Transcript 2001 Form 5500 - ASPPA Benefits Council of Detroit

Form 5500 Update
ABC of Detroit
March 22, 2007
2006 Form 5500
Janice M. Wegesin
www.form5500help.com
What We’ll Talk About Today
Things to know about the 2006 form
and schedules
 Common questions/issues that arise
 Changes for 2007 plan years

Form 5500-EZ threshold increased
 “Small Plan” requirements


3
Mandatory E-Filing for 2008
ABC of Detroit
March 22, 2007
Form 5500
2006 Form 5500 Update

No booklets being mailed to plan
sponsors
Call for forms at 800/829-3676
 Be specific about every schedule you
need


Approved software vendors
Approval for machine print versions
 Required to certify for electronic filing of
2006 forms

5
ABC of Detroit
March 22, 2007
Preparing Form 5500

Consider “entity control” items
Used by agencies to relate one filing
to another
 Plan sponsor name
 Plan name
 EIN / PN


6
Use line 4 wisely!
ABC of Detroit
March 22, 2007
Who Must Sign?
Person authorized by Plan Sponsor
 Person authorized by Plan
Administrator
 May be the same individual
 Not required to be owner/officer of plan
sponsor but often is
 For current e-filing, these are the only
persons who need signer IDs and PINs

7
ABC of Detroit
March 22, 2007
Line 4
Most common error – inconsistent EIN /
PN from prior filing
 Relates only to prior year’s filing, so
amending current year’s filing doesn’t
solve problems

2004 filing shows PN 001
 2005 filing shows PN 002 but line 4 not
completed
 How to fix?

8
ABC of Detroit
March 22, 2007
Edit Checks

EFAST has system checks
Multiple levels that are randomly
applied
 Relate filing to prior year
 Check internal accuracy (math) and
consistency

Are typically the starting point for
deficiency letters
 Your software may provide some level
of edit checks to minimize errors

9
ABC of Detroit
March 22, 2007
Lines 6 and 7

Line 6 is count on first day of plan year
Often, this is not the same count as
shown at line 7f on prior year filing
 Is threshold for establishing small vs.
large plan


80 / 120 Rule
May continue to file as small plan until
count goes over 120 on line 6
 Not a one-time exception!

10
ABC of Detroit
March 22, 2007
Lines 6 and 7
Counts at line 6 and 7a-f include all
eligible employees, not just those with
account balances
 Line 7i ties to Schedule SSA


11
Rules for reporting on Schedule SSA
will be discussed later
ABC of Detroit
March 22, 2007
Lines 8, 9, and 10

Edit checks reference these lines for
consistency and attachments
Box (1) at Line 9a checked means
Schedule A should be attached and
that box (3) should be checked on line
10b
 Lots of “indirect” links

12
ABC of Detroit
March 22, 2007
Schedules
No Changes for 2006

Schedules A, B, C, D, E, G, H, I, R
and SSA
Format is identical
 Instructions are same or have only
minor changes

14
ABC of Detroit
March 22, 2007
Schedule P is Gone!
Schedule A – Insurance
Information

Types of contracts
Allocated (less common in retirement
plans)
 Unallocated (GICs, group annuity
contracts, etc.)

Pooled separate accounts reported at line
4 means Schedule D also required
 Life insurance in retirement plans is
welfare benefit reported in Part III

16
ABC of Detroit
March 22, 2007
Schedule D – Direct Filing
Entities
Part I is completed by plan that
invests in DFE; Part II is left blank
 Values should tie to Schedule H
 If PSA held, should also tie to value
reported at line 4 of Schedule A

17
ABC of Detroit
March 22, 2007
Schedules H / I

Tricky line 4a
Reporting late deposits of payroll
deduction 401(k) withholdings and/or loan
repayments
 Complete line 4d for other than line 4a
events

When is “late?”
 How many years do you have to report
it?

