While the Form 5500 is an incredible treasure trove of useful and informative data, there’s a whole other level of information that sometimes gets overlooked when talking about the 5500. The schedule of assets and the supplemental attachments to the 5500 provide a ton of insight on the plan’s structure and administration. Unfortunately, the Schedule of Assets and supplemental attachments aren’t available for every 5500, as companies that file the 5500-SF are not required to disclose that information. We’re going to walk through a typical example of a Schedule of Assets and supplemental attachments to show you how you can use this information to your advantage.
Schedule of Assets:
While you will find the Schedule of Assets at the end of a filing, it’s actually a section on the Schedule H, the schedule that has financial information for the plan. The Schedule of Assets is a part of the Schedule H Line 4 compliance questions, which have many disclosures that a company might potentially need to fill out. The most common are for Line 4j, which is the Schedule of Reportable Transactions, which is required when a plan completes a transaction worth 5% or more of the plan year-end assets, and Line 4i, which is the Schedule of Assets Held at Plan Year. The Schedule of Assets is the most interesting for an investment advisor looking to learn more about a plan. You’ll get a full breakdown of all the investment vehicles the plan is invested in and the breakdown of assets invested in each separate fund. This allows you as an advisor to look at the fund lineup for a prospective client’s plan and plan your sales pitch accordingly while making you look confident and diligent in the process.
The supplemental filings are usually comprised of two different sections: the independent auditor’s report and the financial statements. Both can be very useful when looking for talking points when approaching new prospective clients.
Typically, the auditor’s report will come back with a favorable opinion or a determination that the auditor was not provided with enough information to make an opinion. That covers a majority of the audit reports, but it’s still worth skimming through to look for any language that implies errors or fraudulent activity. If there are any severe mistakes or fraudulent activity associated with the plan, the plan sponsor will be more keen on switching to a new provider.
Financial Statements and Notes to the Financial Statements:
The financial statements will contain a lot of the same information that the Schedule H has on assets and liabilities. The notes to the financial statement, however, are much more useful. There, you’ll have a document akin to a plan summary, where you can find out all the information on participation eligibility, employer match rates, investment strategy and more. Reading through that information will allow you to make recommendations on new plan strategy with the client and prepare a custom presentation tailored to the individual client.
Judy Diamond Associates has all of the attachments to the 5500 available in our Retirement Plan Prospector and American Directory of Group Insurance Plans. Once you’ve identified a plan you’re interested in prospecting through tools, you can get the extra data you need to go above and beyond and clinch the deal.