Retirement plan vendors throughout the industry are engaging in efforts to prepare for the new disclosure requirements for the 2009 Form 5500 schedules, particularly the disclosures related to direct and indirect compensation under Schedule C and the substantial requirements for Schedule A.
I had the pleasure of a couple of informative conversations this week which were very enlightening. First, Tom Horton of Barrett and McNagney (and one of the very best retirement plan lawyers I know) and I were talking about some about the effects the new Schedule C will have on the plan administrator’s obligations (I know, I know, we need to get a life!). We spoke of how the Schedule C will be providing data for the fiduciaries to which they never had access in the past related to 12(b)-1 fees, sub-transfer fees and other sorts of revenue sharing. What do they do with it? Well, it seems that that they would be ill advised to ignore it. Failing to undertake a review of the data once they receive it may well result in a fiduciary failure. But there is yet another twist. The plan administrators may well need to be on the lookout for the data. If they don’t receive it, they are under the obligation to report that failure. Failing to report that failure can trigger non-filing penalties for the Form 5500.
If that wasn’t depressing enough, Janice Wegesin, author of the Form 5500 Preparer’s Manual and I had a conversation about how the Form 5500 Schedule A applies to individual ERISA 403(b) contracts. The data demands are really pretty incredible. The best example is the requirement under the Schedule to report consolidated information on transfers between the insurance company general account investments and variable investments under those individual contracts. I know of several employers with thousands of such contacts. I’m not sure I want to be anywhere near those 5500’s. But like the Schedule C, there is a reporting requirement under Schedule A which requires the plan administrator to report vendors who do not provide that data to the plan. So it means that plan sponsors will need to be looking for this ugly data.
Its going to be an interesting reporting season, I’m afraid.