April 26, 2010 David O. Reyes CPA - Benefits Tax Compliance Pam Lebold CPA - Risk Management.
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Transcript of April 26, 2010 David O. Reyes CPA - Benefits Tax Compliance Pam Lebold CPA - Risk Management.
April 26, 2010David O. Reyes CPA - Benefits Tax
Compliance Pam Lebold CPA - Risk Management
Greater Transparency
More Disclosure
Accountability
Form 5500 Overview◦ What plans must file◦ 5500 and required Schedules
Changes affecting the 2009 Form 5500◦ Changes to the 2009 Forms◦ 403(b) Plan expanded reporting requirements ◦ New Electronic Filing Requirements
457/Deferred Compensation Plan Compliance
Excess Benefit Transactions
Who must file? Pension and Welfare Benefit Plans subject
to ERISA Pension Plans-401(k), 403(b), Pension, Profit
Sharing Welfare Benefit-Medical, Dental, Life
Insurance, Disability etc. Types of Welfare Benefit plans-Funded
(Trust) and Unfunded (Insurance/Self Insured)
Most Welfare Benefit plans are Insured “unfunded arrangements”.
Unfunded plans have filing exemption <100 Unfunded plans >100 participants must file Other plans exempt from filing-SIMPLE, SEP,
Church Plans, Government Plans Due date is last day of the 7th month after
end of plan year. 2 ½ month extension available, Form 5558.
Form 5500 and Schedules ◦ Schedules filed are dependent of type of plan,
size of plan, and plan features◦ Large plan vs. Small plan◦ Most Common Schedules for all plans
Schedule A- Insurance Schedule D-Investments in Pooled or Collective
Funds Schedule I (Small Plan)- Balance Sheet and Income
Statement, Questions on plan operations Schedule R –Distribution reporting, plan funding and
coverage information
Schedules only for large plans◦ Schedule C- Service providers paid > $5,000◦ Schedule G-Reporting loans and prohibited
transactions◦ Schedule H-Income statement, balance sheet,
accountants opinion, questions about the plan◦ The accountants opinion is the most significant
difference between a large and small plan Form 5500 and Schedules open to public
inspection
Significant penalties may be assessed for late filings◦ DOL $1,100/day◦ IRS $25/day capped at $15,000 per year
Delinquent Filer Voluntary Compliance Program is available from the DOL◦ Penalty reduced to $10/day◦ Per plan cap - multiple filings◦ Avoids both DOL and IRS full penalties
Changes to some of the Schedules Expanded filing requirements for 403(b)
Plans beginning with the 2009 filing New Electronic Filing requirements effective
for plan years beginning in 2009
Continues to be limited to large plan filers, and the $5,000 reporting threshold was retained
Requires direct compensation paid by the plan to be reported on a separate line from indirect compensation received from sources other than the plan or plan sponsor
Additional codes added to types of services provided
Alternative reporting option: Indirect compensation New Part II: Identify each service provider that
failed or refused to provide the information necessary to complete Part I
Form 5500◦ New pension plan characteristics codes◦ Question on number of contributing employers◦ Optional line for principal preparer has been deleted
Schedule A ◦ Identify insurers that fail to supply information
Schedule H◦ Large plan failures to pay benefits due◦ Schedule of delinquent participant contributions – Questions on blackout compliance◦ Reporting of mutual fund dividends
Schedule I◦ Small plan failures to pay benefits due◦ Questions on blackout compliance◦ Separate disclosure of fees paid to administrative service
providers
Schedule SSA◦ No longer required beginning with 2009 filing◦ Replaced with IRS Form 8955-SSA
Attachments Under EFAST 2◦ Accountants opinions/financial statements◦ Actuary attachments to Schedule SB◦ Attached to the 5500 in pdf or plain text files (ASCII)
On Nov. 16, 2007, the Department of Labor (DOL) issued “Annual Reporting and Disclosure; Revision of Annual Information Return/Reports; Final Rule and Notice”
The exemption in section 2520.104-4(b)(3) is being eliminated, with the result that 403(b) plans subject to Title 1 will now be treated the same under the regulations as any other Title I pension plan for purposes of the annual report requirement under Title I of ERISA.
