The New Form 5500 Online Filing Requirements: What Plan Sponsors Need to Know

Frank Pasacreta – Assurance and Advisory Services

Every year, more than 1 million employee benefit plans file Form 5500 or 5500-SF to satisfy annual reporting requirements under the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code. Now, sponsors of ERISA plans must file these forms electronically, using the Department of Labor’s (DOL) ERISA Filing Acceptance System II (EFAST2). Electronic filing is mandatory for plan years ending December 31, 2009 and later. Prior year delinquent and amended Form 5500 or 5500-SF filings must also be filed electronically.

In the past, plan sponsors routinely would rely heavily on their service provider to handle the timely filing of the Form 5500 or 5500-SF by July 31, (October 15, if extended). However, EFAST2 will require significantly more involvement from plan sponsors than in the past. Originally, EFAST2 required each person involved with the 5500 filings at the plan sponsor, including individuals who will sign the forms, to register with EFAST2 and obtain individual electronic signature credentials by means of an ID and PIN. These credentials are limited to one person at one email address. Individuals are prohibited from sharing their PINs, so care must be used on which sponsor employees need to be registered with EFAST2.

Recently, the DOL issued an e-signature option for plan sponsors, whereby the service provider can obtain its own signing credentials and submit the electronic filing on behalf of a plan. The service provider must confirm it has obtained specific written authorization from the plan to submit the filing. In addition, the plan sponsor must manually sign a hard copy of the Form 5500 or 5500-SF, which must be included as an attachment to the electronic filing.

Even with the latest DOL actions to simplify the electronic filing, we highly recommend plan sponsors be proactive by contacting their service providers as soon as possible to work through the expected delays in filing the Form 5500 caused by the EFAST2 implementation. Please click to view the DOL’s current list of EFAST2 FAQs.

Major changes have also been made to certain Form 5500 schedules. For example, the 2009 Form 5500 Schedule C requires more extensive reporting of expenses paid by the Plan to service providers. Reported fees must now be broken out between direct and indirect compensation. Indirect compensation has previously been netted against investment earnings and not reported as plan costs. This change was designed to better identify all fees paid to service providers and to reveal any conflicts of interest that may exist among these providers. The new Schedule C also requires plan sponsors to identify any service providers that fail or refuse to use its best efforts to provide the necessary information to meet the revised cost reporting requirements. Please click http to view the DOL’s list of FAQs about the new Schedule C.

In addition, Schedules E and SSA are no longer part of the Form 5500. Information on separated participants with deferred vested benefits in a plan previously reported on Schedule SSA must now be filed directly with the IRS, as this information includes participant social security numbers.

Please contact Frank Pasacreta at Frank, Rimerman + Co. LLP ([email protected]) if you have questions or need assistance.