Not counting de-admitted 403(b) contracts for Form 5500

[Peter Gulia]

Concerning 403(b) contracts that are de-admitted from a plan after 2008 and meet the conditions stated by the Bulletin, EBSA's Field Assistance Bulletin 2009-02 states some relief from some reporting requirements of ERISA's Part 1 (and relieves a Part 5 civil penalty to that extent).

But the FAB does not state any relief concerning an Internal Revenue Code reporting requirement. Moreover, it seems doubtful that EBSA's Robert J. Doyle has authority to state relief from such an Internal Revenue Code requirement.

What Treasury department guidance allows an employer or plan administrator to omit de-admitted 403(b) contracts from a Form 5500 filed under the Internal Revenue Code's annual report requirement?

[jpod]

What is the Code requirement for a 5500 for 403(b)s? 6057? Assuming there is a Code requirement, what is the purpose of your question? If you can't find an answer to this brain-teaser would you advise a client that it has some risk if it takes advantage of the relief set forth in the Bulletin?

[Peter Gulia]

Internal Revenue Code section 6058 requires an annual return of a funded plan of deferred compensation described in the 400s of the Internal Revenue Code. If a plan includes a 403(b)(7) custodial account, this requirement that the employer (or plan administrator) file an annual return applies. 26 C.F.R. 301.6058-1(a)(2).

The context is my written advice to a client about what it may omit, based on FAB 2009-02, from a Form 5500 and related financial statements. Until I find some administrative-law document that speaks for the Treasury department or at least the IRS Commissioner [see 26 C.F.R. 301.6058-1©(5)], my memo must at least warn my client that a Form 5500 that omits 403(b)(7) custodial accounts as permitted by FAB 2009-02 might not meet a requirement that the Labor department lacks power to relieve.

[jpod]

Assuming you are right about 6058, and I am not suggesting that you aren't right, don't the 2009 5500 instructions say you can follow the FAB? I know that IRS forms and instructions aren't high on the authorities list, but let's be real here.

[Peter Gulia]

On the "let's be real" point, I would advise a client about an unlikelihood that the Internal Revenue Service would pursue enforcement on a reporting requirement about which the IRS at least allowed confusing communications.

But advice about an unlikelihood or even absence of consequences is not the same thing as advice that the omission is correct reporting. A careful lawyer makes clear these different kinds of advice.

There is a reference to FAB 2009-02 in the Form 5500 Instructions. But that reference does not say that a person may treat the FAB as an instruction about how to report under IRC 6058.

[jpod]

FGuidance: Thanks for the advice about lawyering, but I have no idea what are you talking about. The regulation you cited says that IRS can prescribe filing requirements through forms and instructions. It has done that.