When Congress passed the Pension Protection
Act of 2006 (PPA), it enacted several provisions that affect
your Form 5500 filing. The first provision requires that you
file Form 5500 electronically, thereby eliminating the
expensive paper processing system currently in use by the
government.
The second important provision of the PPA relating to
reporting and disclosure is the creation of an electronic
public disclosure "room" on the Department of Labor's (DOL)
web site. Both of these provisions apply to just about every
Form 5500 filing made after December 31, 2009.
Meet EFAST2
The new fully electronic processing system is known as
EFAST2 and is scheduled to go live on January 1, 2010.
Electronic filing applies to all Form 5500 reports filed for
plan years beginning on or after January 1, 2009, except
Form 5500-EZ which will be filed directly with the IRS on
paper. In addition, any amended or late filings submitted
after December 31, 2009 must be filed electronically using
the new system.
Three Components
EFAST2 has three components:
- I-REG, the Internet registration system, used to apply
for credentials to, among other things, sign Form 5500 on
behalf of the plan sponsor, the plan administrator or
both;
- I-FILE, the Internet filing system, which provides the
ability to go online to create, edit and submit filings
for a valid form year and plan year; and
- I-FAS, the Internet filing acceptance system, which is
the function that actually processes the transmitted
filing.
Internet Registration System (I-REG)
I-REG is the first stop for anyone wanting to interact
with the new EFAST2 system. Each person will need an
Internet connection and an email address to sign up for
credentials via the I-REG program. There's more about
establishing your electronic credentials below.
Internet Filing System (I-FILE)
I-FILE is a free, limited-function, web-based application
that provides the ability to create, edit and submit filings
for a valid form and plan year. The I-FILE application
includes validation, authentication and specific edit
tests/checks to make sure the filing is complete before it
is submitted. While most third-party preparers will opt to
use software created by an EFAST2-approved vendor, a plan
sponsor may find the application useful for preparing
filings for welfare plans or small retirement plans.
Internet Filing Acceptance System (I-FAS)
I-FAS, as previously noted, actually processes the
filings as they are electronically submitted. The most
important feature of I-FAS is that it establishes the
"filing status" of the transmitted filing. The possible
filing status messages are:
- Filing Unprocessable:
Generally indicates that the EFAST2 system could not open
the file that was transmitted. In this case, the filing is
not treated as filed.
- Processing Stopped:
Indicates that the file could be read but that critical
errors were detected. The filer should plan to file an
amended return to perfect the data. The filing is treated
as "filed" for purposes of the "timely filing" rules.
- Filing Error:
Indicates the file contains errors that are less onerous
than indicated by a Processing Stopped filing status;
however, the filer should plan to file an amended return
to perfect the data. As with the Processing Stopped filing
status, the Filing Error status message is treated as
"filed."
- Filing Received: The
optimal filing status message inasmuch as it indicates to
the filer that the filing appears to be complete. Of
course, the DOL or IRS may later request additional
information; however, the filing is treated as complete
until and unless there is further notification from the
agencies.
Who Needs Credentials?
The person(s) who signs the face of the Form 5500 on
behalf of either the plan sponsor or the plan administrator
(or both) must apply for "signer" credentials using the I-REG
system. Plan sponsors will receive a postcard from the DOL,
probably in January 2010, inviting them to apply for their
credentials. There are several important rules about these
electronic credentials:
- Only one set of credentials will be issued for each
email address. Signer credentials permit the user to sign
as the plan sponsor, the plan administrator or both. If,
for some reason, a person wants multiple credentials, he
or she must use distinct email addresses to apply for such
separate credentials.
- An individual may apply for credentials as a filing
author, filing signer, schedule author, transmitter or
third party software vendor. Typically, persons who sign
Form 5500 will require only the filing signer credentials
because they will rely on their service providers to
actually author and transmit the filing.
- The credentials belong to the individual, not the
business for which he or she works. Think of the
credentials in the same way you think of an individual's
social security number—the social security number always
follows the individual, no matter where or whether he or
she is employed. For this reason, individuals who have
signer credentials will want to update their profiles
whenever their email addresses change so that any
notification from DOL is delivered to them in a timely
fashion.
