Not properly reviewing your Form 5500 can lead to big penalties

By Yariel Chiong

Have you ever read the statement above the signature line on your Form 5500? It says:
“Under penalties of perjury and other penalties set forth in the instructions, I declare that I have examined this return/report, including accompanying schedules, statements and attachments, as well as the electronic version of this return/report, and to the best of my knowledge and belief, it is true, correct, and complete.”

If you are signing the form it is ultimately your responsibility that it is correct. That is why it’s important that your third party administrator (TPA) or whoever is preparing the form, sends it to you for signature with plenty of time for your review You must do your part by providing them with complete and accurate census when requested.

Poor preparation on behalf of your preparer is not an excuse that the government will accept. Ensure that you have properly reviewed the 5500 and accompanying schedules and are confident in it. Ask questions. If you are currently not an ACI client you can contact us for a limited review of your Form 5500 by one of our highly experienced staff.

Some background on the Form 5500:
The Form 5500, Annual Return/Report of Employee Benefit Plan, including all required schedules and attachments must be filed by the 7th calendar month after the end of the plan year unless a Form 5558 is filed and received by the Internal Revenue Service (IRS) before the due date. This will give you an additional 2 ½ months to file the form without penalties. So for example, if your plan is a calendar year end plan your Form 5500 will be due August 1, 2011 since July 31, 2011 lands on a Sunday this year. And if a Form 5558 is filed for extension, your Form 5500 will be due October 17, 2011.

All plans filing on or after 01/01/2010 are now required to be filed electronically through the Department of Labor’s Employee Benefits Security Administration (EBSA) website www.dol.gov/ebsa.

Penalties:
If your form is late, IRS penalties are $25 per day up to a maximum of $15,000. Department of Labor (DOL) penalties can be up to $1,100 per day with no maximum. In addition, for willful violations on your Form 5500, individuals can face up to $100,000 fine and/or imprisonment up to 10 years.

What to do?:
Ask questions! Do not sign and submit the forms until you are satisfied with the answers. If you have any questions for which you cannot get answers, call us!

What you should know before meeting with a 401(k) prospect

Beginning with Calendar year 2009, 5500’s had to be filed electronically with the Department of Labor. All 5500’s were available on public information within 24 hours of filing. This is great for you as an advisor and I will tell you why.

When you review a 5500 before a prospect meeting you will walk into the meeting armed with talking points and questions. You will show your prospect that you took the time to be curious about them. You will make them feel special and you will be smarter. Some things to look for are:

1) If you go to the DOL website (www.efast.dol.gov/welcome.html) and the plan is not there, it is not a calendar year plan. When you talk to the prospect, tailor your conversations around their urgency, their deadlines. Look at their most current form on www.freeerisa.com instead.

2) Look at the effective date of the plan in 1c. If it was more than a couple years ago, has anyone looked at the plan since then? Is it still meeting the needs of the plan sponsor? When the plan was amended and restated for EGTRRA, were they given the opportunity to make other changes at the same time? This would have saved them money and will make you look like a star for mentioning it.

3) Look at the signature. If it is a typed name, it was filed electronically by the plan sponsor. If a signed copy is attached to the back of the package, that means the plan sponsor had the forms filed on their behalf. Their signature is now on public information! Were they aware of this before they submitted this way?

4) The Pension benefits listed in Question 8a or 9a will give you a good idea of the plan provisions. Code “2F” is an instant conversation point for you. It is an indication that this plan is intended to comply with ERISA section 404(c). 404(c) compliance is a way to abate Fiduciary liability. It is about process. It is almost assured that the plan is not complying with this code section. Have a small discussion about this code section and prove your value. Your prospect will want you back for more.

5) For plans large enough to require an audit, the audit will be attached to the filing. This is huge for you. It will give you an overview of the plan provisions. It will give you the assets held for investment! You can do a little homework and walk into that meeting with alternate investment suggestions. This was not easy for you to do before now.

This touches on only part of the 5500. There is so much more. Send me your contact information and the name of a prospect. I will assist you in developing talking points. When that prospect engages you, I want them to engage both of us. Together we will provide them with what all plan sponsors deserve, stellar service, a pro-active TPA and a fabulous advisor who will ensure a great retirement for themselves and their employees!

Tobi Cogswell,
Director, Consulting Practice
Tobi.Cogswell@acibenefits.com
310.212.2623

Changes to EFAST2 e-signature

By Yariel Chiong

The DOL has announced a new option that allows form preparers, such as ACI, to electronically sign 5500 forms on behalf of the Plan Administrator (client). This new option will be offered to our clients which do not have access to the internet or do not wish to receive signing credentials (User ID and PIN).

EFAST2 which applies to plan years beginning in 2009 states that Forms 5500 and 5500SF must be filed electronically with the Department of Labor (DOL). The Plan Administrator is required to receive signing credentials in order to electronically sign the Form 5500/5500SF posted by ACI to the FT Williams website. The client transmits the signed return to the DOL and also retains a physically signed copy of the return for their records. Instructions on how to electronically file your return were posted on our ACI blog in April and can be viewed at any time.
The EFAST2 I-File system has been updated to include a signing credential for service providers. In order to have ACI electronically sign on behalf of clients the following is needed:

1. Written authorization from the client will be required to allow us to electronically sign on their behalf using our credentials. This is different than the credentials the client receives from the DOL.

