nyc web june 2016

Form 5500 updatePresented by Debbie Packer & Cindy HerendeenJune 16, 2016

www.pwc.com

2PwC | Form 5500 update

When are audited financial statements required?

• Large pension plans (100 or more participants)• 80-to-120 rule• Small pension plans that do not meet the conditions for the audit

waiver• Large funded welfare plans (100 or more participants)

- VEBAs or taxable trusts• 80-to-120 rule different for welfare plans because small fully

insured or unfunded welfare plans are not required to file- Only small funded welfare plans required to file may take

advantage ofthis rule


Small pension plan audit waiver summary

Is the plan a pension plan?

Is the Schedule I required as part of the plan’sannual report?

Do at least 95% of the assets of the plan constitute 'qualifying plan assets'?

Small pension plan audit waiver conditions do not apply.

The conditions for the waiver have not been satisfied.

Is each person who handlesnon-qualifying plan assets properly bonded in an amount that is at least equal to the value of thenon-qualifying plan assets?

The conditions for the waiver of IQPA audit and report have been satisfied.

No

Does the administrator disclose the required information in the SAR and on request?

Yes

No

No

No

No

Yes

Yes

Yes

Yes


File with or without an audit report attached?

A frequently asked question is whether Form 5500 should be filed by the due date if the audit report is not yet completed or should the Form 5500 be filed late through the Delinquent Filer Voluntary Compliance Program (DFVCP).

http://www.dol.gov/ebsa/enforcement/OCAManual/cha8.html


Check the filing status after filing is submitted

• Important to check the status of your submission attempt and make sure theyare accepted

• DOL requires at least one electronic signature be valid• Various ways to check the status:

- Through the software you used to send your filing- Through the EFAST2 Filing Search webpage- Through EFAST2 Submissions webpage

◦ If you submitted through IFILE◦ If you signed the filing

• Also, monitor your email later for correspondence from the EFAST2/DRCemail address

• Note that the signed auditor’s report with financial statements must be attached as a pdf file

• The pdf file cannot be encrypted or password protected- “Unprocessable error”- Remember to pdf in portrait not landscape format- Print heavy letterheads may result in rejection


When is my filing considered filed?FAQ38

Not filed….Unprocessable Submission*Processable Submission++Processing++Filing Unprocessable*** This submission must be corrected and re-submitted.++ This submission is still processing

Filed…..Processing Stopped**Filing Error**Filing Received

** Filings with a status of ‘Filing Error’ or ‘Processing Stopped’ must be corrected through an amended filing


EFAST2

The IRS has all responsibility for the Form 5500-EZ and Form 5558 and their processing. Please call the IRS for questions regarding these Forms.

EFAST2 Help Line • Can’t answer questions regarding Third Party Software• Can’t view your filing prior to submission to EFAST2• Can’t see your password or challenge question • Can reset or revoke Accounts• Can answer questions about IFILE• Can answer questions about Filing Status• Staffed help line at 1-866-GO-EFAST

(between 8:00 AM and 8:00 PM Eastern Standard)


EBSA website

Check EFAST2 Website for:• FAQs• User Guides• Tutorials• DFVCP Info


2015 Edit checks changes/additions

Test Severity Test agency Test explanationB-677MB Error PBGC Fail when the code in Schedule MB, Line 4b indicates that the funded percentage

should be entered in Line 4a, but the funded percentage does not equal Line 1b(2) divided by Line 1c(3) or any of Lines 4a, 1b(2), or 1c(3) are blank.

B-678MB Error PBGC Explanation: Fail when Schedule MB, Line 4b contains "C" or "D", but either Line 4d was not checked "Yes" or "No", or Line 4d was checked "Yes" but reduction in liability of zero or greater is not reported in Line 4e.

B-687SB Warning PBGC Line 1 equals the first day of the plan year and Schedule SB, Line 4 is checked and Line 14 is not equal to (Line 2(b) minus (Line 13(a) plus Line 13(b))) divided by Line 4(a) or at least one of Lines 14, 2(b), or 4(a) are blank.

B-711MB Error PBGC Fail when a multiemployer plan in critical or critical and declining status does not report a plan year for emergence from critical status or a plan year in which insolvency is expected or the plan year reported is less than the current plan year.

I-137MB Warning IRS/PBGC Fail when Schedule MB, Line 4b contains "E", "S", "C", or "D" and the Illustration Supporting Actuarial Certification of Status (Attachment/SchMBActrlIllustration) or Actuarial Certification (Attachment/SchMBActrlCertification) or Funding Improvement Plan(Attachment/SchRFundingImprovementPlan) or Rehabilitation Plan (Attachment/SchRRehabPlan) is not attached.

