New York Metro Chapter – CEBS
Filing Requirements of the 2009
Form 5500 and Related Schedules
June 3, 2010
Agenda
I.
II.
III.
IV.
V.
VI.
Introduction to the Form 5500
Forms 5500 & Schedules Including 2009 Changes
Audit Requirements for Employee Benefit Plans
403(b) Plan Enhanced Reporting
Filing 2009 Form 5500 Electronically in 2010
Articles
2
I. What is the Form 5500?
•
Annual Return/Report of employee benefit plan (generally pension &
welfare)
•
Used to satisfy the annual reporting requirements for the DOL, IRS &
PBGC
•
Primary source of information reported to the government about
employee benefit plans
•
Used for enforcement, research & disclosure
3
Types of Plans Filing the Form
•
Large Pension Plans
•
Small Pension Plans (less than 100 participants)
•
Large Welfare Plan
•
Small Welfare Plan (less than 100 participants)
•
Direct Filing Entity (Master Trust, Pooled Separate Account, CCT,
GIA, etc.)
4
Typical Plans Not Subject to Filing
the Form
•
Fringe Benefit Plans – (Premium Only Plan (POP)), adoption
assistance plan described in §127 job-related benefits are relieved
from the requirement to file annual information returns. IRS Notice
2002-24
- Other types of plans not filing a Form 5500 include, non-electing
church plans, non-ERISA 403(b) plans
- NQDC plans who have filed a registration statement with the DOL
5
The 5500 Process
Custodian
Insurance Companies
Plan Administrator
Recordkeeper
Electronically
Filed with EBSA
Form
5500
Auditor
(satisfies reporting
obligation of DOL,
IRS and PBGC)
Consultant
Employer
Plan Sponsor
Data
Actuary
Legal
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Trustee
II.
•
Form 5500s and Schedules Including
2009 Changes
Form 5558. Extension of Time to File Certain Employee Plan
Returns.
- Filed by paper to IRS Ogden Service Center
- Recommend using a process to produce a receipt of filing
- Form 5558 is not included in the electronic filing to EBSA
7
Form 5500-SF (Short Form)
• An eligible plan may file Form 5500-SF if it meets all eligibility conditions
• Two (2) page Form which contains Financial Information and Compliance Questions,
• Expected to reduce filing burdens of many small employers and 403(b) plan sponsors
Eligibility:
•
Covers fewer than 100 participants or would be eligible to file as a small plan under
the 80/120 rule; (this is also applicable for 403(b) plans)
•
Is eligible for the small plan audit waiver (but not by reason of enhanced bonding);
•
Holds no employer securities at any time during the plan year;
•
Has 100% of its assets in investments that have a readily ascertainable fair market
value; and
•
Is not a multiemployer plan.
8
Form 5500-EZ Annual Return
• Changes made for 2009 reporting to allow additional use of
this Form to satisfy filing requirement. Generally used by
one-participant plans with assets at the end of the 2009 plan
year which are at least $250,000, or is a final filing.
•
The Form 5500-EZ is a paper filing with the IRS only at the
Ogden, UT Service Center. Alternative is to prepare a Form
5500-SF (not a 5500) and file electronically under EFAST2.
9
Form 5500 – Main Form & Schedules
•
•
Needed for large pension, welfare plans and DFEs (Direct Filing Entities)
Contents of this Form includes;
- Identification of certain data about the ER, & plan sponsor
- Basic Plan Information
New for 2009
 The optional, preparer information (former line 5) has been removed.
 Multiemployer plans are now required to provide information about the
number of employers contributing to the plan on a new line 7.
 A one-participant plan may not file an annual return on Form 5500 for
2009.
 New “plan characteristics codes” have been added/changed for Defined
Contribution Plans that use “automatic enrollment” – 2S and “default
investment” 2I and characteristic code 3E, previously used to identify
prototype pension plans, has been removed. Code 3D will be used to
identify all pre-approved pension plans, (including master, prototype, and
volume submitter plans) for 2009.
10
Schedule A – Insurance Information
• Plans or Direct Filing Entities (DFEs) with Insurance Contract
–
–
•
Insurance Information
• Separate Schedule A for each contract
• Contract year reporting is permitted (not PY)
• Data from insurance carriers are due to plan administrators 120 days after PY
ends [ERISA Section 103(a)(2)]
Exceptions
• Contract is an ASO (Administrative Services Only)
• Plan participates in a MT or other DFE which reported the contract data
New for 2009
–
–
–
Fee and commission information formerly reported on line 2 is now clarified and broken
out on lines 2 and 3.