2. A paper copy of the Form 5500 must be manually signed by the employer and a pdf copy of the signed copy will be attached to the electronic filing done by ACI. Please note: the image of the first 2 pages of the manual employer signed Form 5500 will be visible on the DOL’s electronic public disclosure website. Having the manual client signature public visible raises the possibility of identity theft.

3. ACI will inform the employer of any inquiries from EFAST2, DOL, IRS or PBGC concerning the filing.

We recommend that plan sponsors still obtain their own signing credentials from the DOL and file their own Form 5500.

We will have more information regarding the new change soon for those clients wishing to have ACI sign the return on their behalf.

EFAST 2

Please view the presentation for more information on how to electronically file your 5500.

EFAST 2

View more presentations from Actuarial Consultants, Inc..

Change for Tax form reporting for 2009 Plan Years!

By Alison Murray

Medical Groups and Law Firms often have a retirement plan configuration where individual PC doctors or attorneys are in their own Defined Contribution plans, with the staff in a separate plan. The entire arrangement is considered a Controlled Group. All plans are combined for various compliance tests. Until 2009, the individual PC’s, as plans of a controlled group, could not file a short IRS Form 5500-EZ. The individual PC’s were also required to have a bond.

The definition of a “one-participant plan” has changed for purposes of filing 5500’s for 2009 plan years. Even if you are part of a controlled group, if your personal PC-owned plan contains only you, or you and your spouse, you can file a Form 5500-EZ. In addition you are no longer required to have a bond covering the assets of the trust.

If your plan assets are $250,000 or less you don’t have to file anything! The only requirement is that if you terminate your plan you must file a form in the final year.

What does this mean for you?

5500-EZ’s must still be filed in paper form. They can not be filed electronically. It’s one less thing for you to have to learn this year and you can concentrate on doing what you do best.

The cost of 5500-EZ preparation is less than the cost to prepare a regular Form 5500 so you’ll save some money!

5500-EZ’s are not uploaded to public information. You have more privacy.

Larger plans consisting of partners or partners and spouses only will also enjoy this newly-minted definition of “One Participant Plan”. Take advantage of it.

Remember, you heard it here first!!

News Flash: IRS Forms Must be Electronically Filed!

For plan years beginning in 2009, the form 5500’s must be filed electronically with the DOL

Paper forms will no longer be accepted by the DOL unless you are eligible to file a 5500EZ (only for those plans that are maintained by sole proprietors or partnerships, that are not part of an affiliated service group or controlled group and that do not have rank and file employees are eligible ).

This rule applies even if you don't own a computer! The IRS has recommended that if you do not have access to a computer, you use your local library, internet café or come into our offices.

The Plan Sponsor will be required to obtain a user name and PIN from the DOL (credentials) in order to submit the form 5500 electronically to the DOL.

There is a brewing controversy over the DOL’s refusal to allow the Plan Sponsor to share their credentials with third party administrators for purposes of filing the 5500.

Please see the content of an email below from ASPPA (American Society of Pension Professionals & Actuaries) that includes a Petition to Phyllis Borzi, Assistant Secretary/EBSA US Department of Labor. You may want to sign and electronically file this Petition.

Regardless of the outcome on the sharing of the credentials, ACI will be setting up a webinar on our website that you can review at your convenience on how to file electronically and how to set up your DOL signing information. We anticipate this webinar will be available in the next few weeks.

We recognize that you will be going through a learning curve on this new requirement. We are committed to helping you through this change. Your ACI administrator will be co-coordinating with you in setting up the plan administrator, plan sponsor and CPA if applicable for the electronic filing.

The following is an email from the American Society of Pension Professionals & Actuaries (ASPPA) regarding the EFAST2 filing.

Sign the EFAST2 Petition!

ASPPA is soliciting your support in asking the Department of Labor to modify its position with regard to the sharing of EFAST2 credentials. Many practitioners have expressed concern that DOL’s current position will hamper their efforts to assist clients with timely filing of Form 5500. IRS and PBGC have developed systems that recognize the key role played by service providers in achieving compliance. ASPPA proposes that DOL implement similar rules so that filing signers could, at their option, choose to share their credentials with their service providers to facilitate electronic filing.

Read the entire letter here.

If your firm wishes to endorse our efforts, please click here and you can provide the necessary information to have your firm’s name added to the list of signatories on the above letter. Be sure you are authorized to sign on your firm’s behalf and only one member of your firm completes the form.

You do not have to be a member of ASPPA to support this effort. ASPPA believes there is strength in numbers and hopes you will take this opportunity to let DOL know your firm is committed to compliance.

Thank you for your support.

4245 North Fairfax Drive Suite 750 Arlington, VA 22203 703.516.9300 www.asppa.org