P-230SF Stop DOL Fail when Form 5500-SF is provided and Line 5a (the number of participants at the beginning of the plan year) exceeds 120.

P-390SF Error DOL Fail when Form 5500-SF, Line 7c(b) Net Assets End of Year Amount does not equal the sum of Lines 7c(a), 8i(b), and 8j(a).



Test Severity Test agency Test explanationX-111 Error DOL Fail when the Filing Header, Administrator Signature date is less than the Plan

Year End date.X-112 Error DOL Fail when the Filing Header, Sponsor Signature date is less than the Plan Year

End date unless the Administrator Signature date is equal to or greater than the Plan Year End date.

X-125 Error DOL/IRS/PBGC

Fail when the filing has been signed using the E-Signature option, but the Plan Administrator's signed name and/or Plan Administrator's signed date has not been provided on the Form 5500.

X-125SF Error DOL/IRS/PBGC

Fail when the filing has been signed using the E-Signature option, but the Plan Administrator's signed name and/or Plan Administrator's signed date has not been provided on the Form 5500-SF.

X-126 Error DOL/IRS/PBGC

Fail when both valid Administrator credentials and ESignature credentials have been applied.

X-126SF Error DOL/IRS/PBGC

Fail when both valid Administrator credentials and ESignature credentials have been applied.

X-127 Warning DOL/IRS/PBGC

Fail when the Form 5500, Plan Administrator manual signed date is earlierthan the Form 5500, Plan Year End date, or greater than the date the filingwas submitted.

X-127SF Warning DOL/IRS/PBGC

Fail when the Form 5500-SF, Plan Administrator manual signed date is earlier than the Form 5500-SF, Plan Year End date, or greater than the date the filing was submitted.



Test Severity Test agency Test explanationZ-002 Warning DOL/IRS/

PBGCFail when the plan number on Line 1b of the Form 5500 or Form 5500-SF onthe current submission does not match the plan number from the previousyear's submission.

Z-003 Warning DOL/IRS/PBGC

Fail when the plan name on Line 1a of the Form 5500 or Form 5500-SF ofthe current submission does not match the plan name from the previousyear's submission.


Fail when the total participant BOY count on Line 5 of the Form 5500 or Line 5a of the Form 5500-SF of the current submission does not match the total participant EOY count on Line 6f of the Form 5500 or Line 5b of the Form 5500-SF from the previous year's submission.


Fail when the BOY total assets on Line 1f of the Schedule H, Line 1a of the Schedule I or Line 7a of the Form 5500-SF of the current submission does not match the EOY total assets on Line1f of the Schedule H, Line 1a of the Schedule I or Line 7a of the Form 5500-SF from the previous year's submission.


Fail when plan sponsor's address on Line 2a of the Form 5500 or Form 5500-SFmay be invalid.


Fail when plan administrator's address on Line 3a of the Form 5500 or Form 5500-SF may be invalid.


DFVCP filings

• When filing, filer must check box on line C, Part 1 (Special Extension) of the Form 8955-SSA and enter “DFVCP” in the space provided on Line C

• Pilot program for non-ERISA plan filings – now permanent in Rev.Proc. 2015-32- IRS provides late filing relief for plans not covered by DFVCP

◦ Penalty payment required - $500 per return up to a maximum of $1500

◦ “one participant” plans - covering only a 100% business owner(or owner and spouse) or one or more partners in a partnership(or partners and their spouses), and foreign plans› Must file complete Form 5500 return, paper version and a

transmittal schedule for each return (Form 14704 found onIRS website)


Form 8955-SSA

• Annual registration statement identifying terminated vested participants

• Report information on separated participants only on Page 2- Do not use additional pages 1- No attachments or other nonstandard format

• Instructions to lines 6a and 6b clarified – do not include any participants who were previously reported (only report “A’s”)

• Reminder – file with IRS, not EFAST2• IRS regs issued in September 2014 make e-filing mandatory for

2014and forward- Paper still an option for filers with under 250 filings (e.g., W-2s),

otherwise file electronically through FIRE system- Penalty relief available for delinquent filers


Delinquent Form 8955-SSA filings

• IRS Notice 2014-35 provides relief for delinquent Forms 8955-SSA• Penalties waived if DOL DFVCP requirements met for related

Form 5500 series filing• Paper Form 8955-SSA filed with IRS• Must file delinquent Form s8955-SSA no later than 30 days after

DFVCP filing- Check the box in part 1, Line C and enter “DFVCP” in

description


DOL Enforcement

The Office of the Chief Accountant (OCA) queries the ERISA database and targets Form 5500 processing errors that have gone uncorrected as well as filings improperly prepared.1.Notice of Rejection – gives the plan administrator 45 days to

makeany corrections.

