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5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.
The Employee Benefits Security Administration (EBSA) has released a Field Assistance Bulletin that provides relief for profit-sharing and other non-participant directed individual account plans struggling to comply with the requirement implemented by the Pension Protection Act of 2006 (PPA; P.L. 109-280) to provide periodic benefits statements. Under the EBSA guidance, plan administrators of non-participant directed individual account plans will, in the absence of further guidance, be deemed to be in good faith compliance with the governing ERISA requirements if benefit statements are furnished to participants and beneficiaries on or before the date the Form 5500 Annual Return/Report is filed, but not later than the last date on which the plan administrator is required to file the report, including any extensions.
Under ERISA §105 , plan administrators have been required to furnish plan participants and beneficiaries, upon request, with statements showing total benefits accrued and vested. Sec. 508(a) of the PPA amended ERISA §105 to establish, for plan years beginning after December 31, 2006 generally, an obligation to automatically furnish pension benefit statements periodically, and to increase the amount of information required in such statements. Under ERISA §105(a)(1)(A)(ii), the pension benefit statement must be furnished at least once each calendar year to a participant or beneficiary who has his or her own account under the plan but does not have the right to direct the investment of the assets of the account.
This latest guidance issued by EBSA supersedes earlier guidance on this issue set forth in Field Assistance Bulletin 2006-03 (CCH Pension Plan Guide ¶19,981H). In FAB 2006-03, EBSA indicated that the furnishing of pension benefit statement information not later than 45 days following the end of the relevant period (calendar quarter or calendar year) will constitute good faith compliance with the requirement to automatically furnish pension benefit statements by individual account plans. However, since the issuance of FAB 2006-03, the Labor Department has concluded that many individual account plans that do not permit participants and beneficiaries to direct the investment of assets in their individual accounts may not be able to comply within the 45-day period due to the fact that many of these plans are profit-sharing plans and the sponsors of those plans do not determine or contribute profit-sharing contributions until after the sponsor’s business tax return is completed. Similarly, non-participant directed individual account plans sponsored by partnerships cannot make contribution determinations until completion of the partnership tax return. Also, many such plans are dependent on securing third-party valuations for those assets that do not have a readily ascertainable value. “Compliance with the 45-day good faith period, therefore, would appear to be impossible or very expensive for many of these plans unless the benefit statements were based on data from the end of the prior plan year,” according to EBSA. Further, since much of the required information is compiled in connection with the preparation of the plan’s Form 5500 Annual Return/Report, said EBSA, the time frame for furnishing benefit statements should correspond to the required filing of the plan’s Form 5500.
Thus, EBSA has superseded the guidance provided in FAB 2006-03 as it relates to the dates for furnishing pension benefit statements to participants and beneficiaries of individual account plans that do not permit participants and beneficiaries to direct the investment of assets in their individual accounts. Under the new guidance, plan administrators of non-participant directed individual account plans will be treated as acting in good faith compliance with a reasonable interpretation of ERISA §105(a)(1)(A)(ii) when statements are furnished to participants and beneficiaries on or before the date on which the Form 5500 Annual Return/Report is filed by the plan (but in no event later than the date, including extensions, on which the Annual Return/Report is required to be filed by the plan) for the plan year to which the statement relates.
For more information on this and related topics, consult the CCH Pension Plan Guide.
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