Several important developments have an immediate impact on employers who sponsor employee benefit plans. The significant changes include the timeframe when employers must remit employee deferrals into plans, the process surrounding the filing of the Form 5500, and a new requirement that subjects many not-for-profit organizations to the same rules as their for-profit counterparts.
Safe-harbor rule for depositing employee contributions
The U.S. Department of Labor
(DOL) published a final ruling to protect employee contributions deposited into those employee benefit plans considered small plans (plans with fewer than 100 participants) by providing a safe harbor period of seven business days following receipt or with-holding by employers. Previously, plans of all sizes were required to transmit employee contributions to their respective plans as soon as they could reasonably be segregated from the general assets of the employer, but no later than the 15th business day of the month following the month in which contributions were received or withheld by the employer. The timing of deposits by employers is often scrutinized by the DOL and has resulted in sanctioned against plan sponsors.
EFAST2 electronic filing
Effective Jan.1, 2010, all Form 5500 s for 2009 and 2010 plan years must be completed and filed electronically with the DOL.
There are two ways to file electronically: use EFAST2 approved third-party software or IFILE available on the DOL’s site
(www.efast.dol.gov). IFILE should only be used by individuals or organizations filing a small number of Form 5500 filings annually.
Every individual who signs
a Form 5500 or schedule must obtain his/her own credentials as a filing signer. The DOL has imposed a limit of one set of credentials per e-mail address and individuals obtaining the credentials must certify that they will not share the credentials with anyone, including a third-party administrator or financial institution. Depending on the function you provide in relation to the Form 5500, there are several different credential registration options.
One potential issue with the new filing process is that Form 5500 filers will be notified within 48 hours as to whether the Form 5500 has been accepted by the DOL. Plan sponsors who file their returns close to the regulatory deadline should be aware of this lag time Filings submitted close to the filing deadline that are incomplete and rejected may result in a delinquent filing and the imposition of penalties.
Plan sponsors should determine each party’s responsibility in the filing process and register for the appropriate credentials. Communication with your Form 5500 preparer/filer as well as your independent auditor is necessary to ensure the proper registrations are in order for the 2009 Form 5500 filing to avoid any potential delays. As with any new process adequate preparation and a thorough knowledge of the procedures are critical to assuring a smooth transition and submitting Form 5500 filings in a timely and accurate manner.
403(b) plan requirements and issues
In November 2007, the DOL issued amended regulations eliminating an exemption granted to 403(b) plans from the annual Form 5500 reporting, disclosure and audit requirements under ERISA. The removal of this exemption subjects ERISA-covered 403(b) plans to the same Form 5500 reporting and audit requirements as 401(k) plans effective with their 2009 plan year. Generally, 403(b) plans sponsored by religious organizations (church plans) and governments are not covered under ERISA.
ERISA-covered plans with 100 or more eligible participants (as of the beginning of the plan year) that file the Form 5500 as a large plan are required to have an annual audit of their financial statements. In addition, all 403(b) plans are required to have a written plan document and ensure that the plan is operating in compliance with that plan document for the entire 2009 plan year. Plan sponsors should understand how the new reporting requirements affect their plans, and whether it is considered a small or large plan for filing purposes. The designation of an individual within the organization that is familiar with the reporting requirements is important so that there is proper oversight of the audit and filing process.
Although the Form 5500 reporting and financial statement audit requirements are effective for the 2009 Form 5500 filing, the plan’s financial statements need to include a comparative 2008 statement of net assets available for benefits. Communication between the plan sponsor and third party service provider should be ongoing to establish the extent of information that is currently available and the timing of the receipt of this information, and to identify any issues that could arise in obtaining required information.
Upon determination that the plan qualifies for an audit, engaging the services of a qualified independent auditor that has extensive experience with employee benefit plans is critical. The auditor can assist with the information gathering process and discuss any potential issues that may exist from review of the plan document.
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