Audited Plan question

[cpc0506]

Company sponsors 2 401(k) Plans. Prior TPA sent up 2 plans to keep the company from needing an audit. Plan 002 is now subject to audit due to an unfortunate amendment the client decided to make without concern of how it would affect their participant counts.

Assets for both plans are held in the same trust. There is no division (such as Plan 001 participants and Plan 002 participants) split at the investment house. We, the TPA, had asked if the investment house could generate new reports if we provided division information after the fact. They said no, only prospectively.

When we generated the draft Schedule A and Schedule C, we prorated the amounts based on the assets held by Plan 002 in relation to total assets.

Plan 002 has been submitted to the auditors for the plan year. Auditors do not feel that they can certify the information UNLESS all the assets in the trust are reflected on the Form 5500. They have asked that we complete the Form 5500 with total assets for both Plan 001 and Plan 002 on the Plan 002 Form 5500.

I have not encountered this before. Has anyone else ever encountered this situation? And what are your thoughts as to the auditor's request.

[Doghouse]

Is the "investment house" the trustee? If so, perhaps you have an MTIA that is subject to certain filing requirements?

[Flyboyjohn]

Assuming the investment house is a bank or insurance company the auditor wants to do a "limited scope audit" based on information certified by the investment house (not your

breakdown).

So it makes sense they would want to include all the "certified" assets and if the plan sponsor is ready to now admit they only have 1 "plan" for reporting purposes then follow the auditor's suggestion.

Alternatively, you might see if they'd be willing to do a "full-scope" (more expensive) audit of just plan 002.

[Lou S.]

Merge the plans?

[cpc0506]

The plans were merged as of 12/31/15. The issue is with the 12/31/14 Form 5500 filing. (And yes, the audit was not done in time for the filing due date.)

The investment house is a familiar (to many TPAs) alliance.

[cpc0506]

Can we retroactively merge the plans as of 12/31/14? And redo the 2014 Form 5500-SF for Plan 001 and show the assets going to zero at 12/31/14? Is that your recommendation?

If we show all the assets on the 2014 Form 5500 for Plan 002 and leave the Form 5500-SF for Plan 001 as is, does that not overstate the assets?

[E as in ERISA]

The audit and the Form 5500 are PLAN level reporting. But as noted above, there might be some additional reporting if the assets are actually in the same trust.

[Guest djkirby]

Full-scope is likely the only option if the trustee is unable to certify the assets in the plan.

[actuarysmith]

Not sure if the opening thread is intended to imply that you should not or cannot split a plan (say 150 parts) into two totally identical plans in every respect (and aggregate for testing / coverage / etc.) such that each plan is below 100 parts and therefore avoids audit requirement.

thoughts?