Build Credibility with Expertise

 Lawrence Groves-July  2005

As an Investment Representative you’ve worked hard to build trust with your

 pension clients. Now, you can solidify that long term relationship with your

 expertise on one of the greatest fears of small business retirement plan

sponsors.

Next to an audit, nothing frightens retirement plan sponsors

 more than a notification letter from the Dept of Labor

 regarding inadequacies in their responses on the Form  5500

 or 5500-EZ filing.  Inadequacies that, if not corrected

 within 30 days of the date of the letter, would subject the

 plan sponsor to substantial fines and penalties, not only

 from the Dept of Labor but from the IRS as well. 

 Following is a listing of the most common filing errors that

 will generate a letter from the Dept of Labor. 

1. The Form 5500 Must Be Properly Signed And Dated

 Make sure that you have the proper signatures by the Employer and Plan

 Administrator and dates on the Form 5500, Form 5500-EZ, and any attached

 schedules that require a signature (Schedules B: Actuary; P: Trustee; and

 Schedule SSA; Plan Administrator). 

2. The Form 5550 Must Have The Proper EIN And Plan Number (PN)

 It is critical that the Employer Identification Number

 (EIN) used to identify the “plan sponsor?be the same year

 to year when completing line 2b of the Form 5500 or Form

 5500EZ. 

3. The Form 5500 Filing May Not Be For A Period Greater Than 12 Months

Be certain the time period entered in Part I of the Form 5500 is not greater

than twelve months. If the plan is not reporting on a calendar year basis, then

 input the twelve-month fiscal year period in the spaces provided.

4. Use A Proper Business Code When Completing Line 2d Of The Form 5500

 On Form 5500, Line 2d, be certain to enter a valid business code that best

 describes the nature of the plan sponsor\'s business. The only business codes

that are valid for use in answering Line 2d are listed in the Form 5500 filing

 instructions section marked “Codes for Principal Business Activity?

5 Use The Correct Plan Characteristics Codes On Line 8

 Of The Form 5500.

 On Form 5500, Line 8, you must check box A

 to indicate if the plan is providing pension benefits. You

 must enter the Plan Characteristics Codes in the space

 provided beneath box A. These codes describe the type of

 pension benefits provided and other features of the plan. A

 list and description of the Plan Characteristics Codes is in

 Section 6 of the Instructions for Form 5500. 

6. Properly Identify The Funding And Benefit Arrangements On Line 9 Of The Form 5500

Indicate all the proper Funding and Benefit Arrangements on Form 5500, Lines

 9a and 9b. The “Funding Arrangement?is the method used for the receipt,

holding, investment, and transmittal of plan assets prior to the time the plan

actually provides benefits. The “Benefit Arrangement?is the method by which

the plan provides benefits to participants. The responses on Lines 9a and 9b

 are cross-referenced against information on Schedules H, I,

 and/or A as appropriate. Be careful to attach the

 appropriate financial or insurance schedule (H, I, A) that

 corresponds to the Benefit and Funding Arrangements you indicate. 

 7. File All The Required Schedules And Attachments With

 Your Form 5500

Make sure you are filing all the required schedules and attachments with your

 Form 5500. If you check a box indicating that a schedule is attached, the

schedule must be submitted with your Form 5500. 

8. Schedule R And Distributions

 You must prepare Schedule R only if there are any distributions or rollovers

from the plan. You must enter both the EIN of the distribution payer and the

EIN of the pension plan. Part 3 is only for money purchase plans that have

made single sum distributions.

 9. File The Appropriate Financial Information Schedule (H

 or I) With Your Form 5500.

 Make sure you file the proper Financial Information Schedule with your Form

5500. The Schedule H is for “large plan?filers (generally plans with 100 or more

participants at the beginning of the plan year). The Schedule I is for “small

plan?filers (generally plans with fewer than 100 participants at the beginning

of the plan year). 

10. Complete the Participant Benefit Information on the Schedule SSA 

 Make sure that you list all of the terminated participants with their vested

balances from the prior year that still have not been paid. Starting with the

2004 filing year, sponsors are required to list participants, previously

outstanding, who have been subsequently paid. 

When your client calls, anxious of a possible Dept of Labor fine, you can build

long term credibility by taking charge of seeing the correction is made by the

preparer. Better still, review or have an expert review, the Form 5500 before

the client sends the forms into the Dept of Labor and save your client receiving

 any letter at all. Calendar year plans Form 5500 EZ and Form 5500 with

related schedules are due July 31, 2005.

About the Author:

Lawrence Groves is the Small Business Retirement Services Director for The

Retirement Group. He has helped thousands of small businesses set up

retirement plans. Visit the site for more information http://www.solo-k.com.

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