RECENTLY ANNOUNCED CHANGES TO FORM 5500
By: Elizabeth R. Cook
Hatcher, Stubbs, Land, Hollis & Rothschild, LLP
Columbus, GA
On July 21, 2006, the DOLÕs Employee Benefits Security Administration, issued a final regulation that mandates that plans file Form 5500 electronically. DOL Reg. ¤2520.104a-2(a). The Employee Benefits Security Administration, together with the IRS and the PBGC, also published a proposed Notice of Proposed Form Revisions and proposed regulations that will make significant changes to the forms that will be processed electronically. 71 Fed. Reg. 41615, July 21, 2006. The changes are summarized below.
Final Regulation. For plan years beginning on or after January 1, 2008, annual reports (including accompanying statements and schedules) filed with the DOL must be filed electronically. Initially, mandatory electronic filing was proposed to be effective for plan years beginning on or after January 1, 2007. After receiving many comments questioning the ability of employers to comply given such short notice, the effective date was delayed to give filers and providers adequate preparation time. The majority of filers will have until at least July, 2009 to implement electronic filing.
Proposed Regulations. The proposed changes to the Form 5500 are in large part based on the need to facilitate electronic filing. However, the expansion of Schedule C to include additional information on service providers (see below) reflects the DOLÕs continuing efforts to ensure that plan officials have the information required to assess reasonableness of fees paid for services rendered to a plan. The proposed changes, if adopted, will apply for the reporting year in which the electronic filing requirement is implemented.
New Form 5500-SF. A new two page report, Form 5500 Ð SF Annual Return/Report (ÒShort Form 5500Ó), has been proposed for certain small plans. Specifically, a pension or welfare plan will be eligible to file the Short Form if the plan
á covers fewer than 100 participants (or would be eligible to file as a small plan under the 80 to 100 rule)
á is eligible for the small plan audit waiver
á holds no employers securities
á has 100% of its assets in investments that have a readily determinable FMV.
Most plans that file a Short Form 5500 will not have to file any schedules (although a defined benefit plan will continue to be required to file a Schedule B, if applicable).
Elimination of Schedules. The schedules to Form 5500 required only for the IRS will be eliminated (i.e., Schedules E (ESOP Annual Information), P (Annual Return of Fiduciary of Employee Benefit Trust), and SS (Annual Registration Statement Identifying Separated Participants with Deferred Vested Benefits). [Note: the IRS has independently eliminated Schedule P, and the DOL is proposing that the three ESOP information questions on Schedule E be moved to Schedule R.]
Additional Information on Service Providers Required. Schedule C will be expanded to three parts. Part I will require identification of each person who has received, directly or indirectly, compensation (money or anything of value) of $5,000 or more. Filers will also have to indicate whether the a party other than the plan or the plan sponsor provided compensation to the service provider in connection with services provided to the plan.
Part II will require identification of service provides that fail or refuse to provide the information necessary to complete Part I. The threshold for reporting on non-fiduciary employees of a plan will increase from the current $1,000 a month to $25,000 per year. Codes for identifying services will be updated and expanded. Compensation will include ÒfloatÓ or similar earnings that are retained by a service provider as part of its compensation package, and changes will address reportable compensation relating to brokerage commissions and payments for bundled services.
Part III will be the current Part II (i.e., reporting termination information on accountants and enrolled actuaries).
Miscellaneous Changes.