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oldgaloot

Form 5500

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I posted earlier (May 2012) about by very small non-profit's 403(b) plan (Lincoln Multi-Plan Variable Annuity) and my efforts to ask the employer to add a low-cost alternative (LCA; sorry, I use a lot of acronyms)like Vanguard or Fidelity. I thought I would have to go through a comparison of fees to sell the idea, but I did not. They expressed the thought that it was a good idea. Then there was a hiatus as the Executive Director was out of the country for a bit, and the plan admin did not follow up by calling Vanguard (that was the next step). But she called Vanguard and was more or less sold on the idea that adding an LCA alternative to Lincoln was OK.

 

But now a new glitch has come up. The IRS requires Form 5500, and right now the local Lincoln rep fill it out for us for no additional charge (I'm not going to say "free" because the guy is probably making a bundle w/o doing squat right now). It's doubtful he will still want to do it if folks bail on his product and go with the LCA. So the plan administrator calls up the accounting firm that does our Form 990 (the usual form that non-profits have to file) and the guy says the additional charge for filling out Form 5500 (all of 4 pages, with the first page simply the name and address) would be "less than $1000."

 

!

 

I don't know what accountants charge by the hour but it would seem that if an accountant had the numbers in front of them from both Vanguard and Lincoln on the number of participants, $, etc., all the stuff the Form 5550 requires, that it might take 15-30 minutes tops....

 

If it truly costs that much, then it's unlikely that my org will offer an LCA. We are going to ask the org's Treasurer if he has any ideas, and another staffer recommended that we get in contact with a former Board member who is a financial planner...

 

Any ideas? Are there accounting firms that help non profits out with stuff like this? We are near Seattle.

 

Thoughts? Thanks!

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Hi old,

Once in a great while an administrator with a heart comes on this board and wants to do the right thing. I congratulate you. Sorry, but I don't have any ideas on what you can do, but I am very happy you posted this information. I have had a big interest in this area for over 20 years and I have never been told how much the administrative paperwork costs. All I hear is that Vanguard won't pay it. I ask pay what? Never get a straight answer. I still want to know how much does it cost to administer a 403b whereby the employee has the benefit of tax deferral and the TPA makes a profit. No takers, which is amazing with all of those ivy league quants working in the financial industry, nobody can answer that question. An empirical question has an imperial answer and the last I heard finance is definitely empirical based.

What you said about form 5500 that should take 15-20 minutes costing $1000 makes me think of the defense department or a hospital charging $50 for a box of tissue, when you and I can get it for a couple of bucks at Costco.

Please keep us up to date on what is going on and if you have any information regarding what people tell you about costs, please post.

Thanks for sharing. Hopefully somebody else can help you with your specific problem and we can all learn,

Steve

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FYI it is not going to take 15-30 but more like 2-3 hours(if they received good information the 1st time), especially when considering you have two vendors. I'm guessing the 401k referenced is a single vendor plan. $1000 is too much and $500 would be about right.

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