2.Notice of Intent to Assess a Penalty (NOI) – the plan administrator has 35 days to submit to the DOL a statement of reasonable cause.

3.Notice of Penalty Assessment – (failure to respond to the NOI) Now the matter becomes a debt due to the government. There is no appeal at this point and cannot be over turned or reduced.

4.Notice of Determination – after the DOL reviews the statement of reasonable cause the agency issues a notice of determination that contains the final penalty amount.i. The plan administrators may choose to pay the penalty or within

35 days file an answer with the administrative law judge, appealing the penalty.


A Little Bit of History

On November 16, 2007 as part of the fee transparency initiative, EBSA published final form revisions and a final regulation, generally effective for plan years beginning on or after January 1, 2009, providing new requirements for reporting service provider fees and other compensation on the Schedule C of the 2009 Form 5500 Annual Return/Report of Employee Benefit Plan.• Expanded reporting by service providers of indirect compensation

and provided new definitions around indirect and eligible indirect compensation

• The “top 40” reporting was eliminated and you must report all service providers who received $5,000 or more in direct or indirect compensation

• Expanded Service Codes• Added a part to report service providers who fail or refuse to

provide information necessary to complete the Schedule C


Schedule C

Part 1, line 1 – Information on Persons receiving only Eligible Indirect Compensation


Part 1, line 1 – Alternative reporting option

• Allows filers to only report identifying information about theservice providers who provide certain written disclosures aboutindirect compensation

• If meets conditions, then fees/codes not required to be reported (only report who provided the disclosures)

• Make sure plan sponsor/administrator received all required disclosures for ‘eligible indirect compensation’


Required written disclosure

• Existence of compensation• Services provided or purpose for payment of the indirect

compensation• Amount (or estimate) or description of a formula used to

determine compensation• Identity of parties paying and receiving compensation


Examples of Eligible Indirect Compensation

• Fees or expense reimbursements charged to investment fund and reflected in fund’s value or return on investment

• Finder’s fees• Soft dollar revenue• Float• Brokerage commissions• Other transaction-based fees for transactions or services involving

the plan that were not paid directly by the plan or sponsor


Persons receiving only EligibleIndirect Compensation

Part I, Line I(a) • Answer “yes” if service providers are excluded from the remainder

of the form because the receive only eligible indirect compensation

• If “yes” is checked on line 1(a), complete line 1(b)Part I, Line I(b)• Enter the name and EIN or address of person who provided you

disclosures on eligible indirect compensation


Persons receiving only Eligible Indirect Compensation


$5,000 Reporting threshold

• $5,000 threshold remains unchanged• Applies for total of direct and indirect compensation• If administrator is only provided a formula for Schedule C

compensation reporting purposes, generally amount is presumed to meet the$5,000 threshold


Exceptions

• Plan employee compensation <$25,000• Employees of sponsor or service provider as long as:

- Sponsor/service provider is reported on Schedule C- No other compensation from plan is paid to employee

• Person whose only compensation was reported on Schedule A• Sponsor who was not reimbursed by Plan


Direct Compensation

• Payments made directly by the plan (or plan sponsor if reimbursed by the plan) for services rendered to a plan or because of a person’s position witha plan


Persons receiving Direct Compensation reporting

Part I, Line 2(a) • Except for those persons and eligible indirect compensation for

whichyou answered “Yes” to line 1, complete as many entries as needed to listeach person receiving $5,000 or more in total direct and indirect(including EIC) compensation.

Part I, Line 2(b) • Enter service code describing service providedPart 1, Line 2(c)• Enter relationship with Plan or Plan sponsor, if anyPart 1, Line 2(d)• Enter amount of direct compensation paid by Plan


Reporting Indirect Compensation

Part 1, Line 2 1. Capital One charged the plan $141,000 for recordkeeping services

in 2015.2. Massachusetts Mutual pays Capital One 10 basis points for other

administrative services. (These remained unchanged through the end ofthe year.)



Part 1, Line 3



Indirect compensation may be reported by providing an amount, estimated amount, or formula.If provided a formula:• Enter ‘0' in Element (g)• Check 'Yes' to Element (h)• Attach description of formula or other method• Amount or formula to calculate indirect compensation may be

based on service provider’s fiscal year that ends within the Plan’s reporting year. Direct compensation should be based on Plan’s year.


