I've never seen anything like this, and wondered if anyone had, and has an opinion of the likely outcome.
The prior TPA had someone who was either inexperienced or insane prepare the 5500. On the Schedule H, line 3(a)(1), they checked that there was an unqualified opinion attached (although one was never done) and simply attached some statements from the various financial institutions! And the client, apparently not knowing any better, filed the forms as prepared.

Needless to say, the DOL kicked it back and is proposing penalties of mega-thousands or something like that. Client is asking what they can do?

I've never seen such a situation, and wondered if anyone had, or had a feeling as to the likelihood of some successful penalty reduction if they beg for mercy? (and there's the obvious step of a suit against the TPA, which I presume wouldn't be necessary, because I suspect any TPA in this situation will simply ultimately pay any penalty. But maybe not, once the attorneys get involved.)

Any opinions or ideas?

If an audit is required for the plan, then you need to have one performed IMMEDIATELY. If they don't correct, their ability to reduce penalties is limited. The client may not have previously understood that an audit was required, but once the DOL informs them that one is required it expects the client to respond accordingly. The extent to which they can have the penalty reduced may depend on their level of responsiveness. In the past, it was possible to have penalties reduced to zero for a client who had completely corrected a defect by the time of the Notice of Intent to Assess. However, the DOL has more recently only reduced the penalty to only $5,000 for clients who waited until that notice to completely correct. I don't know what happens if you don't completely correct. So I would make sure that the client had the audit completed.

Are you sure the prior TPA didn't simply instruct the client to attach the audit report. I know I rely on my clients to attach the audit reports-The prior TPA may have known exactly what to do, the client probably had someone working on the plan internally who didn't have the sense to know when to ask questions.

I pretty much agree with Katherine's analysis.

Spot,



Really wouldn't the TPA know whether the audit was being completed? Why did the TPA check unqualified opinion? Was the TPA just guessing? I can't remember an audit where I didn't speak with the auditor. I usually send the completed 5500 to the auditor or the auditor sends the opinion to me that way everything is sent to the client in complete form.

I'm always a little suspicious of posts that start out with a story of how stupid the prior TPA was. Your right, at the very least, the prior TPA failed in the communication department. I have a hard time believing a TPA firm would make this sort of error. I wonder if the client's bookkeeper, investment advisor, insurance agent, etc. actually prepared the 5500 and not a "TPA".

Could there be confusion because the prior year did not require an audit?

Have since found out more details. The TPA did in fact do this, because the client didn't want to pay for an audit! Oh well...I agree with Katherine that step one is for them to get an audit done immediately. Then beg.

Aha! Once you actually receive documentation, you find out that things are far different than what they tell you over the phone. First, SPOT is correct - the other TPA completed the form this way, but with the understanding that the client would get the audit done and attach it before filing the forms. Second, the DOL is not yet imposing any penalties - just asking for the audit. But this does make me feel better about the other TPA, since I couldn't imagine anyone doing this. Thanks to you all for your responses, and sorry if I wasted your time based upon incorrect initial information.

"since I couldn't imagine anyone doing this." When a client instructs a TPA to complete a form in a certain manner, I can't imagine them not following instructions (given that they believed the form was going to be correct when filed).

To be honest, I hate doing Sch. Hs b/c they are "a real pain." I was always just an average math student, and I think you need to be a whiz to do these things. JMHO

I never fill this section out. I leave it for teh auditor, and tell the client that when the auditor is done, I can reprint that page for them to send to the IRS.

I had put one of these aside in late June (we moved our offices, then had stmt period, so we've been busy), and just picked it up again yesterday (yes, it was extended). The client finally sent the 2001 singed copy to us about 3 weeks ago, and yesterday I noticed that the auditor used white out on the Sch. H and made some changes! It makes me wonder if he did the same thing to the copy sent to the IRS! So, there are plenty of bumble heads out there!

I'm curious as to how you give a client an incomplete form under the new EFAST requirements?? Unless you are using handprint forms, the answers to all questions on the 5500 series must be included in the 2D barcode, or the questions are considered to be blank and unanswered.