BUSINESS INSIGHTS | WINTER 2009/2010 EFFECTNew Requirements for Employee Benefit Plan Annual Report
by Mark J. RaschiatoreTaxpayers have been electronically filing their corporation, partnership, and individual tax returns with the IRS for years. Practically speaking, electronic filing is more efficient, saves on paper, and results in fewer errors. In addition, you can save your return on your computer and retrieve it with the click of a mouse.
Under Title I and IV of the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code, pension and other employee benefit plan sponsors must file an annual report (tax return). Starting January 1, 2010, plan sponsors will be required to file Form 5500 electronically, under the Department of Labor’s (DOL) final rule on annual reporting and disclosure.
The current filing system, EFAST (ERISA Filing Acceptance System), was designed to accept approved machine-print and hand-print paper tax returns. EFAST will continue to accept paper returns until December 31, 2009. The IRS is even encouraging the electronic submission of amended tax returns for prior years.
New system: EFAST2
Before using the new electronic filing system, EFAST2, plan sponsors must obtain credentials to sign and submit a tax return. Filers can choose between the EFAST2 approved vendor software or a Web-based filing system called IFile. Check the
DOL’s Web site for additional rules and instructions.
Implementation
- EFAST2 is scheduled to accept tax returns for both large and small plans (fewer than 100 participants) starting January 1, 2010.
- Most calendar year 2008 plan sponsors were required to file Form 5500 by July 31, 2009, or with an extension by October 31, 2009.
- Any 2008 fiscal year-end plans that have not filed paper tax returns by December 31, 2009, may file using the new program.
- All calendar and fiscal year 2009 plan sponsors must file electronically using this program.
The new electronic filing
system will change the way
you interact and communicate
with the DOL and IRS …
Independent public auditors’ report
Large pension and employee benefit plans (more than 100 participants) are currently required to be audited by an independent public accountant. The auditors’ report and financial statements are then attached to Form 5500 and submitted to the IRS. Currently, if a plan sponsor is unable to submit the auditors’ report with the tax return by the due date, then an amended tax return could include it.
The rules have changed substantially under EFAST2. Submitting Form 5500 without the independent auditors’ report will now be deemed an incomplete filing, which will subject the tax return to possible review, rejection, or assessment of civil penalties. The fees will be assessed immediately and will be costly. In addition, the IRS will consider this a filing an error, and as such, it must be corrected as soon as possible.
Plan sponsors are encouraged to contact their third party administrators, custodians, trustees, and other vendors to ensure the information needed to complete the audit is available to their accounting firm in time to meet the deadline. Plan sponsors should contact their accountants to schedule the calendar year 2009 audit of the plan. The tax returns must be submitted no later than July 31, 2010, or with an approved extension, by October 31, 2010. More information is available on the DOL’s EFAST Web site.
The new electronic filing system will change the way you interact and communicate with the DOL and IRS relevant to employee benefit plan filings. It is another positive step in automating the plan filing system and continuing to improve efficiency and accuracy.