Clients who dont submit census data

[R. Scott]

Can other TPA's please share how you handle the Form 5500 filings for clients who despite diligent follow up are not submitting their census data to you?

 

Specifically:

1) Do you send one last follow up to them saying that you wont be able to do their compliance testing & 5500 filing without the data and they should prepare to receive an IRS letter at some point?

 

2) Or do you resign as their TPA at some point before the 5500 is due to be filed?

 

3) Do you attempt to at least prepare a 5500 using only the data you have access to at their recordkeeper and then send it to the client with a disclaimer that it may not be accurate and that the compliance testing is still outstanding, just to at least spare them from receiving an IRS letter for a delinquent filing?  

 

How are you all handling these situations? 

[RatherBeGolfing]

Everyone's situation is different, so how they handle these situations may be different. 

What does your service agreement say? 

Regardless of the above, don't make your client's problem your problem.  

[ratherbereading]

We typically do #3.  

[BG5150]

Combination of all three.  But like RBG said, check your service agreement.

In most of the places I've worked we would not prepare the 5500 (or publish it for filing at least) until the work was done and paid for.  ( We usually bill ahead for the next year)

 

 

[rocknrolls2]

Subject to the terms of the service agreement, you should remind the client that the timely filing of an accurate Form 5500 is ultimately their responsibility. If the client does not provide complete data for the completion of the Form 5500, if this is the first time that this is happening, again subject to the service agreement, you could either refuse to file one at all (especially is NO information is provided) or file a partially complete Form 5500 with blank portions for the areas where the client failed to provide timely information. I prefer the former approach because the latter could make your organization appear to be less than professional. If asked to provide services which include the filing of a Form 5500 after a first occurrence, consider imposing a penalty fee for the client's lack of cooperation. Also, tell the client that if it fails to provide any information or any material information, your firm will have the right to resign. Also remind the client that it is their ultimate responsibility to file an accurate and timely Form 5500. Prospectively, consider tightening your service agreements to impose tighter controls over the client's timely cooperation, include non-cooperation of the client as a reason for terminating the ageement, subject to 30 days' advance notice, and include a penalty fee for a first-time incident of non-cooperation or unjustified failure to furnish timely information needed to complete a Form 5500 filing.

 

This is not to be construed as the provision of legal advice.

[Peter Gulia]

For more ways to protect yourself, read my 10 tips for rewriting your service agreements yourself in ASPPA’s Plan Consultant magazine (Fall 2020).

[Jakyasar]

No census thus no compliance testing no matter what. Late 5500 due to lack of information is the client's issue, not yours. How can one complete the 5500 forms without knowing how many participants you have, active, terminated, with account balances, terminated with less than 100% vested balance? RKs o not always have the correct data, depending on who is inputting the data. As a TPA you would be taking a huge risk and responsibility by preparing incorrect information with nothing and also putting in incorrect data knowingly. As RBG said, do not make it your problem if the client is not incompliance with providing the data. They can always file late with DVFC. If the client insists on not providing census, resign.

My 2 cents FWIW

[mming]

We lean more towards option 1.  Can't see how option 3 is even a possibility w/o any census info.

[david rigby]

4.  One more time, remind the sponsor of their responsibility and the penalties for failure to meet compliance parameters.  AND resign.  Now.

[ESOP Guy]

ESOPs can be a bit different here  but we only will do #3 if we think our understanding of the assets and income for that part of the 5500 is materially correct.  With an ESOP since the largest assets often times is a stock that needs an appraisal a client that doesn't send in a census tends to get get the stock price timely also. But if we haven't gotten bank statements, brokerage statements.... and we won't send a 5500 that simply rolls the prior year's numbers forward. 

I get more and more DC plans are daily valued and the TPA can have access to the recordkeeper platform so you might have that.  But we would have a discussion if we have nothing and we think the counts could be materially wrong also but we are pretty hardcore on the assets.  There is a perjury statement the client is signing on the 5500 and we won't help a client make a materially wrong statement at least knowingly. 

 

At some point these people need to be adults with their plan. 

[Paul I]

Make sure you are communicating with individuals who are plan fiduciaries. This particularly is true for smaller plans where the owners sign the documents saying the company is the Plan Administrator, and then the owners abdicate responsibility and rely on payroll or clerical employee to run the plan.

Telling the plan fiduciaries that they personally are accountable for a failure to operate the plan in compliance (including filing accurate 5500s) sometimes gets push back where they say "no one told me, so it's not my fault".  In this case, definitely put an explanation of the issue in writing.  If they refuse to clean up their act, resign and make it clear in the resignation letter the reasons why.

Fortunately, things rarely escalate to this level of stubbornness.