Mastering Form 5500: A to Zand everything in-between

Denise L. Finney, CPAManager - Pension Services GroupAmper, Politziner & Mattia, P.C.www.amper.com

William J. Hein, CPC, QPA, QKASenior Pension ConsultantPreferred Pension Planning Corp. www.preferredpension.com

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Mastering Form 5500: A to Zand everything in-between

Brief Outline: Introduction

Form 5500 and related schedules

DOL Benefit Plan Audit Requirement

Questions & Answers

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Form 5500

William J. HeinSenior Pension ConsultantPreferred Pension Planning Corp.

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Form 5500

Every benefit plan covered by ERISA must file annually, with a few exceptions

ERISA

Form 5500 and required supplemental schedules

Determining number of participants

Due date

Changes to 2007 Form 5500

Penalties for not filing or filing late

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Form 5500 - ERISA

Employee Retirement Income Security Act of 1974

Gives the Department of Labor (“DOL”) and Internal Revenue Service (“IRS”) authority to issue regulations for: Financial records Tax returns Annual reports Audits in accordance with Generally Accepted Auditing

Standards (“GAAS”)

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Form 5500

Who is involved in administering an Employee Benefit Plan?

Required Plan Information

Supplemental Schedules

Who signs Form 5500

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Administration of Employee Benefit Plan’s (“EBP”)

Plan Sponsor – employer, if single-employer plan

Named Fiduciary – plan must designate one or more –usually an officer or employee for single-employer plan

Plan Administrator – responsible for day-to-day operations and operating plan in accordance with plan documents and applicable laws

Trustee – authority to manage and/or control assets

Custodian – holds plan assets

Record Keeper – third-party administrator who provides record keeping services – responsible for participant level data

Form 5500 Preparer

Plan Auditor

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Form 5500 Schedules

Schedule A – Insurance Information – If benefits provided by an insurance co.

Schedule B – Actuarial Information – must be signed by actuary enrolled in the Joint Board for the Enrollment of Actuaries

Schedule C – Service Provider Information – if the plan paid any individual or company > $5000 for services (accounting, auditing, brokerage, administrative fees, investment advisory fees)

Schedule D – DFE/Participating Plan Information – if plan participates or invests in a common collective trust (CCT), pooled separate account (PSA), master trust (MT), or 103-12 Investment Entities (103-12 IE)

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Form 5500 Schedules

Schedule E – Employee Stock Ownership Plan (“ESOP”) Annual Information

Schedule G – Financial Transaction Schedules – If plan has loans or fixed income obligations in default or determined to be uncollectible, leases in default or classified as uncollectible, or prohibited transactions. If required, auditor must report on this schedule.

Schedule H – Financial Information for Large Plans – also required supplemental schedules of:

Assets held at end of year

Assets acquired and disposed of during year

Reportable transactions – single transaction or series of transactions purchased or disposed of that exceed 5% of plan assets

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Form 5500 Schedules

Schedule I – Financial Information for Small Plans

Schedule R – Retirement Plan Information – reports distributions, funding and amendments that increase the value of the plan

Schedule SSA – Annual Registration Statement Identifying Separated Participants with Deferred Vested Benefits

PBGC Form 1 – DB plans pay an annual premium and file this form

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Form 5500

Who Signs Form 5500?

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Form 5500 - Determining the Number of Participants

Determined at beginning of plan year

Active participants – all eligible participants

Retirees or separated participants who are receiving benefits (with account balances)

Retirees or separated participants who are entitled to begin receiving benefits (with account balances)

Beneficiaries of deceased participants (with account balances)

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Form 5500

Due Date:

Form 5500 is due last day of 7th month after plan year-end. May be extended up to 2 ½ month from original due date. For calendar year plans, original due date is July 31 and the extended due date is October 15

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Form 5500

Changes to 2007 Form 5500

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Form 5500

Penalties for not filing or filing late

Delinquent Filer Voluntary Compliance Program (“DFVCP”)

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DOL Benefit Plan Audit Requirements

Denise L. Finney CPAManager – Pension Services GroupAmper, Politziner & Mattia

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DOL Employee Benefit Plan Audit Requirements

What EBP’s require an audit?

