One 5500 for two plans?

[Guest]

We recently assumed administration for a sponsor's mpp and p/s plans (separate documents). Their accountant has been filing one 5500 for both plans, using combined data. Should we start filing separate returns? If yes, how would we do this? Show assets being transferred out and into the other plan? Won't the IRS ask questions?

[Fredman]

I've never seen a 5500 filed as a combined return. If you have two plans, two documents, two plan ids (001 & 002??), two of this and two of that, I think I'd be filing two 5500s.

I'm kind of surprised that the IRS hasn't been around looking for that second 5500.

Anyone else?

[Guest David Dye]

I agree with the post from Fredman. Two plans - two 5500 returns.

Your question brings to mind a number of questions for me as to how the accountant has been completing the forms in the past:

What does he list for the plan name?

What does he list for the 3-digit plan ID number?

What code does he list in the box for the type of plan (i.e., profit sharing or other money purchase)?

How does he answer the question about minimum funding standards?

If the same participants participate in both plans, what does he list for the number of participants? (example - if 20 EEs participate in PS plan and same 20 EEs participate in MP plan, does he list 20 participants, or 40?).

As for how to correct the problem, I would take the assets listed on the combined 5500 and figure the portion belonging to each plan. Then take the amounts calculated and use them as beginning assets on the next year's 5500s (2 separate returns).

If IRS questions it, and they probably will, show them what the accountant has done in past years. (Assuming the accountant is a CPA, he/she should know better). Explain to IRS that you are trying to correct the situation, rather than continue filing an incorrect return. My experience has been that the IRS is usually pretty forgiving in such circumstances.

[Guest]

I agree. That sounds strange to me, and you should file one 5500 for both plans, and the previous accountant better have good malpractice insurance.

[richard]

I agree that the IRS "probably" will be forgiving in this situation, and if not, the accountant (and his/her attorney or malpractice insurance company) will be significantly involved (one plan, how many years of missed filings? the other plan, how many years of materially incorrect filings?)

While you want to file it correctly for this year (at a minimum, to cover yourself). However, you may want to have the client (and perhaps his accountant) determine how to actually go about it. Perhaps, sending 2 5500's with a cover letter describing the situation (perhaps, with last year's 5500 attached). What plan number will be assigned to the 2 plans? Should one plan have the old number, and use a new number for the other plan; or use two new numbers? Is this an EZ or a C/R? (I presume under 100 participants.)

[Guest Linda Moiseyev]

You may want to find a qualified accountant that understands employee benefit plans.

[Guest Yvonne Bonitatibus]

I just stumbled across this message and am frightened to say that our accounting firm also only files one 5500 for several benefit plans. They use the plan name as just "COMPANY NAME Health Benefit Plan". They use plan number 501. They do attach each separate schedule to the 5500. Where does this plan number come from? I know on our 401(k) plan, the plan number is listed on the plan.

[Kirk Maldonado]

Yvonne:

The previous entries only relate to tax-qualifiled retirement plans. This discussion does not relate to welfare plans (such as health plans).

[JohnCheek]

1. While the IRS may be forgiving, you also have to contend with the DOL. I suggest you check out their deliquent filer programs, because they will take the position that no Form 5500 was filed, for all years, if a correct return was not filed for each plan. You very much should discuss this with an attorney with ERISA expertise.

2. I think the same rules apply to welfare plans. One 5500 for each plan. The problem in welfare plans is that it is more difficult to determine what constitutes a separate plan; one plan can offer a variety of benefits, such as health, dental, death, etc. Or, each of these might constitute a separate plan. It depends, in part, on the documentation establishing the plan(s).

[KIP KRAUS]

I have never heard of a plan document that combines two or more pension plans, especially with two or more plan numbers. I've always seen pension plans filed as separate plans.

Welfare plans (i.e., health, life, dental,stc.) on the otherhand, can fall under one plan document and one plan number.

If I was going to contact a peofessional regarding this issue I'd contact an ERISA attorney, not an accountant. Don't get me wrong, accountants are great at auditing and filing plans, but I don't look to them as authorities on ERISA. Just my preference.

[Greg Judd]

Originally posted by Kirk Maldonado

Yvonne:

The previous entries only relate to tax-qualifiled retirement plans.  This discussion does not relate to welfare plans (such as health plans).  

Seconding Kirk's reply, Yvonne. We've seen some mighty creative filing habits for welfare plans....

[BeckyMiller]

Hey - Kip!

As much as I adore all ERISA attorneys, I must disagree. When it comes to reporting and disclosure violations, I have generally found that the accounting profession is better qualified to handle the issues. (Obviously, this assumes an accountant familiar with ERISA, not just any accountant, as you would not use just any attorney.)

We are all assuming that the original filing was in error. I submit that there may be simply a misunderstanding on the nature of the original filing. It could be that the combined Form 5500 that Thornton observed was a Master Trust filing. Such a combined filing is appropriate for a Master trust. Obviously, it would not be the only filing for these plans - each would have separate filings for the non-financial information. A master trust filing should be designated as such, if it is, I would ask for the separate Forms 5500 for each plan.

It is quite possible (and unfortunately more likely) that the assumption is correct and the filings were inappropriate. I just felt the need to stick up for my accounting brethren.

If the original filings were in error, we have been successful with filing amended returns. We file both returns for all applicable years at one time, with one cover letter. To date, we have never had difficulty with either the IRS or the DOL with such filings. There is no assurance that this level of forgiveness will last and the comments about looking at the need to use the DOL relief program are very appropriate.

Finally, with respect to welfare plans, we see a ton of "umbrella" plans - multiple benefit features under a single plan. As long as the features have comparable eligibility standards, this seems to work fine. We have even used this approach under the DOL's relief program to reduce the penalty exposure without negative feedback from the government.