A new Part IV has been added for plan administrators to be able to report insurance
companies that fail or refuse to provide any information necessary to complete Schedule
A.
A reminder has been added to the Schedule A Instructions to advise plan administrators
that they should notify the insurer that the plan administrator intended to identify the
insurer on the Schedule A as not having provided the information needed.
11
Schedule MB – Multiemployer Defined
Benefit Plan Actuarial Information
•
Used by Multiemployer defined benefit plan to report actuarial information
•
Used by money purchase pension plan (and target benefit plans) with funding waivers
that are currently being amortized
–
–
Less encompassing than Schedule SB used to report the funded status,
contributions, assumptions used by the plan, reconciliations, and other
miscellaneous items
Line E – Check box for Type of Plan (Multiemployer or Money-Purchase)
New for 2009
–
–
The plan administrator is required to maintain a fully executed copy of the Schedule
MB with the plan records, and include with the electronic filing as an attachment (in
PDF format) a scanned copy of the executed Schedule MB labeled ‘MB Actuary
Signature.’
The plan actuary can sign the Schedule, or insert the actuary’s typed name in the
signature line followed by the actuary’s handwritten initials
12
Schedule SB – Single Employer Defined
Benefit Plan Actuarial Information
•
Used by Single-Employer or Multiple Employer defined benefit plan to report actuarial
information.
- The schedule contains 8 Parts, 40 line items to report the funded status, contributions,
assumptions used by the plan, reconciliations, and other miscellaneous items
- Line E – Check box for Type of Plan (Single or Multiple Employer A or B)
•
New for 2009
–
The plan administrator is required to maintain a fully executed copy of the Schedule
SB with the plan records, and include with the electronic filing as an attachment (in
PDF format) a scanned copy of the executed Schedule SB labeled ‘SB Actuary
Signature.’
–
The plan actuary can sign the Schedule, or insert the actuary’s typed name in the
signature line followed by the actuary’s handwritten initials.
13
Schedule C – Service Provider Information
•
•
•
•
•
Only required to be filed by large pension and welfare plans, (more than 100
participants) and DFEs (e.g., Master Trusts, 103-12 IEs, GIA)
Used only when plan has a trust (funded status)
Do not report insurance commissions, PBGC fees, ER paid fees
Reporting threshold is $5,000
The Schedule is required to report payments made directly to service
providers or compensation received for services rendered to the plan from
sources other than directly from a plan or plan sponsor (indirect
compensation)
– Never list name or SS#s on Schedule C. Use title/position
14
Schedule C – Service Provider Information
(continued)
•
New for 2009
–
Reporting of indirect compensation
–
Additional service codes to identify service providers
–
Top 40 service providers eliminated. Must report all service providers who receive
$5,000 or more in direct or indirect compensation
–
Do not report plan employee compensation < $25,000
–
Report service providers who fail or refuse to provide information
15
Schedule C – Service Provider Information
(continued)
•
New for 2009 (continued)
•
Examples of indirect compensation:
• Commissions
• Soft dollars
• 12b-1 distribution fees
• Finder’s fees
• Communication expenses
• Redemption
• Consulting fees
• Sales loads
• Brokerage (securities and real estate)
• Surrender/termination fees
16
Schedule D – DFE/Participating
Plan Information
– Plans that participated in a DFE @ any time during the plan year
– Trusts, Accounts, and other Investment Arrangements that file
the Form 5500 as a Direct Filing Entity must include this
Schedule
– The normal due date for a DFE is 9.5 months after the plan year
ends
Type of DFE
CCT ( C)
MTIA (M)
PSA (P)
103-12 IE (E)
Form 5500 Reporting
Voluntary
Required
Voluntary
Voluntary
Audited Required
No
No
No
Yes
No significant changes made to the Schedule for 2009
17
Schedule G – Financial Transaction
Schedules
• Large plan’s required to file if lines 4b, 4c or 4d on Schedule
H are marked yes
– Loans, leases or fixed income obligations due the plan in default, or
classified as uncollectible at the end of the plan year. Not participant
loans in 401(k)/account balance plans if loan is securitized with account
balance.