18
ABC of Detroit
March 22, 2007
FAQs May Be Helpful

EBSA has posted a number of FAQs
on its website to explain rules
Small Plan Audit Waiver
 Delinquent Filer Voluntary Compliance
 Late deposit of 401(k) withholding


19
www.dol.gov/ebsa/faqs
ABC of Detroit
March 22, 2007
Schedule SSA
Cannot use attachments for 2006
filings
 Check with software vendor for data
import capabilities
 Must report –

Deferred vested
 Changes
 Deletes

20
ABC of Detroit
March 22, 2007
Schedule R
Don’t file Schedule R just to complete
line 9
 Only one Schedule R per filing, even if
for multiple employer plan
 Remember: it’s coverage under
Section 410(b) that is being reported
and not satisfaction with Section
401(a)(4) rules

21
ABC of Detroit
March 22, 2007
Odds and Ends
Form 5500-EZ
Form 5558
2006 Form 5500-EZ

Not required to attach Schedule B for
defined benefit plan, but funding
standard account must be maintained.
Must maintain signed copy of
Schedules B.
 New Line 10i asks about actuary’s
certification and whether there is any
funding deficiency

23
ABC of Detroit
March 22, 2007
Form 5558
New form issued in January 2007 that
officially eliminates signature
requirement unless filing to extend
due date of Form 5330
 Who can sign?


24
Attorney, CPA, Enrolled Actuary,
Enrolled Agent
ABC of Detroit
March 22, 2007
Changes for 2007
Form 5500-EZ
The threshold for reporting on Form
5500-EZ is raised to $250,000 for plan
years beginning in 2007
 How will IRS transition from the
$100,000 threshold currently in place?
 No relief in sight for late filers of Form
5500-EZ

26
ABC of Detroit
March 22, 2007
“Small Plan” Relief

PPA requires DOL to create a
simplified reporting scheme for small
plans
Small plans are defined as having 25
or fewer participants
 Rule applies beginning in 2007
 DOL anticipated this for the 2008 year
with the new Form 5500-SF

27
ABC of Detroit
March 22, 2007
Other Issues
Apply to 2008 plan years

PPA extends multiemployer Annual
Funding Notice to all defined benefit
plans instead of SAR

Requirement to post Form 5500 on any
intranet website maintained by plan
sponsor
28
ABC of Detroit
March 22, 2007
MANDATORY
Electronic Filing of Form 5500
Mandatory Electronic Filing

What do we know so far?

How will this change your business?

Getting ready
30
ABC of Detroit
March 22, 2007
Status of E-filing

Proposed to apply to plan years
beginning after 2008

PPA legislated e-filing
Eliminates paper option
 Improves time of public disclosure
 Continue to use vendor software
 Internet-based filing process

31
ABC of Detroit
March 22, 2007
Practitioner Concerns

Registration process for e-signatures

Allow for third-party filing system
Experience with 1999 transition
 Rejection of filings during initial year
 No separate filings with IRS
 Adapt system for late, amended, and
disaster relief filings

32
ABC of Detroit
March 22, 2007
Practical Considerations
Computer “dummies”
 Plan sponsors without computers
 Security and attachments
 Automatic edit tests

Rejection and resubmission
 What constitutes “timely” filing?

33
ABC of Detroit
March 22, 2007
Outreach
Educate practitioners
 Create e-public disclosure room

34
ABC of Detroit
March 22, 2007
Transitions
No learning curve
 Adapting your office procedures
 Preparing clients for e-filing

35
ABC of Detroit
March 22, 2007
Other Issues

Alternatives for Form (Schedule) SSA
submission

Form 5500-SF
Used by “small” plans
 Electronic option for one-participant
plans (instead of Form 5500-EZ

36
ABC of Detroit
March 22, 2007
Late Filing
Penalties
and Options for Abatement
Late Filer Penalties
Assessed under IRC 6652(e).
 $25/day, up to $15,000.
 Can waive or abate penalties if
reasonable cause is established.

38
ABC of Detroit
March 22, 2007
Failure to File Penalties
Up to $1,100 per day for failure or
refusal to file a complete report.
 Other penalties can be imposed for
failure to provide report of
independent accountant, Schedule
SSA, etc.

39
ABC of Detroit
March 22, 2007
Late Filing Solutions

DOL has updated its Delinquent Filer
Voluntary Compliance (DFVC)
Program

IRS has agreed to waive penalties on
plans filing under DFVC
• See IRS Notice 2002-23


40
PBGC also on board
Reasonable cause is still available
ABC of Detroit
March 22, 2007
How Far Back Do You Fix?

41
All the way back, but….

The appropriate Form 5500 filing must
be prepared for every open year.

