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Employee Benefits Client Alert
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John McMorrow
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February 10, 2010
ERISA 403(b) Plans Now Subject to Standard Form 5500 Requirements
ERISA Section 403(b) plans with plan years beginning on or after January 1, 2009 are now generally subject to standard Form 5500 filing requirements. This change occurred when, on November 16, 2007, the Department of Labor (DOL), Internal Revenue Service (IRS), and Pension Benefit Guaranty Corporation (PBGC) published final annual reporting regulations that placed such plans on par with other ERISA-covered pension plans.  Sponsors of plans with 100 or more eligible participants will now need to have their plans audited by an independent qualified public accountant.   Non-ERISA 403(b) plans need not file a Form 5500 Annual Report.
Large Plan Filing Requirements.  A "large plan" is generally a plan with 100 or more participants on the first day of the plan year.  Under the final rules, not only must large plans report basic plan information on Form 5500, they are required to complete the following schedules: 
  • Schedule A (if applicable): Reporting information about insurance/annuity policies including commissions, fees and financial activity.
  • Schedule C: Listing service providers paid $5,000 or more and the termination of a plan accountant or actuary.
  • Schedule D: Listing the value of plan investments in pooled or collective funds.
  • Schedule G: Reporting loans, fixed income obligations or leases in default and prohibiting transactions.
  • Schedule H: Reporting financial information.
  • Schedule R: Reporting distribution, funding, amendment and coverage information. Profit sharing plans with no distributions need not file.
Small Plan Filing Requirements.  A "small plan" is generally a plan that covers fewer than 100 participants on the first day of the plan year. A small plan may use a new two-page form - Short Form 5500 (Form 5500-SF)  -  if the plan:
  •  Holds no employer securities and is not a multi-employer plan
  • Satisfies the audit waiver conditions (see below); and
  • Has 100 percent of its assets in investments that have a readily determinable fair market value
The Department of Labor (DOL) anticipates that most small Section 403(b) plans will be eligible to use the Short Form 5500. 
Audit Requirement. For plan years beginning on or after January 1, 2009, large 403(b) plan filers are required to attach a written opinion of an independent qualified public accountant to the Form 5500.  Small 403(b) plans can waive the audit requirement if the following conditions are met:
  • At least 95 percent of the plan's assets are qualifying plan assets OR any person who handles assets of the plan that do not constitute qualifying plan assets is bonded in accordance with the requirements of ERISA Section 412; and 
  • The summary annual report (SAR) includes certain enhanced disclosures.
Electronic Filing of Annual Reports.  For plan years beginning on or after January 1, 2009, Form 5500 and Form 5500-SF must be filed electronically using the ERISA Filing Acceptance System (EFAST2).  
Action Points.
Although annual reports generally are not required to be filed until the end of the seventh month following the end of the plan year, we recommend that employers take the following steps in the meantime:
  • Sponsors of ERISA 403(b) plans should become familiar with the new filing requirements and take steps to seek assistance with Form 5500 preparations;
  • Large ERISA 403(b) plans should begin taking steps to obtain the services of an independent qualified public accountant; and
  • Plan sponsors should become familiar with the electronic filing and processing system (EFAST2).
This client alert is intended to inform you of developments in the law and to provide information of general interest.   It is not intended to constitute legal advice regarding a client's specific legal problems and should not be relied upon as such.  This client alert may be considered advertising under the rules of the Massachusetts Supreme Judicial Court.