– Nonexempt transactions
– No longer required for delinquent participant contributions/loan
repayments
– Schedule G should resemble amounts and description included in the
financial statement Schedule of Nonexempt Transactions
No significant changes made to the Schedule for 2009
18
Schedule H – Financial Information
(Large Plan)
•
Schedule should report assets using current value
•
Pension and Welfare plans, and DFEs
– Exceptions:
• Insured, unfunded or combination of insured/unfunded welfare plans
•
Part I Asset and Liability Statement (Balance Sheet)
– Any differences between FS reporting or assets must be reconciled in the FS
footnotes
– Beginning of year balances must match prior year ending balances otherwise DOL
Notice generated
•
Part II Income and Expense Statement (Income Statement)
– Assets/Expenses/investments reported elsewhere throughout return on Schedules
(A, C, D) should be readily identified by similar category on the income statement
19
Schedule H – Financial Information
(Large Plan)
•
Part III Accountants Opinion
– Ensure Accountant’s Opinion issued is correctly marked
•
Part IV Transactions During Plan Year
– This part of Schedule H (IV) requires a ‘YES’ or ‘NO’ response,
‘N/A’ is unacceptable. Amounts will be needed for any ‘YES’
response
– Line 4a – Delinquent EE contributions and loan repayments.
– Yes responses to line items 4a, 4b, 4c, 4d, 4i, 4j will require a
DOL Schedule (AICPA Guide and Form 5500 instructions for
guidance)
20
Schedule H – Reporting Delinquent
Participant Contributions
•
Participant contributions (i.e., employee contributions including deferrals, and
loan repayments) are plan assets on the earliest date they can reasonably be
segregated from employer’s general assets
– For pension plans – no later than 15th business day of the month
following the month in which contributions are withheld or received by
employer. (This is the rule an auditor of a plan uses in their test work)
– For welfare plans – no later than 90 days after withheld or received by
employer
•
An employer who is delinquent in forwarding participant contributions and
who holds them commingled with its general assets has engaged in a
prohibited transaction (PT) under ERISA §406
21
Schedule H – Reporting Delinquent
Participant Contributions
•
•
•
Delinquent contributions are no longer reported on Schedule G, but line 4a
must be treated by the auditor as a PT and a separate schedule is required in
the financial statement for the plan
Those corrected using VFCP and PTE 2002-51 are not considered to be PTs
See instructions to line 4a, Schedule H for additional guidance on reporting
0and correction requirements, (e.g., filing Form 5330 with IRS, contributing
‘lost’ earnings to the plan, communications to participants)
New for 2009
•
•
DOL is vigilantly contacting all plan administrator’s when line item 4a is
marked ‘yes’. The DOL requests documentation to support correction.
Consider DOL’s VFC program.
Line 2b(2)(C) has been added for reporting dividends on registered
investment company (mutual fund) shares.
22
Schedule H – Reporting Delinquent
Participant Contributions (continued)
New for 2009 (continued)
•
•
•
•
The instructions for line 4g have been modified to make clear that insurance
investment contracts for which the plan received valuation information at
least annually and mutual fund shares are not reportable on line 4g.
A new standardized schedule has been to report delinquent participant
contributions.
A line item was added regarding whether the plan failed to provide any
benefit when due under the plan.
Line items were added pertaining to whether there has been blackout
(temporary suspension, limitation, or restrictions) lasting more than 3
consecutive business days. If yes, the plan administrator will need to
respond to an additional question regarding if the required notice was
provided to the plan participants, or an exception applied.
23
Schedule I – Financial Information
(Small Plan)
– Small pension and welfare plans
– Report assets similar to large plan reporting on Schedule H
– Transactions During Plan Year are reported similar to Part IV of the
Schedule H
New for 2009
•
Line 2 has been revised to have plans separately report expenses for
administrative service providers (salaries, fees, and commissions) and other
expenses
24
Schedule H — Line 4a – Schedule of
Delinquent Participant Contributions (If
Corrected Under DOL VFC Program)
Participant
Total that Constitute Nonexempt Prohibited
Total Fully
Transactions
Corrected
Contributions
Transferred
Under VFCP
Late to Plan for
and PTE 2002-
Plan Year
51
Contributions
Contributions
Contributions
Not Corrected
Corrected
Pending
Outside VFCP
Correction in
VFCP
Check here if
late participant
loan repayments
are included: 
25
Schedule R – Retirement Plan Information
•
•
Plans required to file
─
Defined benefit
─
Defined contribution plans which are subject to minimum funding
standards
─
Defined contribution plans which paid distributions in other than cash
during the plan year
-
Generally, the plan’s actuary may need to assist with these line items
Part I – Requests information on distributions
26
Schedule R – Retirement Plan Information
(continued)
•
Parts II & III – Funding Information & Amendments made to the plan.
