Prohibited Transactions

[JCK535]

During the current audit we discovered that a Trustee of the plan engaged in a prohibited transaction. On further review it was determined that this had also occurred in a prior year for which the form 5500 had already been filed. I believe that we should go back and amend the 5500 for the prior year to reflect that a prohibited transaction had occurred and also include the Schedule G for the prior years amended 5500.

Has anyone else have experience with a similar circumstance and how did they handle the prior year problem.

[Andy the Actuary]

It sounds as if you were the preparer of the 5500 (or are you the auditor?) If the case, nothing gets fixed without the authorization of the plan sponsor since doing so might subject the plan sponsor to penalties. On this note, be prepared to walk away if the plan sponsor says "no." I say plan sponsor but not being a compliance expert, unsure whether plan admin, plan sponsor, or trustee is at risk.

It might be helpful to others to disclose your role and whether it was an external trustee or plan sponsor trustee who is at fault.