The client came to us by way of their ERISA counsel. A routine internal review had surfaced what the in-house team described as "a number on a Schedule A that does not match anything we can find." The number was small in absolute terms — well under one percent of total plan spend — but the question it raised was not. If the figure was right, the company's prior filings were wrong. If the figure was wrong, the company's broker compensation agreement was being administered inconsistently with what had been disclosed to the carrier. Either answer required an explanation.
The situation
The plan was a fully insured welfare arrangement covering approximately 1,500 lives across two operating entities, with a Schedule A filed against each carrier. The Form 5500 had been prepared in each of the last three plan years by a competent third-party administrator using carrier-provided Schedule A data. The broker of record had been the same firm throughout. No party — the TPA, the broker, the carrier, or the plan sponsor — had identified a discrepancy on the face of any single year's filing.
What had emerged was a pattern only visible in cross-section: the broker compensation agreement on file with the sponsor described a commission structure that did not, when applied to the reported premium, produce the figures shown on Schedule A. The variance was consistent across years and across carriers. The figures were not random — they were systematic. Which meant the most likely explanation was not a transcription error.
What we found
Our diagnostic took approximately three weeks. We reconciled the broker compensation agreement against the premium-based Schedule A figures provided by the carriers, surfaced the indirect compensation that the agreement had not made explicit, and traced it back through the carrier's own internal reporting. The substance of the finding can be summarized in three observations:
- The broker had been receiving an annual incentive payment from each carrier — a volume-based bonus tied to retained-business thresholds — that had never been included in the broker's own Schedule A reporting to the plan.
- The carriers had reported the bonus to the broker but had not characterized it as compensation "in connection with" the plan, on the basis of an internal classification that the underlying contracts did not actually support.
- The TPA had filed the Schedule A as received from the carriers, in good faith, with no operational means of identifying the omission.
The omitted amounts, aggregated across the three years and the two carriers, were not de minimis. They were also not so material as to render the prior filings unrecognizable. They were, in our experience, exactly the size of error that gets missed every year — large enough to matter under audit, small enough to slip past a filer who is not reconciling the broker compensation agreement against the carrier's Schedule A as a deliberate step.
The approach
We did three things in the order that the facts required them. First, we documented the reconciliation in a memo addressed to the plan sponsor's general counsel, with attachments tied to the underlying agreements, carrier statements, and broker filings. The memo was the record on which every subsequent step would rely; we wrote it as if it would eventually be read by a regulator, because the more cautious posture was the right one given the multi-year pattern.
Second, we worked with ERISA counsel on the form of remediation. The choice was between amending each of the three prior Form 5500 filings and addressing the omission only on a prospective basis. We recommended amendment. The omissions were systematic, the corrected figures were defensible, and the documentation in support of the amended returns was already prepared. Counsel concurred and the amendments were filed under a coordinated schedule.
Third, we worked with the broker — through counsel — to update the compensation disclosure protocols so that the bonus payments would be reported, on Schedule A, going forward. The broker was cooperative; the disclosure framework had been a function of carrier classification rather than broker intent, and once the analysis was documented the operational change was straightforward.
The result
The three amended filings were accepted without inquiry. The current plan-year filing was prepared against the updated disclosure protocols and submitted on the original deadline. The plan sponsor retained Cherry Park on a continuing basis to perform an annual Schedule A reconciliation against the broker compensation agreement — a step that was, before this engagement, not part of the annual filing workflow.
The most useful thing we did, in our own assessment, was not the technical reconciliation. It was the framing of the questions for the carriers. The amounts were never in dispute; the classification was. A regulator examining the file would not have been persuaded by an argument that the bonus payments fell outside the scope of Schedule A reporting. By documenting the analysis in advance of any agency contact, the sponsor's posture moved from "the prior filings may have been incomplete" to "the prior filings were incomplete; here is the remediation."
Engagement summary published with the explicit consent of the client. Industry, scale, and engagement scope have been generalized where necessary; the analytical pattern and the corrective approach are described as performed. Cherry Park engagements are confidential by default. To discuss a specific filing or a specific Schedule A question, request a confidential plan review.