Receivable Contribution

[Pension RC]

We have a takeover plan. The prior administrator only prepared the Schedule SB, but the plan sponsor prepared the 5500-SF each year. for 2015, we prepared the 5500-SF. The plan sponsor makes one contribution, which is deposited shortly before the extended deadline. In past years, when the plan sponsor completed the form, they listed the prior year's receivable as the contribution, so the contributions on the 5500-SF didn't match the contributions on the Schedule SB. When we prepared the 2015 form, our trust accountant decided that, in order to bring up the 5500-SF to date, he counted the prior year's receivable and the current year's receivable. This way, when we prepare the 2016 form, the contribution on the 5500-SF will match the contribution on the SB. The 2015 form was filed and we explained what we did to the plan sponsor.. My contact at the plan sponsor just sent me an e-mail. She is very upset that we switched the methodology without asking her first. She is concerned that, one day, when she prepares the form, she'll switch back to the old method and list $0 contributions, which will look bad. It sounds to me that she is making a big deal out of nothing. Would you agree?

Any responses would be appreciated!

[mphs77]

A change from a cash accounting basis to an accrual basis is not a big deal.

My bigger concern is that the Employer feels that they are more able to fill

out the Form 5500 package than a business that does that task fro a living.

[My 2 cents]

The decision to make a change from using a cash basis to using an accrual basis for 5500 purposes (assuming that such a decision can be made without governmental acceptance) is, clearly, one that belongs to the sponsor. How could the service provider think the decision was theirs to make?

If past practice was to report on a cash basis (recognizing that Schedule SB reporting is never on a cash basis), there would be no compelling reason to switch just so the 5500-SF (or Schedule H if a larger plan) would match the Schedule SB. Note that if there are receivable contributions, the market value on the Schedule SB will NEVER match the 5500-SF or Schedule H beginning balance, since the former would include the receivable contribution on a discounted basis but the latter would include it on an unadjusted basis. True, it used to be expected that they would match, but since PPA became effective, the SB must reflect for all purposes a discounted value for any receivable contributions.

[ESOP Guy]

Full disclosure here I am a DC not a DB guy.

However, my basic take on this before any of the DB experts commented was like My 2 cents (I waited to reply to see if there was any unique DB issues the DB experts would bring up) -- The sponsor/administrator signs the Form 5500 they get the final say on how it reads. So unless you can show what they want is some kind of reckless disregard for the law that could harm your practice I don't see a good reason for the sponsor's wishes to not be the final result.

I can see why you might want to document why you think your answer is the better answer with the client but the TPA isn't the plan sponsor or plan administrator.

[Bird]

Well, we would make a change to our Standard Operating Procedure (accrual basis) and tell the client. In that sense it is "no big deal." I guess if they objected we would keep doing it the way it was.

[My 2 cents]

I guess I may be thinking about income tax returns rather than informational returns like the Form 5500. One cannot just change from accrual to cash for tax purposes, but the 5500 Schedule H instructions just require that the cash/accrual method must be handled "consistently". Perhaps IRS approval is not necessary.