Compliance with Form 5500 filing requirements is a critical annual responsibility. Among the many components of this filing, the Supplemental Schedule of Reportable Transactions (Line 4j) plays a key role in ensuring transparency and regulatory adherence.
When Is a Supplemental Schedule of Reportable Transactions Required?
When is a Supplemental Schedule of Reportable Transactions required to be included with an employee benefit plan’s financial statements and how are reportable transactions determined? Here is a general summary of how to deal with this issue:
- Exception to Reporting– Participant-directed employee benefit plan transactions should not be treated as reportable transactions. Accordingly, participant-directed employee benefit plans typically are generally not required to have a supplemental schedule of reportable transactions. Therefore, this exception would apply to most 401(k) and 403(b) plans.
- The 5% Threshold– Transactions subject to reporting are based on a 5% threshold. To measure the 5% threshold, the denominator should be based on value of plan assets as of the beginning of the year, or if it is the plan’s initial year, as of the end of the initial plan year.
- Any of the following other transactions should be included on the supplemental schedule as a reportable transaction:
- A single transactionwithin the plan year over the 5% threshold.
- Theaggregate amountof any series of transactions with the same person involving property,other than securities, where the aggregate amount is over the 5% threshold.
- Any transaction involving aparticular security, if within the plan year, the aggregate amount of transactions with that security is over the 5% threshold.
- Ifa person had a single securities transactionwithin the plan year of over 5%, all other securities transactions with that person during the plan year.
- Master Trust Rules– If all assets are in a master trust, the supplemental schedule is not required. If only some of the plan assets are in a master trust, the denominator should be determined by excluding the assets of the master trust.
- A pooled separate account (PSA)or a common collective trust (CCT) is deemed to be a particular security for purposes of this evaluation. Individual CCT or PSA transactions are not included.
- Individual registered investment company and 103-12 IE (Direct Filing Entity)transactions are not included.
- Information to Be Reported– The following informational columns are required to be reported on the Schedule of Reportable Transactions:
- The identity of the party involved
- Description of asset (include interest rate and maturity in case of a loan)
- Purchase price
- Selling price
- Lease rental
- Expense incurred with the transaction
- Cost of asset
- Current value of asset on transaction date
- Net gain or (loss)
Plan sponsors are well advised to develop processes to collect this information throughout and as of the end of the plan year or perform a review of information provided by the plan’s trustee/custodian.
Author: Anastasia Romeo, CPA|[email protected]
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For more information on this topic, please contact a member of Withum’s Employee Benefit Plan Services Team.
