While the service provider is responsible for providing compensation information, the plan sponsor / administrator is responsible for reporting it on Form 5500. Plan administrators must review the existing disclosures annually, to ensure the disclosures remain accurate, and update them, as needed.
Confirming Schedule C compensation arrangements should be relatively straight forward; however, when a plan deals with numerous providers (as is the case for multiemployer plans), it can be a cumbersome process. Furthermore, these “Schedule C confirmations,” if not addressed in a timely fashion, can hinder the preparation of a plan’s Form 5500.
Following are Lindquist LLP’s top tips for administrators to facilitate the collection of Schedule C confirmations:
Accumulate a list of service providers, if not already available, and make updates to the list on an annual basis.
Send the list of service providers to the plan’s CPA firm for suggestions and updates.
Send the confirmations out to the service providers shortly after year-end. It is not necessary to wait for receipt of the document request list from the auditor or commencement of the audit.
Plan to do two rounds of follow-up communications:
Send a letter to the service providers who have not responded. The letter does not necessarily have to be sent in hard copy; the plan administrator should consider distributing this communication electronically.
If the plan does not receive a response, send a second letter to the service provider, followed up by a telephone call. Include in the letter an explanation that the service provider will be reported as a non-responder on Form 5500 if the plan administrator does not hear from the provider by a certain date.
It is in the best interest of a plan to be diligent about following-up with service providers, with the goal of having to report as few non-responders as possible. Reporting a number of unresponsive service providers may present red flags to the Department of Labor about the integrity of the service providers with whom the plan’s trustees choose to do business.
Contact your Lindquist LLP engagement partner with any questions about the confirmation process.