Form 5500—Are You Ready for the Changes in 2010
Peter J. Marathas, Jr.
Compliance Director, Benefit Advisors Network
Partner, Proskauer Rose LLP
617-526-9704
BAN April 2010
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April 2010 © Proskauer
ERISA Compliance Overview/18167869_1
Form 5500’s
• The Basics
- Form 5500 must be filed by the end of the seventh month after
the close of the plan year (July 31 for calendar year plans)
- Reminder on short plan years, terminated plans, merged plans
- Extension of 2½ months if Form 5558 timely filed
- Required for all Retirement Plans
- Large plans (100+ participants) must include audit each year
by an independent qualified public accountant (IQPA)
- Small plans may not be required to have audit
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April 2010 © Proskauer
ERISA Compliance Overview/18167869_1
Form 5500’s
• The Basics
- For Welfare Plans, in general, required if health plan has 100 or more
participants on the first day of the plan year
- Self funded plans that either use a Veba or accept employee
premium other than through a 125 Plan, file—regardless of size
- Health care flexible spending account plans, health care plans,
dental plans, long-term disability plans, AD&D plans and group
term life plans are required to file Form 5500
- Common Misconception: There is NO BLANKET EXEMPTION
for tax-exempt entities
- 125 Only Plans not required to file Form 5500
- Dependent care flexible spending account plans funded with only
salary reductions are not ERISA welfare benefit plans and are not
required to file Form 5500
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April 2010 © Proskauer
ERISA Compliance Overview/18167869_1
Form 5500’s
• Penalty for Not Filing
- Penalties can be imposed by the DOL for any refusal or failure to
file a required Form 5500
- Penalties available not just for late or un-filed Form 5500s but
also for incomplete or otherwise deficient Form 5500s
- Criminal penalties are also possible for intentionally not filing
- Penalties can be $1,100 per day for each Form 5500 not filed
- DFVCP: $10 per day not to exceed the greater of $2,000 per
Form 5500 or, in the case of a DFVC submission relating to more
than one delinquent Form 5500 filing for the same plan, $4,000
per plan
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April 2010 © Proskauer
ERISA Compliance Overview/18167869_1
Form 5500’s
• New for 2010—Schedule C Changes
- Form primarily used to provide information on service provider fees and other
compensation
- Also used to report information regarding terminated plan accountants or
enrolled actuaries
- Who must file: large retirement and welfare plans, but not small welfare plans
- For the 2009 Plan Year (i.e., forms filed in 2010), many new changes to
Schedule C implemented to promote “transparency” with respect to plan fees
and expenses
- Intent is to provide Plan Sponsors with information necessary to assess
reasonableness of compensation paid to service providers
- Many have noted that the new rules are confusing and duplicative
- Question whether “transparency” is served by confusing and duplicative rules?
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April 2010 © Proskauer
ERISA Compliance Overview/18167869_1
Form 5500’s
• New for 2010—Schedule C Changes
- Schedule C is completed when service provider received during a
plan year, directly or indirectly, $5,000 or more in total “reportable
compensation” for services rendered to the plan
- Information Reported on Schedule A does not have to be
repeated on Schedule C
- Fees received and reported on Schedule A must be considered to
determine whether $5,000 threshold is met
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April 2010 © Proskauer
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Form 5500’s
Example: Broker receives $4,000 in insurance commissions from
an insurer in connection with policies purchased by the plan, and
$2,000 from the plan for providing consulting services to the plan.
The plan’s Form 5500 includes a Schedule A identifying the $4,000
in commissions and a Schedule C for the broker reporting the
$2,000 for the consulting services provided to the plan because the
two amounts combined exceed the $5,000 Schedule C threshold.
Example: If same broker receives $6,000 in commission from
insurance company, all is reported on Schedule A. Nothing is
reported for this broker on Schedule C.
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April 2010 © Proskauer
ERISA Compliance Overview/18167869_1
Form 5500’s
• New for 2010—Schedule C Changes
- Certain Persons Providing Services Are Not Included:
- employees of the plan whose only compensation with respect
to the plan was less than $25,000 for the plan year;
- employees of the plan sponsor or other business entity where
the plan sponsor or business entity is reported on Schedule C
as a service provider, provided the employee did not
separately receive reportable direct or indirect compensation
in relation to the plan; and
- persons whose only compensation with respect to the plan
consists of insurance fees and commissions listed on a
Schedule A filed for the plan
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April 2010 © Proskauer
ERISA Compliance Overview/18167869_1
Form 5500’s
• New for 2010—Schedule C Changes
- Only compensation from the Plan is included;
- Services provided by lawyers apparently not included;
- Rebates or discounts received by PBMs generally not included
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April 2010 © Proskauer
ERISA Compliance Overview/18167869_1
Form 5500’s
• Electronic Filing
- Pre-January 1, 2010, Form 5500 filings could be submitted by paper
or electronically using a system called EFAST (ERISA Filing
Acceptance System)
- EFAST allows filers to submit Form 5500s in one of two computer
scannable formats—hand print (generally on a pre-printed IRS form,
which could be filed only on paper by mail) or machine print
(generated with approved software, which could be filed by mail or
transmitted online via modem)
- Effective for filings in 2010 to report on plan years beginning on or
after January 1, 2009, however, all Form 5500s must be filed
electronically
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April 2010 © Proskauer
ERISA Compliance Overview/18167869_1
Form 5500’s
• Electronic Filing
- DOL transitioned to all-electronic, web-based system for filing Form 5500s—
called EFAST2—on January 1, 2010
- With EFAST2, choose between two Form 5500 filing methods:
- DOL’s free (“no-frills”) web application (called “IFILE”)
- EFAST2-approved third-party software, which integrates with the EFAST2
system
- Approved software vendors are listed on the DOL’s webpage at:
http://www.efast.dol.gov/software/software.html
- EFAST2 can be accessed online at http://www.efast.dol.gov
- Further information on the electronic filing requirement is also available
beginning on page 5 of the Instructions for Form 5500
(http://www.dol.gov/ebsa/pdf/2009-5500inst.pdf)
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April 2010 © Proskauer
ERISA Compliance Overview/18167869_1
Form 5500’s
• Electronic Filing
- DOL expects most filers will use third-party software
- DOL notes IFILE’s limitations include:
- Batch filing submissions. IFILE can only transmit single filings; unlike
some third-party software approved for EFAST2 use, IFILE cannot be
used to transmit batches of filings
- Filing preparation. Unlike IFILE, some approved third-party software may
integrate with a filer’s system to automatically populate certain information.