Special Rules for Certain Compensation


Reporting gifts and othernon-monetary compensation

• Non-monetary compensation must be reported• Limited de minimis exception• Instructions caution filers that gifts and gratuities of any amount

paid to or received by plan fiduciaries may violate ERISA and give rise to civil liabilities and criminal penalties


Limited exceptions from reporting for gifts and other non-monetary compensation

• Tax deductible for federal income tax purposes by person providingnon-monetary compensation

• Nontaxable to recipient• Valued at less than $50• Aggregate value of gifts from one source is less than $100 in a

calendar year• Gifts with a value of less than $10 do not have to be counted

toward the$100 limit

• If the $100 aggregate value limit is exceeded, the value of all gifts willbe reportable

• Reported only if the provider receives in total $5,000 or more


Fully insured group health and similarly fully insured benefits

If fees and expenses have been reported on Schedule A, they do not also have to be reported on Schedule C• Insurance investment contracts are not eligible for this exceptionCompensation paid by insurer from its general assets to affiliates or third parties to satisfy its contractual obligations to provide benefits is not required to be reported on Schedule C• Would not include compensation provided by insurer incidental to

the sale or renewal of a policy


Part II, Service Providers who fail or refuse to provide information

Before reporting a service provider in Part II:• Contact the service provider to request necessary information• Warn them you will list them on Schedule C, Part II


Expenses on Schedules H and C

Schedule H • Reports expenses paid directly by plan/trust or where employer

paid an expense and is reimbursed by plan• Includes taxes (UBIT or foreign taxes paid on investments)• Includes PBGC premiums• Usually prepared on accrual basis, consistent with financial

statementsSchedule C• Frequently prepared on cash basis• Includes indirect fees• Does not include taxes or PBGC premiums• Note – DOL has sent letters to plan sponsors where no fees shown

onForm 5500


More on Schedule H & Coordination with other Schedules

• Codes used in Form 5500, Line 8a and 8b describe the benefits/features of the plan- FYI – if new employee rolling over account from prior employer,

the plan administrator can check the prior employer’s Form 5500 on EBSA see if “not intended to be qualified” code “3C” is listed

• Schedule C – expense information• Schedule D – existence of master trust, DFEs• Schedule G – prohibited transactions, leases or loans in default• Schedule SB and H for contributions & receivables


A word about delinquent participant contributions

• All delinquent contributions, whether or not corrected, must be reported on Line 4a of Schedule H until the year corrected

• Do not report on Line 4d (or Schedule G)• Delinquent contributions that were corrected using VFCP and PTE

2002-51 are not considered PTs, so are not disclosed on a supplemental schedule

• Others may be reported on a separate schedule, see the instructions for the required format

• Filers may also include delinquent loan repayments• Failure to make deferrals are not the same as delinquent

contributions


Schedule H - Part I – Asset & Liability Statement

• Cash, modified cash or accrual basis may be used as long as thereis consistency

• Differences between Schedule H and audited financial statements must be reconciled in footnotes

• Beginning balances must equal prior year ending balances• Generally the company EIN is used to file (vs. trust EIN)


Master Trusts/DFEs

• Expenses reported at master trust level should not also be reported atplan level

• All expenses must be reported – either at trust level or at plan level

• Master trust footnote – review Schedule H for consistency• Remember master trusts must always file Form 5500 DFEs

- Form 5500 filing is optional for 103-12 IE, CCTs and PSAs- 103-12 IEs must attach audited financials


DFE Recap

Entity 5500 filing required? Audit required?MTIA Yes NoPSA No NoCCT No No103-12 IE Yes YesGIA Yes Yes


How are DFE investments reported on Schedule H when DFEs don’t file?

Entity Effect of non/deficient filing on participating plansMTIA Plan filings are deficientPSA/CCT Plans must allocate investment among Schedule H,

Part I categories103-12 IE Same as PSA/CCT + Full scope audit is requiredGIA Each plan must file as an individual plan


Emerging issues

• IRS Form 8822-B was revised in October 2014- New filing requirements that relate to business entities with an

EIN, such as plan sponsors◦ Abandoned EINs, or incorrect addresses

- Report address change, change in responsible party- Currently no penalty for failure to file

• DOL focus on plan’s internal control environment- Lost participants- Uncashed benefit payment checks- ERISA spending accounts- Quality of audits

• New Compliance Questions – not to be answered• Penalty relief for Late EZ filers


Other developments

• Extension Due Dates – October 15, 2016 versus October 17, 2016 – what to report on Form 5558?

• DOL issued proposed regulations in September 2014 that would require electronic filing for top-hat and apprenticeship and training plan notices- No changes in content- Filers may immediately start using electronic systems to satisfy

current paper filing requirement- The new electronic filing system for both types of notices is

accessible via the EBSA website

Questions?

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

© 2016 PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

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nyc web june 2016

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