Effective for 2009 filings, ERISA covered 403(b)’s are required to file a complete 5500
Must complete all the same schedules as a 401(k) plan
Large plans will require Schedule H and accountants’ opinion with financial statements
FAB 2009-2, DOL ruling which allows plan auditor to exclude certain plan participants and their investments for 5500 and audit purposes
www.dol.gov/ebsa/403b.html
EFAST2 replaces EFAST1 Electronic filing becomes mandatory with EFAST2 for
plan years beginning on or after 1/1/09 ◦ Required for retirement and welfare plans◦ Exception: Form 5500-EZ electronic filing not available◦ Form 5500-EZ may elect to file a Form 5500-SF and
electronically file◦ Also applies to 403(b) plans, except those not subject to Title I
of ERISA Any plan which has a due date before 1/1/10 will
automatically have an extension until 90 days following the date on which the Form 5500 is available for filing electronically (i.e. 3/31/10)◦ Short plan-years are encouraged to wait and file electronically,
but it is not required – May file utilizing the prior year’s form and mail the forms
Software: Three options◦ A private, Web-based system◦ A third-party software application◦ DOL’s Web-based system (IFILE)
Registration with EFAST2◦ Began 1/2/2010◦ Must register if using IFILE or third-party software◦ www.efast.dol.gov and click “Register”◦ If you are registered for EFAST1, you will need to register again for EFAST2◦ All persons who touch a Form 5500 in any way, including signers, will need to register with EFAST2 and obtain a user ID and PIN◦ DOL will limit one set of log-in credentials per e-mail
address – can’t obtain signature authority for the client
When registering, disclose what user types(s) you are. The type selected affects the available menu.◦ Filing author (return preparer)◦ Filing signer (person who signs the return) – individuals,
not plan sponsors/entities
– Schedule author (schedule-only preparer – i.e. actuary and
Schedule MB or SB) – Transmitter (party who transmits the electronic return) – Third-party software developer
IFILE – the basics of how it works◦ Complete forms on screen by navigating through each section of
each form◦ Add forms by clicking on the schedule name/letter from a menu
and completing the form ◦ Add attachments such as the accountant’s opinion/report
Accountant’s opinion/report MUST be in PDF format only, as it requires a signature
Other attachments can be PDF or text files 2GB limit on the size of the electronic file; large attachments will not be
able to be transmitted Once preparation is complete, associate a
signer◦ Provide signer’s e-mail address◦ Program searches and matches the e-mail address to those
registered with EFAST2◦ If the signer is registered, an e-mail will be generated informing
the signer that a return is awaiting their signature◦ If the signer is not registered or if the e-mail address entered is
incorrect, an error message will be displayed
• Other items◦ Plan sponsor must maintain a paper copy of the
electronic return, complete with original signatures◦ Extension procedures will not change (although Form
5558 will no longer be required to be attached to the Form 5500)
◦ Amending pre-2009 forms or filing pre-2009 forms late under DFVC program must do so electronically DFVC - Use current year forms and indicate the dates If amending, you must resubmit the Form 5500 and all of
the schedules included with the original filing (even those that remain unchanged)
Must reference the original acknowledgment ID with the amended filing
Two types - 457(b) and 457(f) Only available to nonprofit organizations Focus on 457(b) plans Two common issues
◦ Proper timing of FICA withholding◦ Failure to file proper Top Hat filing
IRC Section 4958 Penalty on the individual for non-fair market
value transactions Most common: unreasonable compensation Individuals are “disqualified persons” or
insiders
1st tier penalty: 25% of the excess benefit
2nd tier penalty: 200% if correction not made
Penalty cannot be paid by organization
How to correct excess benefit
College President’s comp & benefits = $400,000
Assertion that reasonable compensation = $300,000
Excess benefit = $100,000
1st tier penalty = $25,000
Correction = pay $100,000 back to College
Shifts burden of proof to IRS 3 requirements:
1. Persons making decision are independent2. Comparability data3. Contemporaneous documentation
990 questions