•
Parts V & VI – Additional Information for Multiemployer and Single-Employer
Defined Benefit Pension Plans
New for 2009
•
A new Part IV has been added for reporting certain employee stock
ownership plan (ESOP) information formerly reported on Schedule E.
•
The instructions for Part V relating to required attachments for multiemployer
defined benefit plans have been modified to take into account elections under
sections 204 and 205 of WRERA.
27
Form 8955-SSA – Separated Participants
With Deferred Vested Benefits (New)
•
Replaces Schedule SSA
•
Filing is required for the Internal Revenue Service only (Ogden)
•
Pension plans (DB or DC) who have separated participants with deferred
vested benefits
─ Automatic extension of time to file the Form for 2009 calendar year plans
─ Form 5558 may be used to request an extension of time to file the Form
28
III. Audit Requirements for Employee
Benefit Plans
• Large Plan versus Small Plans
• The 80-120 Rule
• Audit requirements
• Active versus inactive participants
29
30
Planning and General Audit
Considerations
Audit Objectives
• Expression of an opinion
• Auditor must obtain reasonable assurance that material
misstatements are detected.
Auditor Considers
• Existence and valuation investments
• Completeness as to EE and ER contributions
• Accuracy of benefits paid and benefit obligations
• Appropriateness of plan expenses
31
Determination of Audit Scope
and Communications
A. Initial or First Year Audits
B. Full Scope Audit
C. Limited Scope Audit
D. Form 5500 and Required Schedules Covered by Auditor’s
Report
E. Engagement Letter/Communication with Those in Charge
with Governance
Understanding of the Plan and Information Gathering
Audit Risk
32
Initial Audit Considerations
•
Engagement letter
– Scope of services
• Any client-imposed scope restrictions?
– Excluded contracts per DOL FAB?
– Limited scope audit under 29 CFR 2520.103-8?
– Auditor responsibility for prior year (comparative) statement of
net assets available for benefits?
– Audit, review, compilation?
33
Initial Audit Considerations
•
Make inquires of the plan administrator and outside service providers, as
applicable, regarding the plan’s operations during those earlier years.
•
Obtain relevant information (for example, trust statements, recordkeeping
reports, reconciliations, minutes of meetings, and SAS No. 70 reports) for
earlier years, as applicable, to determine whether any errors were noted
during those years that could have a material effect on current year balances.
•
Gain an understanding of the accounting practices that were followed in prior
years to determine that they have been consistently applied in the current
year.
34
Initial Audit Considerations Comparative Statements of Net Assets
•
Comparative statements of net assets available for benefits required by
ERISA
•
Apply procedures that are practicable and reasonable in the circumstances to
obtain assurance that the accounting principles used by the plan in the
current and the preceding year are consistent.
35
Initial Audit Considerations Risk Assessment Procedures
•
Planning the nature, timing, and extent of further audit procedures
depends on the outcome of the auditors risk assessment
procedures.
•
The 2010 EBP Audit Risk Alert includes a list of factors (not all
inclusive) that the auditor may want to consider when performing
their risk assessment procedures for an initial audit of a 403(b) plan.
•
General
•
Plan reporting and governance
•
Fraud
36
Initial Audit Considerations Areas of Special Consideration
•
Completeness of participant data and records
•
Participant eligibility
•
Amounts and types of benefits
•
Eligibility for benefits
•
Account balances
•
The nature, timing, and extent of auditing procedures applied by the
auditor are a matter of judgment and will vary with factors such as the
adequacy of past records, the significance of beginning balances, the
complexity of the plan's operations, and controls covered by SAS No. 70
reports.
37
IV. 403(b) Enhanced Reporting Financial
Statements and Disclosures
•
403(b) plans are considered a type of defined contribution plan.
•
The financial statements and disclosures will be similar to
those of a 401(k) plan.
