5500 Schedule C information not avaialble

[Molly the cat]

One of the investment companies has been promising the Schedule C information for our calendar year audited plans since May 3.  The last communication we received is that they suggested we go ahead and file for an extension.  Even if we do that, I'm concerned that the information still won't be available in time to meet the 10/15/17 due date.  They don't seem to be too concerned that the clients don't want to file an extension. 

Can you file the Schedule C with a notation that the information is not available?  What other options are there? 

[My 2 cents]

Part II of Schedule C is where you list service providers who "fail or refuse to provide information".  Tailor-made for this situation.  Too bad for the investment company if your reporting them there causes them grief!  If you want to file the 5500 and don't have their information, put them in Part II and file.

[K2retire]

7 hours ago, My 2 cents said:

Part II of Schedule C is where you list service providers who "fail or refuse to provide information".  Tailor-made for this situation.  Too bad for the investment company if your reporting them there causes them grief!  If you want to file the 5500 and don't have their information, put them in Part II and file.

The one time I did that, the client was immediately investigated by the DOL. It caused them grief, not the errant record keeper.

[Belgarath]

That's rather disturbing. Did anyone ask the DOL auditor why they were investigating your client, rather than going after the entity that refused to provide the information? If so, what did they say? Or were there other reasons for the investigation?

[My 2 cents]

I agree that the DOL's action, if triggered by the entry on the Schedule C, appears overly zealous and misplaced.  Is there any kind of fiduciary duty (implied or explicit) for plan trustees to shun shady investment advisors (as evidenced by their not providing the mandated information)?

Perhaps the appropriate course of action is to tell the investment company that if they don't provide the mandated information by [date based on a not unreasonable but short turnaround time, for example if demand were given today July 12th, then a date no later than the end of July, assuming that the 5500 filing deadline has been extended] then you will consider them as having violated the terms of whatever contract would otherwise stand in the way and pull all of the assets they hold for the plan and put them somewhere else. The letter should probably come from the sponsor's legal advisor. That is the sort of complaint that investment companies are likely to treat seriously.

[K2retire]

In my experience the DOL will not tell you why you are being investigated. But the investigation occurred shortly after filing the form indicating that the provider refused to provide the information. And it was primarily focused on the plan's fees.

[My 2 cents]

Put that way (and in light of the spate of recent lawsuits), it does make you wonder how the trustees are making sure that they are not paying unreasonable fees.  How do they know, for example, that the investment company is not collecting 5% annual fees through indirect compensation?  Perhaps it would trouble the DOL if a plan sponsor tolerated the failure of an investment company to comply with the applicable disclosure rules.

[K2retire]

On 7/12/2017 at 2:27 PM, My 2 cents said:

Put that way (and in light of the spate of recent lawsuits), it does make you wonder how the trustees are making sure that they are not paying unreasonable fees.  How do they know, for example, that the investment company is not collecting 5% annual fees through indirect compensation?  Perhaps it would trouble the DOL if a plan sponsor tolerated the failure of an investment company to comply with the applicable disclosure rules.

I think that is exactly the issue. In this case, we were able to show that it was only for that one year that the record keeper did not provide the information. They did provide it for that year once it was under investigation. And ultimately it was determined to be reasonable. The case was closed with no sanctions.

[Molly the cat]

Update to original question.  Investment company sent me an e-mail on 8/1/2017 indicating that the Schedule C information was available.  Since 5558 extension had been filed, I let client and auditor know and completed the Schedule C and sent them an updated Draft 5500 with the Schedule C completed.  At least my fear that it wouldn't be ready before 10/15/2017 didn't come to fruition.