Retroactive fidelity bond for large plan?

Large plan started a few years ago, but no 5500 was ever filed.

Currently working on past filings and ultimately DFVC.

They also never had a fidelity bond, or they can't find record of it due to complete change in personnel.

Question is - I know retroactive fidelity bonds can be purchased, and that this is not meant to be done illegally, but can the 5500 be marked Yes for coverage, when it is being filed late for the first time?  if not, is there any reason to buy the fidelity bond retroactively?  Alternatively, it would not be marked yes until the 2024 plan year during which it is finally purchased.

2 hours ago, TPApril said:

I know retroactive fidelity bonds can be purchased, and that this is not meant to be done illegally, but can the 5500 be marked Yes for coverage, when it is being filed late for the first time? 

Yes, if you purchase a retroactive bond  that covers the period you are filing for, you check yes.

I'm curious of any thoughts about a VFCP filing of a late large plan 5500 that checks No to Fidelity Bond coverage?

Plan sponsor's broker does not want to set up a retroactive bond.

Note - there are no plan auditors yet - no one seems to have capacity for a new large plan, even with multiple years to make up.

32 minutes ago, TPApril said:

I'm curious of any thoughts about a VFCP filing of a late large plan 5500 that checks No to Fidelity Bond coverage?

Plan sponsor's broker does not want to set up a retroactive bond.

Note - there are no plan auditors yet - no one seems to have capacity for a new large plan, even with multiple years to make up.

Yea the auditor community reacted as expected to the change in participant count for audit purposes.  It tough to find someone wiling to accept a new audit client unless it's an ongoing relationship, and even then it can be difficult.

Filing without a bond could be red flag, but I have seen so many filed with no bond that don't get an agency love letter that I'm convinced you need really bad luck to get picked for follow up due to no bond. Even then, they will most likely just tell you to get a bond. YMMV

If a prospective audit client’s starting point is that the plan’s administrator (or “management” in auditor jargon) did not file required reports, a CPA firm might think it’s difficult to make the engagement profitable.

If CPAs find the auditee has weak controls or, worse, missing controls, generally accepted auditing standards (“GAAS”) require an auditor to widen and intensify controls testing and audit procedures. That the plan’s administrator didn’t know ERISA and the Internal Revenue Code required it to file yearly reports suggests at least one weak or missing control. And one wonders about what else was not done. Further, an auditor cannot rely on the recordkeeper’s controls if the auditor knows (or using “appropriate professional skepticism” should consider) that the plan’s administrator did not operate what that report describes as the compensating controls.

While in theory a CPA firm might increase its fee to get the extra work paid for (and still get a normal or reasonable return to margin), in the real world it might be impractical to increase the fee that much.

TPApril, one way to persuade a CPA firm to take on a difficult engagement is to reach out to a firm that knows and trusts you, and persuade the engagement partner that your new client is committed to doing everything you advise them to do.

Peter - thank you for your thoughts!

What we haven't figured out how to deal with is that there was actually a TPA they signed on with, and they did nothing. They've since been bought out by one of the larger national firms who themselves hasn't figured out that nothing has been done.

Yes we have been fixing a number of problems that have occurred.

Only one potential relief for audit purposes is that there has only ever been 401(k), no ER contributions.

Unless you work for the national firm, consider suggesting that the plan’s administrator lawyer-up to evaluate whether the administrator has good claims against the third-party administrator.

Yet, a lawyer so engaged might fair-mindedly consider that the fact that a contracted service was not performed does not necessarily mean the service provider breached its contract. Until the whole story is discovered, it’s at least possible that the service recipient did not meet a condition. That recognized, a lawyer doesn’t concede her client’s weaknesses, and might assert anything that can be stated truthfully.

Further, consider that the employer-administrator might want to protect the secrecy of its communications with evidence law’s privileges for lawyer-client communications and attorney work product.