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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 by July 31, each year.

Lawrence Groves is the Director of the small business retirement administration services for the Retirement Group with the Solo 401k administration program at http://www.solo-k.com and the special 401(k) "Free for Three" ? administration program.

Lawrence comes to his clients with over 25 years as an experienced expert in plan design, administration, and compliance. Lawrence works closely with for profit, non-profit, and government agencies on 401(k), 403(b), 457, Profit Sharing, and Puerto Rican 165(e) small business plans.

Lawrence can be reached at Lawrence@solo-k.com or 727.844.7000

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