5500 Proposed Revisions

[austin3515]

Oh. My. God.

You have to guess how many pages it is before you actually open It. It will be more fun that way!

https://s3.amazonaws.com/public-inspection.federalregister.gov/2016-14893.pdf

[Lois Baker]

... and there's more:

http://benefitslink.com/newsletters/2016/2016_07_11_retirement_bulletin.html

[austin3515]

Oh. My. God.

[My 2 cents]

Is there a way for a plan sponsor to take the 5th and refuse to answer any of the compliance-related questions? Just wondering.

[austin3515]

That's a fascinating question actually. It seems to me it is an individual protection though and not to non-human enterprises. But then again I do not include J.D. in my listing of credentials and rightly so!

"No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a grand jury, except in cases arising in the land or naval forces, or in the militia, when in actual service in time of war or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation."

[Lou S.]

Does this mean we can raise fees and they will now be considered reasonable?

[austin3515]

That was on page 772

[RatherBeGolfing]

Yikes... I was hoping for some light night reading

[Tom Poje]

my brief look at the "Readers Digest condensed version" would seem to imply that much of the info pertains to group health plans, which means much of the large version of 777 pages is not applicable, at least to what I do.

the biggest highlight I found was the following pertaining to small plans that can't file a 5500-sf:

elimination of Sched I forcing you to use sched H

Under the proposal, such plans instead would be required to complete Schedule H and the Line 4i Schedules of Assets

However: such plans

would still be eligible for a waiver of the annual examination and report of an IQPA under 29 CFR 2520.104-46, and the number count required to determine eligibility would be changed from the number of participants at the beginning of the plan year to the number of participants with account balances at the beginning of the plan year.

if that rule applies across the board to all plans, that would eliminate audits for a number of plans that have a lot of 4101k plans with non-participants.

[Tom Poje]

there it is page 62 of the 777 page document -

The Agencies are also proposing to change the rules for determining when a plan is
exempt from the requirement to include an IQPA report with its filing. In that regard, the
Agencies are proposing to add to the Form 5500 a new question, for defined contribution pension
plans only, asking for the number of participants with account balances at the beginning of the
plan year. Defined contribution pension plans would determine whether they have to file as a
large plan and whether they have to attach an IQPA report based on the number of participants
with account balances as of the beginning of the plan year, as reported on the face of the Form
5500 or Form 5500-SF. Currently, the IQPA requirement is based on the total number of
participants (including those eligible but not participating in a Code section 401(k) or 403(b)
plan) at the beginning of the plan year. With the changes in the reporting requirements for small
plans (for example, the elimination of the Schedule I), this would minimize burden, but would
still provide a picture of the types of investments and fees of small plans (plans with fewer than
100 participants that have an account balance) without requiring them to cover the cost of an
audit. For first plan year filings, the plan would have to have fewer than 100 participants with
account balances both at the beginning of the plan year and the end of the plan year.

"and there was much rejoicing!"

[austin3515]

WOW... WOW... This is HUGE.

[austin3515]

Any word on when this would be effective?

[david rigby]

Any word on when this would be effective?

Page 14 (link in Post #1) includes the following:

As with previous major forms revisions cycles, the Agencies anticipate actively engaging in outreach and education regarding the forms revisions well in advance of the plan year for which the majority of the revisions would be effective.

[Peter Gulia]

Among other changes some of us are beginning to spot, the revised instructions would state:

The statute of limitations under [internal Revenue] Code section 6501(a) for any trust described in section 401(a) . . . will not start to run until you timely file with the appropriate trust information on this Form.

See pages 518 and 700.

[Tom Poje]

These revisions, which are being proposed in conjunction with a recompete of the ERISA Filing and Acceptance System (EFAST2) contract, if adopted, generally would apply for plan years beginning on or after January 1, 2019."

of course the reason for the delay is so people can make comments like

"But I like having to gat an audit for a plan with over 100 people and only 37 have balances"

personally I would hope someone with power could get them to at least get this one provision to apply effective "yesterday".

I don't think I ever used the word 'recompete', at least not like how it is used here, but I guess this particular change would be far superior than to what we have.

and Austin, I think you are understating the impact!

[austin3515]

I have to say Tom, once they let that cat out of the bag it would seem to me there would be a clamoring to get that effective 1/1/2017. OF all the changes, this seems to be the one that would be limited to changing 5 or 6 words in the instructions. No new technology, no revisions whatever to the form itself. Instant relief.

I hope ASPPA pounces on this!!

[Tom Poje]

Austin
Tell us how you really feel
lol.

777 pages and I find one paragraph (only because of the Cliff notes version) that makes me lose interest in reading anything further.

[Bill Presson]

Could one of y'all read this out loud and create a book on CD so I could listen in the car?

[austin3515]

I nominate Tom! Sell it on Audible!

[Tom Poje]

Unfortunately, I would probably corrupt it into a parody based on the old alka-seltzer ad

Oh What a relief it is

[Peter Gulia]

To get a sense of how the proposed reporting changes relate to a software revision, search the .pdf for the document's five uses of the word "recompete" and read the text surrounding those uses.

[Kevin C]

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.

[Lou S.]

Could one of y'all read this out loud and create a book on CD so I could listen in the car?

Dead lord do you want crashes from folks falling asleep at the wheel?

[My 2 cents]

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.

One problem with electronic filing is that an EFAST account would be necessary. At present, anyone can submit a Form 5558 to obtain the extension. No signatures, no permissions are needed to get the 5500 and 8955-SSA extended. It is probably not uncommon for TPAs to submit 5558s for all clients en masse, without having to discuss the issue on a client by client basis.

[Kevin C]

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.

[My 2 cents]

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?

[RatherBeGolfing]

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

[chc93]

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?

[jpod]

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?

[RatherBeGolfing]

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.

[RatherBeGolfing]

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

[chc93]

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>

[BG5150]

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

[RatherBeGolfing]

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

[My 2 cents]

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?

[BG5150]

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.

[My 2 cents]

The wise sponsor whose auditor provides valuable oversight of the 401(k) plan in operation may well choose to have the auditor audit the plan even if not required for the 5500 filing.

[austin3515]

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

[austin3515]

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.

[Belgarath]

And I'm just not quite old enough (or wealthy enough - age would be immaterial if I were loaded) to retire!! This is pure horse pucky...

[GMK]

And some of us will get to revel in the new Schedule J (Group Health Plan Information) as well.

And I'm just not quite old enough

As much as I'd like to hang around for all this fun, I am old enough, and Feb. 3 is the 'GMK Out' date (ready or not as far as the wealth part goes)..

[Bird]

...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.

[austin3515]

Let's see how many sponsors just say "you know what, never mind. I'll just terminate this thing." Tell ya one thing, I am all over pooled plans now... They are regulating these participant directed plans to the grave, literally...

[My 2 cents]

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!

[GMK]

And the clamoring in post #16 is for the good parts (a technical term), not for these parts, right?

[austin3515]

Absolutely! But honestly some of these new requests are ridiculous. I'm not opposed to change. I'm opposed to regulators who possess not the ability to view the world from a vantage point of practicality and reality.

[GMK]

It's for data mining, and usually, where there's a mine, there's a shaft, no?

[Belgarath]

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.

[RatherBeGolfing]

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...

[austin3515]

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...).