The EBSA today announced that the EFAST2 electronic filing system for Forms 5500 and 5500-SF employee benefit plan annual reports has a new e-signature option. This option is designed to simplify the electronic filing process, especially for small businesses that use service providers to complete and file their annual reports.

Effective Jan. 1, 2010, retirement and welfare plans required to file an annual Form 5500 or 5500-SF must file electronically using the department’s new EFAST2 electronic filing system. More than one million Form 5500 reports are filed each year to satisfy annual reporting requirements under the Employee Retirement Income Security Act and the Internal Revenue Code.

EFAST2 is designed to improve the receipt and processing of the Forms 5500 and 5500-SF.

Under the new e-signature option, service providers that manage the filing process for plans can get their own signing credentials and submit the electronic Form 5500 or 5500-SF for the plan. The service provider must confirm that it has specific written authorization from the plan administrator to submit the plan’s electronic filing. In addition, the administrator must manually sign a paper copy of the completed filing, and the service provider must attach a PDF copy of the manually signed Form 5500 or 5500-SF as an attachment to the electronic filing submitted to EFAST2.

The service provider must communicate to the plan administrator any inquiries received from EFAST2, the Department of Labor, the Internal Revenue Service or the Pension Benefit Guaranty Corp. regarding the filing, and inform the plan administrator that, by electing to use this option, the image of the plan administrator’s manual signature will be included with the rest of the annual return/report posted by the Labor Department on the Internet for public disclosure.

The additional e-signature option will be available in the government-sponsored IFILE application beginning May 13, 2010. Filers using EFAST2 approved software to complete and file the Form 5500 or Form 5500-SF should contact their software vendors for information regarding availability of this new e-signature option as part of their software.

The current EFAST2 frequently asked questions have been updated, and a new fact sheet and set of frequently asked questions have been developed to help small businesses understand this new option. Those materials are available through http://www.efast.dol.gov. Assistance with the EFAST2 system and the Forms 5500 and 5500-SF is also available toll-free at 866-463-3278.

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I know that simple 403(b) answers are rare, but here goes...

Are 403(b)(9) in-service withdrawal restrictions the same as for 403(b)(1)?

Thanks!

The DOL just put out guidance for investors in Target Date Funds. Are any of you going to forward this to your employees?

http://www.dol.gov/ebsa/pdf/TDFInvestorBulletin.pdf

I have a client who wants to amend their loan policy to require that loans be repaid within 4 years rather than 5 Years. Is this permissible?

Thanks much for your help!

Due to an administrative payroll system error on one pay period only double the amount of salary deferrals were withheld from Participant paychecks. What are the appropriate correction alternatives? Is it acceptable to not withhold employee deferrals on next payroll to correct the error? Do the extra deferral amounts need to be removed from plan and if so by what method?

Any suggestions are appreciated.

I made my first post in the 403b forum, and didn't get a response, so I thought I'd come back home to the 401k forum...

I've come across a small dentist office where the dentist and his wife make salary deferrals into something called a "Supplemental Retirement Account" with Merrill Lynch. I've never heard of this, so I Google'ed it. Everything that popped up referred to either a 403(b) or a 457 plan for a college or university. Neither of which would be appropriate for this particular client.

Does anyone know anything about these SRAs?

Thanks!

There's a Quality Assurance Bulletin from 2006 which allows employers to categorically exclude part time employees as long as any part time employee who reaches 1,000 hours of service be eligible to participate in the plan. The plan must include this failsafe language. This doesn't seem to work well with a 401(k) plan that has a service condition more favorable to employees, such as 30 days, or immediate entry. I'm thinking that this concept was designed for plans that had a year of service eligibility condition. For example, a part timer can't make deferrals until they reach 1000 hours, but everyone else can begin making deferrals upon completing 30 days of service. My question is whether this failsafe approach is permissible in a plan that has a service period shorter than a year of service. If so, I assume we would have to test the different eligiblity provisions under 401(a)(4). By the way, the plans in every example have a year of service condition. Help!

Can you declare a discretionary match to apply to deferrals in the prior plan year?

In 2009, Company A and Company B are affiliated employers both participating in Plan A, which is a safe harbor 401(k) with an enhanced match of 100% of deferrals to 5%. Plan also permits discretionary match - discretionary percentage of deferrals to a discretionary cap.

Plan A permits each employer to allocate contributions to only its own employees. (coverage testing performed)

Mid 2009, Company A has financial trouble, so Plan A suspends safe harbor match. Company B declares a discretionary match of 100% of deferrals up to 5% of comp per payroll period to make up for safe harbor.

In 2010, things look better and company A wants to make up the match to its employees. Is there any prohibition to declaring a discretionary match for 2009 now? They have until end of 2010 to deposit the match and up to the due date of the tax return to contribute it in order to deduct for the taxable year and 30 days after that to include it in that year's annual additions.

ACP testing would be rerun including the discretionary contribution, and is projected to pass.

