Beginning in 2009, The U.S. Department of Labor’s Notice of Adoption of Revisions to Annual Return/Report Forms issued November 2007 eliminated the exemption from the annual IRS Form 5500 reporting, disclosure, and audit requirements previously granted to ERISA-covered 403(b) Retirement Plans.  The removal of this exception subjects ERISA-covered 403(b) Retirement Plans to the same reporting and audit requirements of 401(k) plans.  Understanding the new requirements of your ERISA-covered 403(b) Retirement Plan is essential to ensuring the continued compliance of your plan.

Retirement PlanThe new requirements for ERISA-covered 403(b) Retirement Plans depend on the number of eligible participants in your plan at the beginning of the plan year.  Eligible participants include not only those participating in the plan, but also those employees eligible to participate in the plan, but who choose not to.  In the first year, determining whether your plan qualifies as a large plan or a small plan depends on if you have more or less than 100 eligible participants at the beginning of the plan year.  The need to file as a large or small plan must be evaluated each plan year by the Plan Sponsor.  This will determine your reporting, disclosure, and audit requirements

 –          Large Plans – ERISA-covered plans with 100 or more eligible participants are generally required to file audited financial statements with the IRS Form 5500.

 –          Small Plans – ERISA-covered plans with fewer than 100 eligible participants may be eligible to file the IRS Form 5500-SF.  The IRS Form 5500-SF is only two pages and usually does not require schedules or attachments.  If eligible to file under this option, audited financial statements are not required.

 Guide to Implementation

If your plan is required to file the IRS Form 5500 as a large plan, your requirements and responsibilities as Plan Sponsor have significantly changed beginning in 2009.  In order to ensure a smooth transition to reporting under the new requirements, it is important you understand appropriate steps to take.

 1.      Hire a qualified independent auditor for your plan

–          If you are required to have an independent audit performed, the selection of an experienced auditor is essential to protecting plan assets and ensuring compliance with all reporting requirements.  A quality auditor will provide guidance and expertise to help you through this transition period.

 2.      Discuss your new reporting requirements with your third party administrator and/or custodian

–          In order to comply with your new reporting requirements your information needs may change.  Being proactive will ensure that all the necessary information is available when it is time for the plan’s audit and filing of Form 5500.

3.      Organize your records

–          In order to complete the new filing requirements and provide requested information to your auditors, many plan documents and participant information will be required.  Organizing your plan records helps you verify the information you have is complete and accurate and identifies information you must request from your third party administrator, custodian or participants. 

 4.      Establish proper internal controls

–          Establishing and implementing internal controls over the plan’s financial reporting process will help ensure all plan transactions are properly authorized and accurately recorded.  As part of the plan audit, your auditor will obtain an understanding of your internal controls and is required to communicate to you and others in your organization charged with governance, certain deficiencies and weaknesses in your internal controls.

 5.      Understand your reporting deadlines

–          Understanding the Form 5500 due date and filing timely will help your plan stay in compliance and avoid costly penalties. 

i.      All required forms, schedules, statements, and attachments must be filed by the last day of the 7th calendar month after the end of the plan year.

ii.      A plan may obtain a one-time extension of time to file an IRS Form 5500 annual return/report, up to 2 ½  months, by filing IRS Form 5558 on or before the normal due date of the return/report. 

–          For example a plan with a December 31, 2009 year end must file the IRS Form 5500 by July 31, 2010.  If an IRS Form 5558 is filed prior to, or on July 31, 2010 the due date of the IRS Form 5500 is extended until October 15, 2010. 

 

Additional tips

–          Designate a knowledgeable party to be responsible for the coordination of matters relating to the preparation of the financial statements and Form 5500.

–          Ask questions now of your third party administrator, custodian, and auditor.  Fifteen minutes now can save time and costly penalties later.

–          Try using the IRS’s Letter Forwarding Program or Social Security Administration Letter Forwarding Program to locate missing participants.

The elimination of the exemption from the annual Form 5500 reporting, disclosure and audit requirements previously granted to ERISA-covered 403(b) Retirement Plans has changed your duties as Plan Sponsor.  Understanding and implementing the required changes will help ensure your plan stays in compliance and continues to provide retirement benefits for your employees.

 HELPFUL RESOURCES

The DOL EBSA 403(b) Website provides guidance on your responsibilities, links to publications discussing 403(b) plans, error correction, and other helpful information.  www.dol.gov/ebsa/403b.html

The IRS 403(b) Website provides information on operating 403(b) plans, regulations, error correction, and other helpful information to Plan Sponsors and participants. http://www.irs.gov/retirement/article/0,,id=172430,00.html

These IRS publications discuss using the IRS and Social Security Letter Forwarding Program

www.irs.gov/retirement/article/0,,id=110106,00.html

http://www.ssa.gov/foia/html/ltrfwding.htm

About Blackman & Sloop CPAs, P.A.:

Blackman & Sloop is a full-service CPA firm headquartered in Chapel Hill, North Carolina and is actively involved in auditing, taxation, management consulting, financial planning, and related services. The firm directs a large part of its services toward providing management with advice on budgeting, forecasts, projections, financing decisions, financial analysis, and tax developments. The firm also performs review and compilation services and prepares not-for-profit, corporate, individual, estate, retirement plan, and trust tax returns as well as technology consulting services regarding installation and training on QuickBooks. Blackman & Sloop provides services in Raleigh, Durham, Chapel Hill, RTP, Hillsborough, Pittsboro, Charlotte, and the rest of North Carolina. To find out more please visit http://www.blackmansloop.com

 

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