It’s critical that the filings for the last
three years be perfect. These three
filings will be subjected to full edit
testing and review at EFAST.
ABC of Detroit
March 22, 2007
What About Audit Reports

DOL requires at least past three years
be complete

Digress for a moment –
Never ignore a letter from DOL about
missing audit reports
 10 day letter; followed by 45 day letter

42
ABC of Detroit
March 22, 2007
Reasonable Cause
Agencies must continue to consider
reasonable cause for late filing
 Each agency can assess penalties
independent of each other


43
Not clear if IRS is reviewing
reasonable cause letters sent to
EFAST with original filing
ABC of Detroit
March 22, 2007
Reasons for Late Filing
Based on events or parties involved.
 Did taxpayer exercise ordinary
business care and prudence?
 A first time delinquency does not by
itself establish reasonable cause.

44
ABC of Detroit
March 22, 2007
Facts and Circumstances
Length of time between event cited as
reason filing is late and the actual
filing date.
 Could taxpayer have anticipated the
event?
 Were circumstances beyond
taxpayer’s control?

45
ABC of Detroit
March 22, 2007
Common Reasons Cited
Death, illness, or absence of taxpayer
or immediate family member having
sole authority to execute return.
 Destruction of records.
 Unable to obtain necessary records.
 Ignorance of the law.

46
ABC of Detroit
March 22, 2007
Contents of Letter
Dear EBSA:
We are filing with this letter the Form 5500
for the above-named Plan for its calendar
plan years ending in 2002 through 2005.
These filings are late; however, we believe
we have circumstances that qualify as
“reasonable cause” and, therefore, request
that both the EBSA and the IRS grant a
waiver or abatement of any late filing
penalties that may be assessed due to
these late filings.
47
ABC of Detroit
March 22, 2007
Tell the Truth
“My dog ate it” is ok, if that’s the truth
 No “right” or “wrong” excuses
 Confusion among professionals or
bad/no advice are very common
excuses


48
Consult honestly – some facts just
don’t warrant reasonable cause!
ABC of Detroit
March 22, 2007
Beg for Mercy
Our firm has every intention of
complying with ERISA’s reporting and
disclosure rules. We believe the late
filing of prior year reports for this Plan
is the result of reasonable cause, not
willful neglect. Accordingly, we
request relief from any and all late
filing penalties which the agencies
may assess.
49
ABC of Detroit
March 22, 2007
Closing Paragraph
Under penalties of perjury, ABC
Company presents this information
and declares that these statements
are, to the best of our knowledge,
true, correct, and complete. Please
contact the undersigned if you have
any questions in connection with this
request.
50
ABC of Detroit
March 22, 2007
Who Signs?

The ‘reasonable cause’ letter must
always be signed by the plan
sponsor/plan administrator


51
They have the liability for the filing, not
the practitioner [who may or may not
have some fault in the late filing]
Letter should appear on plan
sponsor’s letterhead
ABC of Detroit
March 22, 2007
Other Tips

Attach a copy of the ‘reasonable
cause’ letter to each of the late filings
you submit

You may get correspondence on one
of the filings or from one of the
agencies – just send the same letter
again (assume they didn’t read it the
first time!)
52
ABC of Detroit
March 22, 2007
DFVC Program Basics

Submit late filing to EBSA in
Lawrence, KS
Use form for year of late filing, or
 Most current form available


Send DFVC penalty to Charlotte, NC


53
Attach copy of late Form 5500, but not
schedules or attachments
More information available on EBSA
website or call 202/693-8360
ABC of Detroit
March 22, 2007
Eligible for DFVC if

Plan sponsor has not already been
contacted by EBSA or IRS about late
filing

Typically, this means a penalty letter
has been issued
Not available for Form 5500-EZ or
filings for plans with no employees
 A DFE filing is never “late” for penalty
purposes!

54
ABC of Detroit
March 22, 2007
DFVC Penalty Structure
Per day penalty is $10
 Small plan penalty limited to

$750 per filing
 $1500 per plan


Large plan penalty limited to
$2000 per filing
 $4000 per plan

55
ABC of Detroit
March 22, 2007
Per Plan Bargain
Filings for same plan
 Missed more than two filings

56
ABC of Detroit
March 22, 2007
Resources
Get more information…
www.freeERISA.com
 www.EFAST.dol.gov
 http://www.sec.gov/edgar/searchedgar
/companysearch.html
 www.form5500help.com
 Call DOL Public Disclosure Room at
202/693-8673

58
ABC of Detroit
March 22, 2007
Thank You!
Questions welcome at
www.form5500help.com