Mastering Form 5500: A to Z and everything inbetween

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Mastering Form 5500 A to Zand everything
in-between

• Denise L. Finney, CPA
• Manager - Pension Services Group
• Amper, Politziner Mattia, P.C.
• www.amper.com

William J. Hein, CPC, QPA, QKA Senior Pension
Consultant Preferred 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. Hein
• Senior Pension Consultant
• Preferred 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 Plans (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 gt 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 CPA
• Manager Pension Services Group
• Amper, Politziner Mattia

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DOL Employee Benefit Plan Audit Requirements

• What EBPs 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 (lt 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 EBPs 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 EBPs 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 lt 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 sponsors 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
(contd)

• 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 employers 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 (contd)

• 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
  Labors annual audit requirement.

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Audits of Small Plans (contd)

• 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 (contd)

• TWO
• Certain required disclosures are made in the
  plans 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 (contd)

• 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, CPA
• Manager - Pension Services Group
• Amper, Politziner Mattia, P.C.
• 750 Rt. 202, South
• Suite 500
• Bridgewater, NJ 08807
• 908-218-5002 ext. 269
• finney_at_amper.com
• www.amper.com

• William J. Hein, CPC, QPA, QKA
• Senior Pension Consultant
• Preferred Pension Planning Corp.
• 991 Route 22 West
• Bridgewater, NJ 08807-2956
• [phone] ext. 204
• wjhein_at_preferredpension.com
• www.preferredpension.com