charles, remember that you will have to get a CPA firm to agree to whatever audit adjustments are decided upon. Just because the CAO says something doesn't mean a CPA firm will agree that it meets AICPA standards. And they will likely want some kind of indemnification.

[CharlesLeggette]

Thanks Bill, as soon as I find out what the "hit" is from DOL OCA ...I'll reach out...