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5500 Proposed Revisions


austin3515
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There's another good proposed change on page 133. The IRS wants to have an electronic version of Form 5558 that would be processed through EFAST2. Hopefully, that will end the 3+ months processing time we've had in prior years for the 2.5 month extensions.

Noting that the IRS has had difficulty promptly adjusting their records to recognize that a Form 5558 has been filed, there should be no problem to solve. Timely filing a Form 5558 to extend the filing deadline for the 5500 and the 8955-SSA is all it takes. IRS approval is not required. If the Form 5558 is completed properly and submitted on time, the IRS has ceded all authority to reject such a filing.

I'm guessing you haven't had the IRS send a letter to some of your clients claiming a Form 5500 was filed late and a penalty will apply because the IRS did not process the 5558 timely. We had one client receive two of those letters in a four year period. After getting a power of attorney signed and wasting time on hold, the matter was quickly resolved once I was able to speak to a live person at the IRS. I don't enjoy extra non-billable work and having clients think we missed a deadline that we did not miss just because the IRS waited until November to process some extensions filed in July after they sent out late filing notices in October.

As I said, there SHOULD not be a problem with this. That doesn't mean there isn't.

If it migrated to EFAST2, who would be able to file a whole batch of 5558s at one time (as in one 5558 for every single ERISA client)? Would plan officials authorized to sign off on the 5500 filing have to get involved? And (as much as I hate to suggest this) what guarantees are there that submitting a 5558 through EFAST2 would keep the IRS from failing to notice that it had been submitted?

How often does the IRS assert that timely filed 1040s were late? Why do they do so with the 5558s, which (one presumes) come to them in much smaller quantities?

Always check with your actuary first!

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There's another good proposed change on page 133. The IRS wants to have an electronic version of Form 5558 that would be processed through EFAST2. Hopefully, that will end the 3+ months processing time we've had in prior years for the 2.5 month extensions.

Noting that the IRS has had difficulty promptly adjusting their records to recognize that a Form 5558 has been filed, there should be no problem to solve. Timely filing a Form 5558 to extend the filing deadline for the 5500 and the 8955-SSA is all it takes. IRS approval is not required. If the Form 5558 is completed properly and submitted on time, the IRS has ceded all authority to reject such a filing.

I'm guessing you haven't had the IRS send a letter to some of your clients claiming a Form 5500 was filed late and a penalty will apply because the IRS did not process the 5558 timely. We had one client receive two of those letters in a four year period. After getting a power of attorney signed and wasting time on hold, the matter was quickly resolved once I was able to speak to a live person at the IRS. I don't enjoy extra non-billable work and having clients think we missed a deadline that we did not miss just because the IRS waited until November to process some extensions filed in July after they sent out late filing notices in October.

As I said, there SHOULD not be a problem with this. That doesn't mean there isn't.

If it migrated to EFAST2, who would be able to file a whole batch of 5558s at one time (as in one 5558 for every single ERISA client)? Would plan officials authorized to sign off on the 5500 filing have to get involved? And (as much as I hate to suggest this) what guarantees are there that submitting a 5558 through EFAST2 would keep the IRS from failing to notice that it had been submitted?

How often does the IRS assert that timely filed 1040s were late? Why do they do so with the 5558s, which (one presumes) come to them in much smaller quantities?

I'm cautiously optimistic that electronically filed 5558 would not be worse than the current paper filings. For the possible issues, I see simple solutions.

1. If migrated to EFAST2, who could file a whole batch? I don't see why it wouldn't be possible to batch file 5558 electronically. If the e-5558 can be filed without a signature like the paper 5558, third party software can easily come up with a batch function. Even if you had to extend the plans one by one, it shouldn't take that long for the average service provider...

2. Would plan officials have to get involved? Maybe, but again, not the end of the world. You simply send out authorization for the extension when you collect your annual data.

3. Of course there are no guarantees, but can it really get worse?

J

 

 

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I would think that the e-5558 would be filed through the IRS FIRE system, and not DOL/EFAST2, like the 8955-SSA, 1099-R, etc since the DOL/EFAST2 don't need these forms. So if e-filed through IRS FIRE, I would assume a "batch" file can be submitted like the 8955-SSA and 1099-R. Wishful thinking?

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Speaking of Form 5558, does anyone think it's a bad idea to put multiple 5558s for the same employer in the same envelope when filing by certified mail/return receipt requested under a single cover letter? (In this case the employer is filing 8 5558s.)

In the old days you had a single 5558 for multiple plans, but should there be a concern with the staff at Ogden messing up if there are multiple 5558s in the same envelope?

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Speaking of Form 5558, does anyone think it's a bad idea to put multiple 5558s for the same employer in the same envelope when filing by certified mail/return receipt requested under a single cover letter? (In this case the employer is filing 8 5558s.)

In the old days you had a single 5558 for multiple plans, but should there be a concern with the staff at Ogden messing up if there are multiple 5558s in the same envelope?

Yes there is a chance they will mess up. However, just like sending a stack of 5558 for unrelated employers, I don't think its an issue to have more than one 5558 for the same employer. I attach a cover with a list of each employer, EIN, and plan number included in the package. The IRS will return the cover because they can't process it, but I use it as "proof" that a certain 5558 was indeed mailed. Every time I have had 5558 issues, the agent has accepted my list along with the certified mail/return receipt as proof of filing.