IFILE also does not contain filing assistance or integrated instructions
- File sharing functionality. Some third-party software permits different
people to work on a single filing in a coordinated manner. IFILE does not
- Minimizing technical issues. For those filers that have traditionally used
third-party software, continuing to use software provided by the same
software vendor (assuming it has been approved under EFAST2) may
offer continuity and a reduced risk of technical issues
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April 2010 © Proskauer
ERISA Compliance Overview/18167869_1
Form 5500’s
• Steps for Electronic Filing:
- Identify the Filing Signer.
- For a single-employer plan with a third-party preparer
that transmits the Form 5500, an employee of the Plan
Sponsor need only to register as a Filing Signer
- A Filing Signer is the person who can sign the Form
5500 on behalf of the Plan Sponsor
- A Plan Sponsor can identify multiple individuals who are
Form 5500 Signers
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April 2010 © Proskauer
ERISA Compliance Overview/18167869_1
Form 5500’s
• Steps for Electronic Filing:
- Register for Filing Credentials.
- Signers must register with EFAST2 to receive appropriate
credentials in order to sign the Form 5500
- Required even if a third-party prepares Form 5500
- Signers register as a Filing Signer at
http://www.efast.dol.gov
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April 2010 © Proskauer
ERISA Compliance Overview/18167869_1
Form 5500’s
• Steps for Electronic Filing:
- Six Steps to Process:
1. Read and accept the privacy statement;
2. Provide contact information and select user type(s) – in most
cases this is a Filing Signer;
3. Select a challenge question and answer;
4. Verify registration information;
5. Receive a credentials email notification; and
6. Retrieve and activate credentials
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April 2010 © Proskauer
ERISA Compliance Overview/18167869_1
Form 5500’s
• Steps for Electronic Filing:
- Email with a link to retrieve User ID and PIN are sent
- The User ID and PIN are required to sign the Form 5500
- Return to EFAST2 and acknowledge receipt of credentials and
establish a password
- Each Filing Signer must sign in and follow these steps
- Credentials may not be shared
- Credentials are used for both Welfare Plan and Retirement Plan
filing—if same person is signing both;
For screen shots to guide you through this process, see the EFAST2 Guide to Filers
& Service Providers
http://www.efast.dol.gov/fip/pubs/EFAST2_Guide_Filers_Service_Providers.pdf
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April 2010 © Proskauer
ERISA Compliance Overview/18167869_1
Form 5500’s
• Steps for Electronic Filing With EFAST2:
- Your Third Party preparer will prepare your Form 5500 and
load onto EFAST2
- You should receive an e-mail notification that the Form 5500
has been loaded
- The e-mail will direct you to a secure Web site, where you can
download and review your Form 5500 for accuracy
- Once the filing is reviewed, transmit the Form 5500 electronically
by clicking the button and electronically signing the Form 5500
- Your User ID and PIN together serve as your electronic signature
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April 2010 © Proskauer
ERISA Compliance Overview/18167869_1
Form 5500’s
• Steps for Electronic Filing With IFILE:
- DOL Guidance for IFILE is available at:
http://www.efast.dol.gov/fip/pubs/EFAST2_IFILE_User_Guide.pdf
- Some preparers may create your Form 5500 using EFAST2 and then
have you file with IFILE
- You should make immediate inquiry as to whether they will use this
approach and, if so, download DOL Publication and begin to
understand requirements
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April 2010 © Proskauer
ERISA Compliance Overview/18167869_1
Form 5500’s
• Steps for Electronic Filing With IFILE
• Registration is at the EFAST2 site
• Designate Filing Author:
- Initiates filing and responsibility for submitting filing
- Has the ability to initiate filings, populate data, upload/import
filings/components, download/export filings/components, and ultimately
submit a filing
- Signature authority is separate
• Designate Filing Signer:
- As previously discussed
• Designate Schedule Author:
- Person who has been requested by a Filing Author to complete one of the
Schedules for a filing
- This user type may not initiate or submit a filing
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April 2010 © Proskauer
ERISA Compliance Overview/18167869_1
Form 5500’s
• Form is Created and Reviewed
- Filing is completed with a touch of the button
• Amendments may be affected using filing system
• Attachments are loaded electronically, including audited
financials and accountant’s opinion (PDF Only)
• Extensions are done electronically
• DFVCP is now done electronically
• Be sure to print and keep a copy of all materials
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April 2010 © Proskauer
ERISA Compliance Overview/18167869_1
Form 5500—Are You Ready for the Changes in 2010
Peter J. Marathas, Jr.
Proskauer Rose LLP
617-526-9704
pmarathas@proskauer.com
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April 2010 © Proskauer
ERISA Compliance Overview/18167869_1