Reimbursement to Plan Sponsor and Schedule C

[cathyw]

During the year, the plan sponsor received a reimbursement from the plan's revenue credit account for investment advisory and other consulting fees that the plan sponsor had paid directly.  The record keeper issued a report reflecting all payments and recipients during the year, and listed the plan sponsor as a service provider receiving a direct payment.  How should this be reported on Schedule C?  Is the plan sponsor to be listed, with what service code and what relationship?

Thanks.

[chc93]

In my limited experience, I've never seen the plan sponsor as a "service provider" receiving direct payment.  Usually, the revenue credit account is used to pay fees "outside" of the plan (legal, CPA, TPA, etc), or if not, allocated to participants accounts as additional gains.  Was if over $5,000?

[cathyw]

I agree that the usual sequence is to have the revenue credit account used for direct payment to the service provider.  But if the plan sponsor pays the service provider directly, the record keeper allows the plan sponsor to request reimbursement from the plan via the revenue credit account.  Unfortunately, now the record keeper is listing the plan sponsor as the entity receiving the payment from the plan (which technically is correct).

[Peter Gulia]

One guesses the recordkeeper assembled the report you describe using facts from its records.  That reporting might be designed to report facts with little or no attempt to characterize them beyond instructions the plan administrator had furnished.  A service provider might do this for reasons of business efficiency.  And a service provider might do this so it avoids discretion that could be argued as suggesting that the provider was a fiduciary, or practiced accounting or law.

 

A Form 5500 annual report is the plan administrator’s report.  It should report correctly and fairly.

 

Depending on all the facts and circumstances, that might include reporting on Schedule C the reimbursed amount as the plan’s payments, naming each investment adviser and each other service provider, and showing appropriate service and compensation codes for each.

[cathyw]

Thanks to all.  I found the answer on the DOL website.

Q37: If a plan sponsor pays a third-party service provider on the plan's behalf and seeks reimbursement from the plan, should the Schedule C reflect a direct payment from the plan to the service provider and not a payment to the employer?

 

Yes. When a plan sponsor pays a plan third-party service provider and then seeks reimbursement from the plan, the Schedule C for the plan should reflect a direct payment from the plan to the service provider. In this regard, direct compensation is defined in the instructions for purposes of Schedule C as ”payments made directly by the plan for services rendered to the plan or because of a person's position with the plan” and excludes ”payments made by the plan sponsor, which are not reimbursed by the plan . . . .” The Department notes that if the plan sponsor pays a service provider directly, and does not seek reimbursement from the plan, such payment does not need to be reported on the Schedule C.

 

https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/2009-form-5500-schedule-c.pdf