Types of audits required by ERISA Section 103(a)(3)(A)

General components of an employee benefit plan audit

Contribution Timeliness Issues

Small Plan Audits (< 100 participants)

Changing 403(b) Plan requirements

Employee Benefit Plan Audit Quality Center

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DOL Employee Benefit Plan Audit Requirements

What types of EBP’s require an audit

Defined Contribution Plans

Defined Benefit Plans

Health and Welfare Plans funded through the Voluntary Employee Beneficiary Association (“VEBA”) Trust

What size of EBP’s require an audit

An excess of 100 eligible participants at the beginning of a plan year

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DOL Employee Benefit Plan Audit Requirements

Exemptions to requirement –

General rule - plans with < 100 participants

Plans electing to file as “small plan” under the 80-120 participant rule – for plans that each year fluctuate around the 100 participant level – if plan has 80-120 participants in beginning of plan year, can file same way it filed previous year

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DOL Employee Benefit Plan Audit Requirements

A plan sponsor’s fiduciary responsibility as required by ERISA and scrutinized by the Department of Labor includes having a prudent process for selecting service providers.

Generally, an audit is required by an independent CPA for each plan with over 100 eligible participants at the beginning of a plan year.

There are two levels of audits acceptable to the DOL.

Limited scope

Full scope

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DOL Employee Benefit Plan Audit Requirements (cont’d)

The type (limited or full) depends on where the assets are held.

Limited Scope - can be performed if held by:

Bank,

Trust company

Insurance company

Failure to supply acceptable audited financial statements is considered failure to supply a complete Form 5500 and substantial penalties apply (Generally $50,000).

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DOL Employee Benefit Plan Audit Requirements

Investments Limited scope/full scope procedures Certification

Participant Accounts Contributions, fund allocations, earnings allocations,

distributions, rollovers

Supplemental Schedules Non exempt transactions

Reviewing Form 5500 No material inconsistencies Generally focus on Schedule H

Audit Report is filed along with the Annual Form 5500 filings

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Pitfalls of Investing Contributions

RULE #1:

KNOW DOL 29 CFR 2510.3-102

Employee deferrals must be contributed to the plan as of the earliest date on which such contributions can reasonably be segregated from the employer’s general assets.

In no event shall the deposit occur later than the 15th business day of the month following the month in which the participant contribution amounts are received/withheld by the employer.

Question on Form 5500.

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Pitfalls of Investing Contributions (cont’d)

This is a very sensitive area with the DOL.

Plan Sponsors must be made aware of its importance.

The DOL considers infractions to be prohibited transactions and an extension of credit to the Plan Sponsor.

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Audits of Small Plans

Effective as of the first plan year beginning after April 17, 2001 (or effective January 1, 2002 for calendar year plans), employee benefit plans with fewer than 100 participants at the beginning of a plan year are no longer automatically exempt from the Department of Labor’s annual audit requirement.

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Audits of Small Plans (cont’d)

Generally, a two-part test applies. A plan must meet both 1 AND 2 below, or an audit is required:

ONE:Either

At least 95% of plan assets (measured at the end of the prior plan year) are “qualifying plan assets” 

Or If less than 95% of plan assets are held in

“qualifying plan assets,” any person who “handles” assets is covered by a fidelity bond (as defined). 

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Audits of Small Plans (cont’d)

TWO: Certain required disclosures are made in the plan’s Summary Annual Report regarding names of institutions holding assets, name of surety company issuing the bond if more than 5% are non-qualifying assets and various other notices to participants. 

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Audits of Small Plans (cont’d)

Qualifying assets are basically assets held at: Bank Insurance company Broker-dealer Trust company Mutual Fund Company Participant loans

Qualifying employer securities

Non-qualifying assets would include:

Hedge Funds

Real Estate

Art

Coin Collections

Antique Cars

etc.

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DOL Employee Benefit Plan Audit Requirements

Changing 403(b) Plan Requirements

Plan document effective January 1, 2009

Audits required, same guidelines, for the 2009 Form 5500 filing

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Employee Benefit Plan Audit Quality Center (“EBPAQC”)

The EBPAQC was opened in March 2004

The purpose of the Center is to promote the quality of employee benefit plan audits and serve as a comprehensive resource provider and provide support for the performance of employee benefit plan audits

There are approximately 1,500 member firms

Website: http://ebpaqc.aicpa.org/

Plan Sponsor Resources Page

Helpful no matter what the plan size

Can assist in finding a firm center member

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Questions?

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Contact Information

Denise L. Finney, CPAManager - Pension Services GroupAmper, Politziner & Mattia, P.C.750 Rt. 202, SouthSuite 500Bridgewater, NJ 08807908-218-5002 ext. 269finney@amper.comwww.amper.com

William J. Hein, CPC, QPA, QKASenior Pension ConsultantPreferred Pension Planning Corp.991 Route 22 WestBridgewater, NJ 08807-2956(908) 575-7575 ext. 204wjhein@preferredpension.com www.preferredpension.com

“The material contained in this presentation is for general information and should not be acted upon without

prior professional consultation.”