 

 

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I would think that the e-5558 would be filed through the IRS FIRE system, and not DOL/EFAST2, like the 8955-SSA, 1099-R, etc since the DOL/EFAST2 don't need these forms. So if e-filed through IRS FIRE, I would assume a "batch" file can be submitted like the 8955-SSA and 1099-R. Wishful thinking?

The proposal specifically says that they want to process it through EFAST2 so that both extension and filing is processed by the same system. I still think that a batch feature will be available through third party vendors though.

The proposal also states that you could still file on paper if you prefer that method

 

 

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I would think that the e-5558 would be filed through the IRS FIRE system, and not DOL/EFAST2, like the 8955-SSA, 1099-R, etc since the DOL/EFAST2 don't need these forms. So if e-filed through IRS FIRE, I would assume a "batch" file can be submitted like the 8955-SSA and 1099-R. Wishful thinking?

The proposal specifically says that they want to process it through EFAST2 so that both extension and filing is processed by the same system. I still think that a batch feature will be available through third party vendors though.

The proposal also states that you could still file on paper if you prefer that method

Thanks... obviously I didn't read through the proposal <g>

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I would think that the e-5558 would be filed through the IRS FIRE system, and not DOL/EFAST2, like the 8955-SSA, 1099-R, etc since the DOL/EFAST2 don't need these forms. So if e-filed through IRS FIRE, I would assume a "batch" file can be submitted like the 8955-SSA and 1099-R. Wishful thinking?

The proposal specifically says that they want to process it through EFAST2 so that both extension and filing is processed by the same system. I still think that a batch feature will be available through third party vendors though.

The proposal also states that you could still file on paper if you prefer that method

Thanks... obviously I didn't read through the proposal <g>

No worries. I actually thought FIRE would make more sense as well until I saw the reasoning.

J

 

 

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I`m sure there are a lot of accounting firms and CPAs who don't want that "account balance only" rule instituted.

Would it be fair to say that accounting firms seeking make-work revenue by providing auditor's reports for 401(k) plans with well under 100 actual contributors don't have any kind of legitimate objection to this otherwise entirely beneficial change?

Always check with your actuary first!

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I`m sure there are a lot of accounting firms and CPAs who don't want that "account balance only" rule instituted.

Would it be fair to say that accounting firms seeking make-work revenue by providing auditor's reports for 401(k) plans with well under 100 actual contributors don't have any kind of legitimate objection to this otherwise entirely beneficial change?

I find that auditors perform varying levels of investigation.

Some are only concerned the financials tie from the reports to the form to the ER records.

Some go through the year-end work to see the proper people are covered, that is, they check eligibility and vesting for everyone.

Those in the second group can say they are providing a valuable service.

QKA, QPA, CPC, ERPA

Two wrongs don't make a right, but three rights make a left.

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http://us.practicallaw.com/w-002-7791

Well this sucks...

New Information for Retirement Plans

The proposed regulations would also add new questions to the Form 5500, Form 5500-SF, and Schedule R on participation, contributions, and asset allocation by age, and participant-level diversification. Questions include the number of participants:

•Making catch-up contributions.
•Investing in default investment options.
•Maximizing the employer match.
•Deferring compensation.
•With account balances as of the beginning of the plan year.
•That terminated employment during the plan year that had their entire account balance distributed.

Austin Powers, CPA, QPA, ERPA

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...and we have to include an electronic copy of the comparative chart of investment options...

...and say how many are index funds.

They can't legislate so they are just going to wear us down until they get what they want.

Ed Snyder

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Not one of my clients wants to part with $12,000 unless they have to.

http://us.practicallaw.com/w-002-7791

Well this sucks...

New Information for Retirement Plans

The proposed regulations would also add new questions to the Form 5500, Form 5500-SF, and Schedule R on participation, contributions, and asset allocation by age, and participant-level diversification. Questions include the number of participants:

•Making catch-up contributions.

•Investing in default investment options.

•Maximizing the employer match.

•Deferring compensation.

•With account balances as of the beginning of the plan year.

•That terminated employment during the plan year that had their entire account balance distributed.

There goes the $12,000!

Always check with your actuary first!

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Hey Austin - I love the idea of pooled plans, for the sake of simplicity, etc. - but I wonder how many employers, having been sold on the benefits of 404© relief from liability (such as it is) and the benefits of current "standard" daily val recordkeeping, etc. will want to switch back to pooled plans?

Let us hope that some of the more egregious foolishness in this proposal can be eliminated - everyone write your Congressperson! Anyone know if ASPPA is going to come up with one of those canned e-mail things, once all this is digested?

And I think I saw that the comment period is only 75 days? That's not really much time for stuff of this magnitude.

Fun times ahead.

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A part of the proposed changes we haven't talked about in here is plan and investment information for participant directed plans. A newsletter from Ascensus included this little gem:

For participant-directed defined contribution plans, the “investment option comparative chart” used to satisfy the DOL’s participant fee and expense disclosure (ERISA Sec. 404(a)(5)) regulations must be attached to the Form 5500 filing

New compliance questions indeed require you to attach the Investment Comparative Chart distributed to the participants as part of 404a-5 compliance. (see page 174)

Other questions include number and type of DIA's and whether the plan made a designated investment manager available to participants.

Time to move all those SDBA plans to platforms or pooled investments...

 

 

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WE have a ton of plans on Fidelity's small non-prototype platform. But guess what? There is nowhere for them to go. Well, that is other than an insurance product with expenses of 2%+. Or I'm sure the employer would be happy to spend the $750 out of pocket for RK Direct (a sweet platform of course, but out of pocket is bad...).

Austin Powers, CPA, QPA, ERPA

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