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
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.
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.
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 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
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
|Defined contribution plan maximum
|Defined benefit plan maximum benefit
|401(k), 403(b) and 457 plan maximum elective
|SIMPLE plan maximum elective deferrals
|IRA maximum contributions
|Highly compensated employee threshold
|Key employee (officer) threshold
|Social security taxable wage base
*Available to participants who are or will be age 50 or older by
the end of the calendar year.
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