2009 Instructions For Schedule C (Form 5500) Service Provider Information (Page 2 of 4) in pdf

company pooled separate accounts, and other separately

These thresholds are for purposes of Schedule C

reporting only. Filers are strongly cautioned that gifts

managed accounts and pooled investment funds in which the

and gratuities of any amount paid to or received by plan

plan invests that are charged against the fund or account and

CAUTION

fiduciaries may violate ERISA and give rise to civil liabilities and

reflected in the value of the plan’s investment (such as

criminal penalties.

management fees paid by a mutual fund to its investment

adviser, sub-transfer agency fees, shareholder servicing fees,

Fully Insured Group Health and Similarly Fully Insured

account maintenance fees, and 12b-1 distribution fees). The

Benefits: Where benefits under a plan are purchased from

investment of plan assets and payment of premiums for

and guaranteed by an insurance company, insurance service,

insurance contracts, however, are not in and of themselves

or other similar organization, and the contract or policy is

payments for services rendered to the plan for purposes of

reported on a Schedule A, payments of reasonable monetary

Schedule C reporting and the investment and payment of

compensation by the insurer out of its general assets to

premiums themselves are not reportable compensation for

persons for performing administrative activities necessary for

purposes of Part I of the Schedule C.

the insurer to fulfill its contractual obligation to provide benefits,

where there is no direct or indirect charge to the plan for the

In the case of charges against an investment fund,

administrative services other than the insurance premium,

reportable “indirect compensation ” includes, for example, the

would not be treated as indirect compensation for services

fund’s investment adviser asset-based investment management

provided to the plan for Schedule C reporting purposes. This

fee from the fund, brokerage commissions and fees charged in

would include compensation for services such as recordkeeping

connection with purchases and sales of interests in the fund,

and claims processing services provided by a third party

fees related to purchases and sales of interests in the fund

pursuant to a contract with the insurer to provide those

(including 12b-1 fees), fees for providing services to plan

services, but would not include compensation provided by the

investors or plan participants such as communication and other

insurer incidental to the sale or renewal of a policy, such as

shareholder services, and fees relating to the administration of

finder’s fees, insurance brokerage commissions and fees, or

the employee benefit plan such as recordkeeping services,

similar fees. Insurance investment contracts are not eligible for

Form 5500 return/report filing and other compliance services.

this exception.

Amounts charged against the fund for other ordinary operating

Bundled Service Arrangements: For Schedule C

expenses, such as attorneys’ fees, accountants’ fees, printers’

reporting purposes, a bundled service arrangement includes

fees, are not reportable indirect compensation for Schedule C

any service arrangements where the plan hires one company to

purposes. Also, brokerage costs associated with a

provide a range of services either directly from the company,

broker-dealer effecting securities transactions within the

through affiliates or subcontractors, or through a combination,

portfolio of a mutual fund or for the portfolio of an investment

which are priced to the plan as a single package rather than on

fund that holds “plan assets” for ERISA purposes should be

a service-by-service basis. A bundled service arrangement

treated for Schedule C purposes as an operating expense of

would also include an investment transaction in which the plan

the investment fund, not reportable indirect compensation paid

receives a range of services either directly from the investment

to a plan service provider or in connection with a transaction

provider, through affiliates or subcontractors, or through a

with the plan.

combination.

Other examples of reportable indirect compensation are

Direct payments by the plan to the bundled service provider

finder’s fees, float revenue, brokerage commissions (regardless

should be reported as direct compensation to the bundled

of whether the broker is granted discretion), research or other

service provider. Such direct payments by the plan do not need

products or services, other than execution, received from a

to be allocated among affiliates or subcontractors and do not

broker-dealer or other third party in connection with securities

need to be reported as indirect compensation received by the

transactions (soft dollars), and other transaction based fees

affiliates or subcontractors unless the amount paid to the

received in connection with transactions or services involving

affiliate or subcontractor is set on a per transaction basis, e.g.,

brokerage fees and commissions.

the plan whether or not they are capitalized as investment

costs.

Fees charged to the plan’s investment and reflected in the

net value of the investment, such as management fees paid by

For more information, see “FAQs About the 2009 Form 5500

mutual funds to their investment advisers, float revenue,

Schedule C,” available on the EBSA website at

commissions (including “soft dollars”), finder’s fees, 12b-1

distribution fees, account maintenance fees, and shareholder

servicing fees, must, subject to the alternative reporting option

Special rules for non-monetary compensation of

for “eligible indirect compensation,” described below, be treated

insubstantial value, guaranteed benefit insurance policies,

as separate reportable compensation by the person receiving

bundled service arrangements, and allocating

the fee for purposes of Schedule C reporting.

compensation among multiple plans:

For each person who is a fiduciary to the plan or provides

Excludable Non-Monetary Compensation: You may

one or more of the following services to the plan – contract

exclude non-monetary compensation of insubstantial value

administrator, consulting, investment advisory (plan or

(such as gifts or meals of insubstantial value) that is tax

participants), investment management, securities brokerage, or

deductible for federal income tax purposes by the person

recordkeeping – commissions and other transaction based

providing the gift or meal and would not be taxable income to

fees, finder’s fees, float revenue, soft dollar and other

the recipient. The gift or gratuity must be valued at less than

non-monetary compensation, would also be required to be

$50, and the aggregate value of gifts from one source in a

treated as separate compensation for Schedule C purposes

calendar year must be less than $100, but gifts with a value of

even if those fees were paid from mutual fund management

less than $10 do not need to be counted toward the $100 limit.

fees or other fees charged to the plan’s investment and

If the $100 aggregate value limit is exceeded, then the value of

reflected in the net value of the investment.

all the gifts over $10 will be reportable. Gifts received by one

Other revenue sharing payments among members of a

person from multiple employees of one entity must be treated

bundled service arrangement do not need to be allocated

as originating from a single source when calculating whether

among affiliates or subcontractors and treated as indirect

the $100 threshold applies. On the other hand, gifts received

compensation received by the affiliates or subcontractors in

from one person by multiple employees of one entity can be

determining whether the affiliate or subcontractor must be

treated as separate compensation when calculating the $50

separately identified on line 2 of the Schedule C.

and $100 thresholds. For more information, see FAQS about

the 2009 Form 5500 Schedule C, available on the EBSA

For more information about bundled arrangements for

website at

reporting purposes, see FAQs about the 2009 Form 5500

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Instructions for Schedule C (Form 5500)

2009 Instructions For Schedule C (Form 5500) Service Provider Information Page 2

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