If questionnaires are not returned in a timely manner, this can hinder the preparation of the Form 5500. In some cases, vendors may need to be reported as non-responsive within Schedule C if no response is received after numerous attempts. Therefore, it is key to start the questionnaire process early. Questionnaires can be sent out immediately after the benefit plan’s year-end.
Here are some best practices to obtain completed questionnaires in a timely manner, step by step:
Create a standard template questionnaire that will apply to most vendors. Include definitions of direct and indirect compensation to facilitate the understanding of what is being requested. Direct compensation is payments made directly from the plan’s trust. Indirect compensation is payments made other than directly from the plan’s trust in connection with services rendered to the plan and often based on a transaction with the plan.
Create a template for indirect compensation only that will be sent to plan trustees and plan employees. From plan records, the direct compensation is already known, so this will make it more efficient and quicker to obtain responses since only asking to confirm indirect (include definition of indirect compensation), if any. This streamlined approach will encourage responses much more quickly from these individuals since they are just being asked a “yes” or “no” question regarding indirect compensation.
Keep and accumulate a list of service providers throughout the year and update for any changes on an annual basis. This is much more efficient than trying to start a list from scratch each year.
Coordinate the service provider list with the Form 5500 preparer to verify its accuracy. This will prevent any last-minute additions that you may have missed.
As suggested above, send out questionnaires immediately after plan year-end. Also include a due date for responses so all parties involved know the timing and that there is some accountability.
For trustees, consider bringing the questionnaires to a Board of Trustee’s meeting. This will simplify the process and ease of collecting the completed questionnaires.
Review returned questionnaires to make sure they are fully completed by responders and if any questions need to be resolved. Immediately contact the responder while it is fresh in everyone’s minds to follow up on any open items.
For any responses not received by the due date, send a second request by email (if possible) rather than mailing a hard copy.
If still no response, send a third request followed up by a phone call. Include in the final request that, if no response is received by a certain due date, the service provider will have to be reported as a non-responder on the Form 5500.
It is in the best interest of the plan to be diligent about the Schedule C process for accuracy and to minimize the reporting of non-responders. If there are numerous non-responders, it could be a red flag to the Department of Labor about the integrity of the service providers that the plan’s trustees choose to do business with on behalf of the plan.
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