Client overstepped their bounds

[Basically]

A client (husband and wife) that was a single member plan for many years in 2021 became a plan with a rank and file employee.  Naturally due to this added employee they are required to have a full administration performed and a form 5500-SF filed electronically.  For 2021 the relationship was peachy. Come the 2022 annual administration and the client balks at the price-tag of the annual admin work performed.  A back and forth via email ensues where I explain everything.  Old emails are used to show that she was accepting of the cost, even offered to pay me more for all the back and forth questions.  Yet now she is being cheap.  Her excuse?  She thought the 2021 fee was only for that year due to the added work.  Here is the kicker, my process is to email the client the form 5500 and efile authorization form along with my invoice.  The client returns the form signed and upon payment in full I would file the return electronically and then forward on the complete bound report.  I hear nothing from this client so I file an extension since the 7/31 filing deadline was approaching.  Just now I looked at the DOL website and can see that the return was filed on 7/21.  I am guessing she took my completed form and filed the return herself.  I'm sorry, WTF!

Here is my question, the DOL site says on the form 5500 that the return was "Filed with authorized/valid electronic signature" in the signature space.  Is there a way to find out who exactly filed the return? Who's credentials?

I'm so angry.  You work your @ss off researching, helping someone, holding their hand to get everything the way they want it, you are more than fair to them and then you are taken advantage of.  I need to be more cutthroat and business strong.

And, to head off the inevitable question, no, a current contract was not executed (my bad).  This unfortunate event is making a review of all client contracts a priority. But on that subject, it is in writing that she is ok with the cost quoted and she did pay the first year setting a precedent, right? 

[Lou S.]

Invoice them for 2022. You can threaten collections or not if they don't pay, your choice.

You can resign from the client for 2023 or know you'll probably be going through this with them next year.

Lesson learned, some folks are just not worth having as a client.

If they are on your preapproved document kindly remind them they can no longer rely upon your opinion letter and will be considered an individually designed plan and that you are not responsible for timely amending their document.

[Basically]

It is a lesson learned.  She responded to my email (where I played like I didn't know the 5500 was filed) and told me that she did not authorize me to file an extension of time for her.  I mean sheesh, I hear nothing and the deadline comes and goes.  Any good TPA would file the extension, it's not difficult.  Had I not filed one and she was relying on me then she would say the opposite.  She further goes on that she has lost confidence in my service and had filed the 5500 herself, "it was easy" she said. I'm sure she copied my form and filed it.  She went on to tell me that she has hired a new TPA.  

I'm wondering, while we did not have a signed contract between us, since she paid my fee last year would that be considered a hand shake agreement?  And would it be binding year to year until one party terminates the agreement?  I'm happy no longer working together, just would like to be compensated for the work performed.  I get clients come and go. That's business.  Just don't hide behind a lame excuse.

I will inform her she can no longer rely upon my document.  Just sucks

Thanks for your thoughts

[Effen]

Lessons learned on this one.  FWIW, we very rarely send the 5500 before the invoice is paid.  Once they have the 5500, they have no real incentive to pay you.  

You can warn the new TPA to that they didn't pay you, and definitely don't provide any data to them without pre-payment.  

If you have been providing 5500s before being paid for a long time, and this is the first time you were unpaid, consider yourself blessed.   

[RatherBeGolfing]

38 minutes ago, Basically said:

while we did not have a signed contract between us, since she paid my fee last year would that be considered a hand shake agreement?  And would it be binding year to year until one party terminates the agreement?

Even if it was, what is your remedy and how would you enforce it?  

[ratherbereading]

19 hours ago, Basically said:

 

Methinks it's time to move on and turn the page! 

[RatherBeGolfing]

40 minutes ago, ratherbereading said:

Methinks it's time to move on and turn the page! 

And dare I say, time for service agreements.  I know some folks still resist service agreements, but I think its getting harder and harder to defend running a business without them. 

[Basically]

The initial sting has worn off, only a little.  I am going to respond to her email today, thought it best to cool down and collect my thoughts, be professional.  For future 5500 signatures I think I'll only include the signature page and not the bulk of the return.  And updated service agreements will be prepared and sent out.  All good advice.  Lesson learned.

[Paul I]

I expect anyone who is in our business has a similar of a long-standing relationship souring because the plan became subject to new rules that require more time and fees that the client did not want to pay.  The 408(b)(2) fee disclosures were a good nudge to not be complacent and to document fees for services.

This experience may sting a little, and very likely will sting a little more when a new TPA starts asking the client for more information which may not happen until this time next year. 

Should this happen take a deep breath, review your obligations if you are subject to an IRS code of professional conduct or a code of ethics for any professional associations you belong to, and do what you must.  If you get asked for something outside of these obligations, decide what you want to do and charge and collect a fair fee prior to delivery.

 

[Peter Gulia]

If you get ASPPA’s Plan Consultant magazine, the Fall 2020 issue has an article for TPAs, “Rewrite your service agreement to protect your business: Ten tips to do it yourself.”

[Dare Johnson]

When we have had a client that balked at the fee for extra work, we would tell them to pay what they thought it was worth.  Of the few occasions, all but one paid the full bill.  

We have had some accounts receivable write-offs.  We disengage them as a client by certified mail.  It is not worth the hassle of collections and it gives the ex-client a chance to bad mouth you.

[Basically]

I was paid 1/2 my fee and she parted ways with a snide email.  She claimed that the "bigger" TPAs only charge a fee for the doc when the client is new and then every 5+/- ears when required by the IRS, not including an annual doc fee (duh).  She is mistaking an interim IRS snap-on amendment for an amendment created due to her needing to change the plan as a result of hiring an employee and tweaking eligibility and vesting, which is charged in addition to the annual doc fee.  She went on to say that they would allow her to file the form 5500 herself but if they did it that would only be $375.  I'm guessing there is no testing performed or asset reconciliation.  Bottom line is that she isn't comparing apples to apples with these fees.  If I am mistaken then I am gouging my clients. 

The case is closed and her folder moved to the deleted clients folder.  An eye opening situation that has prompted new agreements to all clients.  A good way to clean out the book of business and maybe even slim down a little to better serve the clients who see value in my service.

Thanks all for their insight.  Always learning, always welcoming advice.