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Guest Article

DOL Regs Impose Additional Requirements on Sponsors of Small Pension Plans

by Powell, Goldstein, Frazer & Murphy LLP

Sponsors of employee benefit plans that hold assets must generally file an annual report on Form 5500, including financial statements audited by an independent public accountant. There is an exception to the audited financial statement requirement for plans that have less than 100 participants. On October 19th, the Department of Labor (DOL) released final rules that impose additional requirements on sponsors of small employee benefit plans who file annual reports on Form 5500 without audited financial statements. These rules are designed to increase the security of the benefits of participants in smaller plans by adding requirements for sponsors who do not want to file audited financial statements.

Under the new rules, effective for plan years beginning after April 17, 2001 (the 2002 plan year for calendar year plans), an employee benefit plan with less than 100 participants does not have to have an audit if the plan meets the following requirements:

At least 95% of the assets of the plan, as of the beginning of the plan year, are invested in qualifying plan assets, which include:
1. employer securities,
2. participant loans,
3. assets held by banks, insurance companies, broker-dealers, or another organization authorized to hold IRA assets,
4. mutual funds,
5. investment and annuity contracts issued by an insurance company, and
6. for an individual account plan, assets in the individual account of a participant over which that participant has the opportunity to exercise control and in which the participant gets a statement of assets at least once a year.
If 95% of the assets are not invested in qualifying plan assets, the person handling the non-qualifying assets must be bonded in the amount of the non-qualifying assets.
The summary annual report for the plan must (except for those assets listed in 1(a), 1(b), or 1(f) above) include:
1. the name of each institution holding qualifying plan assets and the amount of those assets at the end of the plan year;
2. if the plan has more than 5% of its assets in non-qualifying assets, the name of the surety company issuing the required bond;
3. a notice stating that participants can request, and receive without charge, evidence of the required bond and the information received from the financial institutions regarding the qualifying plan assets;
4. a notice stating that participants should contact the regional office of the Department of Labor's Pension and Welfare Benefits Administration if the information in (c) is not available for examination.
If a participant requests documents pursuant to 2(c) above, the plan administrator must furnish copies of the documents to the participant.

Copyright © 2000, Powell, Goldstein, Frazer & Murphy LLP
Powell, Goldstein, Frazer & Murphy LLP is a global law firm with offices in Atlanta, Ga. Washington, D.C., Reston, Va., and Geneva, Switzerland. Established in 1909, the firm employs more than 300 attorneys and provides legal counsel in 27 practice areas.
The information on this page is intended to provide general information and is not intended as specific legal advice. Please read the disclaimer notice at http://www.pgfm.com/disclaimer/disclaimer.html for further information.

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