– Comparative Statement of Net Assets Available for Benefits
(2009/2008)
– Current year Statement of Changes in Net Assets Available for
Benefits
38
403(b) Financial Statements
and Disclosures
•
Consideration should be given concerning which disclosures
may need to be modified or added.
– For example, the general description of the plan, eligibility
requirements, funding, and tax status should reflect the
requirements of the 403(b) plan document.
– Note: 403(b) plans do not currently have IRS determination
letters
39
DOL Advisory Opinion (AO) 2010-10A
•
Issued March 4, 2010- Addresses Traditional Annuities issued by TIAA-CREF
•
Allocated vs. Unallocated insurance contracts?
•
DOL concluded the contracts are UNALLOCATED
–
For plan years beginning on or after 1/1/09 must be reported as plan assets
on the Form 5500
–
DOL will not reject (or require amended) Form 5500 for plan years ending in
2008 or prior which contain a modified opinion due to exclusion of these
contracts from plan assets
•
What about similar contracts with other insurance companies?
40
DOL Advisory Opinion (AO) 2010-10AAudit/5500 Considerations
•
Depends on facts and circumstances
– Financial Statements
• Could be an error
• May require restatement of financial statements
• Modified opinion
• Reconciliation to the 5500
•
Form 5500
– Will not have to restated or amended
– Treat the contracts as a transfer in for the 2009 Schedule H
41
Allocated Contracts Emerging
Technical Issues
•
FASB Definition (FASB Codification Master Glossary)– A contract in which an insurance entity unconditionally
undertakes a legal obligation to provide specified pension
benefits to specific individuals in return for a fixed consideration
or premium. An annuity contract is irrevocable and involves the
transfer of significant risk from the employer to the insurance
entity.
•
Allocated=not recognized as a plan asset
Unallocated=recognized as a plan asset
•
Read insurance contracts and supporting documentation to
determine appropriate classification of the contract
42
403(b) Financial Statements
and Disclosures
•
Additional or modified disclosures of the accounting policies
surrounding the accounting treatment of certain contracts may be
necessary.
• “Loans to participants”
─ Loans to participants are made by the vendor to the participant
which are secured by the participant’s assets
─ Loans to participants are not currently on the plan’s financial
statements or the Form 5500
─ Possible need additional disclosures in the footnotes to the financial
statements
43
V.
•
Filing 2009 Form 5500 Electronically
DOL final regulations issued November 2007
─
Eliminate paper filings
─
Applies to plan years beginning in 2009 and all prior year filings (except 2008 until 10/15/2010)
─
Internet-based methods to transmit filings
1. IFILE – Free, “no frills” web based filing application available on the DOL’s EFAST2
website, or
2. Approved third-party software
─
Signing credentials (2) need to be secured from the DOL and input on 1 st page of Form 5500
─
Alternative filing option available if signed copy of 5500 is attached (PDF) and preparer
inputs signing (and transmitter credentials)
44
2009 Form 5500 Filings –
Summary of Changes
•
Electronic Filing
•
Paper filing still applicable for; Form 5558, Form 5500-EZ, Form 8955-SSA
2008 plan year amended filings until 10/15/2009
•
New Form 5500-SF < 100 participants (small plans)
•
Schedules E and SSA (IRS filings) eliminated from DOL filing
•
Attachments to Form 5500 – do not include 5558, must be in PDF format,
cannot exceed size limitation (or contact EFAST2)
•
403(b) plans will be subject to enhance reporting and be required to be filed
in the same manner as qualified retirement plans
•
Schedule C – fee disclosures (direct and indirect compensation)
45
2009 Form 5500 Filings –
Summary of Changes (continued)
•
Immediate validation or rejection of filing by EBSA. If rejected the Form 5500
would not be considered filed and potentially subject to penalties
•
Signing credentials are needed by signer of the Form 5500 and possibly
others – Schedule preparer’s, transmitter’s of the form,
46
Q&A and Contact Information
Louis F. LiBrandi
Tim Desmond
Principal
Partner
212-286-2600
914-381-8900
llibrandi@odmd.com
tdesmond@odmd.com
www.ODMD.com
IRS Circular 230 Disclosure
To ensure compliance with requirements imposed by the IRS, we inform any U.S. federal tax advice contained in this
document is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the
Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter that is
contained in this document.
47