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) website. 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 website.
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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