Is there any formal or guidance from IRS that says you need to declare a match to apply to Plan Year X before the end of the Plan Year?

Recently, my email address changed and in the interim, I missed some Benefit News Letters. I wanted to retrieve them in the same format. Here is a way to do so if you use a PC, provided you are using Internet Explorer (IE).

(1) In IE, ensure that you have appropriately designated your email program.

{Tools}{Internet Options}{Program}. Use drop-down menu to designate an implemented email program such as Outlook or Outlook Express.

(2) In BenefitsLink

{News}{Newsletter}{By Date} and select {lef mouse click} the newsletter

(3) In IE, {File}{Send}{Page by E-Mail}. The email template appears and designate yourself as recipient and send

Voila!

say we have a non erisa 401k profit sharing plan where only a husband and wife participate.

say the plan is self directed non 404 c plan.

say each participant defers 16k for 2010 for a total of 32k in plan.

say they want to make an investment where they loan a non interested party 30k with say a 5 year terms with interest and principle, much like a plan loan to a participant.

Since it is a self directed plan i presume this could be accomplished if each participant agrees to loan 15k to the unrelated party.

If it were non self directed i presume plan could just write a 30k note.

is this a reasonable investment/transaction? I see no problem with it.

Thanks.

to my knowledge a roth ira cannot be rolled into a defined benefit plan (or a profit sharing plan for that matter). Is that correct? I realize it makes no sense to roll a roth into a qual plan but some people seem to think it is a good idea to roll into a qual plan for protection against crediters.

thanks

We are a TPA firm who has been asked if we could recommend an administrator for a 403(b) plan. We do not administer 403(b)'s as they are a little different from 401(a) plans and we already have too much to do with what we have. Apparently they are a local college and have been administering it themselves.

If there is anyone in the Southern California area who would be interested in this?

If so, let me know.

Although I haven't done it before, I guess you can send me a private message.

10/1 plan year completed the most recent valuation and AFTAP was certified at less than 60% triggering an automatic plan freeze. What are the rules regarding when the plan can become unfrozen. Does the AFTAP need to be certified at 80% and then it can become unfrozen?

What is the correction for a plan loan when loan payments received exceeds scheduled amortized loan payments.

Example scheduled loan payment $27 per paid period. Amount received $282 per paid period. Loan is paid up now through 2012.

The loan policy does not allow for partial payments or loan refinancing.

Do you refund amount the overpayments, if so do you apply earnings? Stop payroll deduct until 2012? Reamortize loan?

Thank you!

Forgive my paranoia, but my reading of Notice 2010-6 indicates that correction would be necessary only if an arrangement with a failure is subject to 409A. Clients have severance plans exempt from 409A under the separation pay exception. Releases are required, and the severance is paid when the release is returned. Since this plan is exempt from 409A, the IRS' problems with releases providing the employee with discretion as described in Notice 2010-6 should not be of any concern, correct? Or, is anyone thinking that all 409A-exempt severance plans must be amended to include the specific payment date indicated under the Notice?

I've come across a small dentist office where the dentist and his wife make salary deferrals into something called a "Supplemental Retirement Account" with Merrill Lynch. I've never heard of this, so I Google'ed it. Everything that popped up referred to either a 403(b) or a 457 plan for a college or university. Neither of which would be appropriate for this particular client.

Does anyone know anything about these SRAs?

Thanks!

We just took over a plan and the prior tpa sent us a letter saying that the plan document is null and void after termination of services. My understanding is that this is not the case. Can someone point me to somethign in a revenue procedure or whatever that addresses this?

I thought I read this somewhere but my search did not find it. Where can I find the guidelines for the auditors report that is attached to the Schedule H? I thought I'd read that there were size limits.

Thank you

(added after I posted) I did find that the entire filing cannot exceed 100MB but thought there was an individual limit.

The Plan uses the Safe Harbor Definition of Hardship. We know that Compensation while under the "Suspension Period" can be excluded from ADP/ACP Testing. Would you also excluded this pay when determining the Safe Harbor Match of 100% on the 1st 4% deferred, or the 3% Safe Harbor Nonelective Contribution? Going further, would this same exclusion apply to determination of a "normal" Match that has a "compensation cap", or for a Profit Sharing Contribution. I believe that this exclusion is solely for Testing Compensation, but can't find any reference in the Plan document beyond reference to 414(s) for Testing Compensation. Any insights would be greatly appreciated.

The defined benefit plan terminated in 2009 and has already been liquidated in 2009. However, there is an unpaid minimum required contribution still existing in 2009. As a result, 100% excise tax penalty is imposed on the plan sponsor. The plan sponsor is going to apply for waiver of this 100% excise tax penalty. Does the plan sponsor need to pay 10% of excise tax penalty before IRS grants the waiver right now? Should Form 5330 be filed during which the plan sponsor applies for the waiver of excise tax penalty right now? When is the deadline to file Form 5330 for 2009 plan year? What should the plan sponsor do right now to deal with the excise tax penalty right now before IRS grant the waiver?

Thanks