Distributions double counted due to TPA reporting error

[yd37]

Hello,

Hoping someone can help me figure this out. In June 2014, the plan changed TPAs and there was an error in the transfer of loan balances from the old TPA to the new one, causing certain loan payment schedules and balances to be wrong. In July 2015, the new TPA corrected the payment schedules and the loan balances for the loans affected, however the way they did those adjustments have cause the 2015 loan report to be inaccurate.

1- the beginning loan balances per the 2015 loan report do not agree to the 2014 ending balances. The beginning balances actually seem to be exactly the balances as of the TPA transfer date in June 2014. These balances also appear in the participant's account in the annual activity report under a "converted value" column

2- there are two loans that were offset in 2014 and zeroed out in 2014 when they were deemed distributions. In 2015, because of the issue explained in #1 above, the loans appear to have a beginning balance and are then offset again, causing yet another deemed distribution. This distribution appears in the participant's account in the annual activity report and was therefore included in Form 5500 line 2e(1) when prepared.

This is merely a reporting issue since the taxable event occurred only once in 2014, when the 1099s were distributed.

In order to correct the 2015 form 5500, I would think distributions line 2e(1) needs to be reduced by the amount of the double counted deemed distributions.

Question is, what other line in Schedule H should be adjusted to make it balance? I would think Plan assets needs to be increased, but is that correct?

I asked the TPA, since I don't know their system, when the loans were put back on in 2015, what was the other side that was affected so I know how to correct the problem. However, they are not understanding what I mean. As an accountant, we tend to think in terms of debit and credits.

Thanks in advance!

[Bird]

Sounds like this should be figured out and fixed by the TPA, but I'm guessing it's some large/gigantic firm, possibly a payroll company, and so it is easier to fix it yourself, right...? The world sucks that way.

Anyway, yes it sounds like an asset needs to be adjusted, but that doesn't make sense, if the reported assets tie out to actual assets. You might find an adjustment buried in the gain or loss. We are a TPA (and we make sure things reconcile, properly, before we prepare a 5500) and often see recordkeepers fix, for example, a contribution error by showing one end as a distribution and the other end as a gain...or whatever, there are lots of permutations on this theme.

[yd37]

Thanks for your reply. Yes, the TPA is a large company. They prepare the form 5550 based on the recordkeeper's reports. Neither the TPA nor the recordkeeper seem to know how to fix this issue.

[K2retire]

Sounds like you need a better TPA!