The majority of I-REG applicants will be seeking signer
credentials only. The individual applying for credentials
will log in to I-REG at
www.efast.dol.gov to register for his or her
credentials. There will be a series of input screens for the
person to act upon, culminating in the assignment of
specific electronic credentials, comprised of a User ID and
PIN.
Form 5500 preparers may apply for author and/or
transmitter credentials in a similar fashion, although the
need for such credentials will be driven by which
EFAST2-approved third-party software vendor is selected.
Where Do I Sign?
While the new system is referred to as a paperless
system, that is only on the part of the government. Plan
sponsors must maintain a fully executed (wet signature) copy
of the Form 5500 with all schedules and attachments. If the
filing is for a defined benefit plan, the wet signature copy
of the actuarial schedule, Schedule SB or MB, must be part
of the plan's permanent records as well.
The instructions for the 2009 Form 5500 indicate that the
filer may store the plan's copy electronically, so long as
the electronic copy captures the handwritten signatures.
The electronic "signing ceremony," as it is dubbed, will
be a new process for plan sponsors next year. Depending on
the software used by your service provider, you will receive
a notification (most likely by email) inviting you to link
to the provider's software. There, you will be presented
with a series of screens to act upon, thereby executing the
signing ceremony. By inserting your User ID and PIN, you
will have effectively signed the filing electronically.
The plan sponsor will no longer ship a paper filing off
to Lawrence, Kansas. Instead, in many cases, the service
provider will transmit the electronically signed filing and
provide the plan sponsor a copy of the filing status report
for its records. The filing status, as described earlier, is
proof that the filing was processable and verifies the date
and time of receipt by the EFAST2 system of the electronic
filing.
Electronic Public Disclosure Room
The DOL has long maintained a Public Disclosure Room that
holds all of the Form 5500 filings ever filed by any plan;
however, access to data is available only by phone or by
making a written request. Beginning with the 2009 Form 5500,
the DOL will be building an electronic public disclosure
function on its web site.
Only the filings processed by the EFAST2 system will
appear on this database and information also will continue
to be accessible through the old Public Disclosure Room. The
DOL expects to post filings to the new site within 24 hours
of receipt by the EFAST2 system.
What Do I Need To Do?
Fortunately, your service provider will be able to manage
much of the transition to the electronic filing system for
you. Software providers are still working out the details of
their solutions so that everyone is ready for the January 1,
2010 go-live date. Watch for specific instructions from DOL
and your service provider so that you are ready to make the
jump to electronic filing.
IRS and Social Security Annual
Limitations
Each year the U.S. government adjusts the limits for
qualified plans and social security to reflect cost of
living adjustments and changes in the law. However, the 2009
limits will remain unchanged for 2010 because the applicable
cost of living index has not been increased. Many of these
limits are based on the "plan year." The elective deferral
and catch-up limits are always based on the calendar year.
Here are the 2010 limits as well as the three prior years
for comparative purposes:
| Maximum compensation limit |
$245,000 |
$245,000 |
$230,000 |
$225,000 |
| Defined contribution plan maximum
contribution |
$49,000 |
$49,000 |
$46,000 |
$45,000 |
| Defined benefit plan maximum benefit |
$195,000 |
$195,000 |
$185,000 |
$180,000 |
| 401(k), 403(b) and 457 plan maximum
elective deferrals |
$16,500 |
$16,500 |
$15,500 |
$15,500 |
| Catch-up
contributions* |
$5,500 |
$5,500 |
$5,000 |
$5,000 |
| SIMPLE plan maximum elective deferrals |
$11,500 |
$11,500 |
$10,500 |
$10,500 |
| Catch-up
contributions* |
$2,500 |
$2,500 |
$2,500 |
$2,500 |
| IRA maximum contributions |
$5,000 |
$5,000 |
$5,000 |
$4,000 |
| Catch-up
contributions* |
$1,000 |
$1,000 |
$1,000 |
$1,000 |
| Highly compensated employee threshold |
$110,000 |
$110,000 |
$105,000 |
$100,000 |
| Key employee (officer) threshold |
$160,000 |
$160,000 |
$150,000 |
$145,000 |
| Social security taxable wage base |
$106,800 |
$106,800 |
$102,000 |
$97,500 |
*Available to participants who are or will be age 50 or
older by the end of the calendar year.
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