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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 Pension Protection Act of 2006 (PPA; P.L. 109280) requires government agencies to issue guidance or perform some task in 407 instances, according to a word search of the PPA conducted by W. Thomas Reeder, benefits tax counsel with the Treasury Department. The agencies involved will be very busy in the next year; he told the 40th annual conference of the American Society of Pension Professionals and Actuaries (ASPPA), in Washington, D.C., on October 24, 2006. With more than 300 references made to the Secretary of the Treasury, Mr. Reeder's department faces the most work, followed by 44 references to the Secretary of Labor, 21 references to the Pension Benefit Guaranty Corporation, and various references to other agencies.
According to Mr. Reeder, guidance will be issued in three phases. In the first phase, the Treasury Department hopes to publish guidance by the end of November 2006 on issues such as mortality tables, a unified definition of governmental plan, the annual 401(k) safe harbor notices, and the issues surrounding Subchapter S ESOPs under Code Sec. 409(p). In addition, Mr. Reeder expects the Treasury Department to give the Internal Revenue Service guidance for opening the determination letter process for many cash balance plans that have requested letters in the past six years.
Distribution rules will be another major issue addressed fairly soon, particularly the problem surrounding lump-sum distributions calculated using interest rates that are higher than those retroactively set by the PPA. Other items in the second phase of guidance will include final Roth 401(k) regulations, final 403(b) regulations, final 415 regulations, guidance concerning phased retirement, and a list of items that must be changed in plan documents. The third phase will be items later in 2007 and beyond.
Reeder indicated that the Safe Harbor 401(k) notice will no longer allow a cross-reference to the vesting and distribution rules contained in the plan's summary plan description (SPD). The vesting and distribution provisions will need to be set forth in the Safe Harbor notice. IRS Notice 2000-3 (CCH Pension Plan Guide ¶17,117R) allowed for a cross-reference to SPD provisions governing the plan's withdrawal and vesting provisions. The final 401(k) regulations do not specifically authorize cross-reference to the SPD discussion of the plan's withdrawal and vesting conditions. However, in Notice 200595 (CCH Pension Plan Guide ¶17,132N ), the IRS stated that, for plan years beginning after 2007, a Safe Harbor 401(k) plan will not violate the notice requirement of Code Sec. 401(k)(12)(D) merely because the notice cross-references the plan's SPD, in accordance with Notice 2000-3. The IRS has now reversed course. Accordingly, sponsors of a Safe Harbor 401(k) plan will need to modify the Safe Harbor notice to incorporate disclosure of the distribution and vesting conditions.
The issuance of guidance is not as easy as it used to be, Joseph H. Grant, the new director of Employee Plans at the IRS, told the ASPPA conference. The PPA provisions often require a partnership involving the Treasury Department, IRS, DOL, and the PBGC. In addition, each agency continues to have its normal workload. For example, the IRS is expecting a large number of individually designed retirement plans to file for approval letters shortly before February 2007 for "Group A" under the IRS's new staggered determination letter process. Of the 4,000 plans in Group A, only approximately 400 plans have filed to date, and it will be difficult to approve plans rapidly, he noted.
In addition to issuing PPA guidance, the DOL also has another major project - reform of the Form 5500 annual reporting form so that electronic filing by all plan sponsors can be implemented. The DOL is working on a new short form for plans with fewer than 100 participants and a fee disclosure form, Bradford Campbell, deputy assistant secretary of the DOL's Employee Benefits Security Administration, told the ASPPA audience. Campbell explained that the additional fee and expense information will enable fiduciaries to better assess the reasonableness of fees. In addition, the PPA has made necessary a revision of Schedule B, Actuarial Information.
In the near future, the DOL will be finalizing its recently issued proposed regulations on default investments (CCH Pension Plan Guide ¶20,535), issuing a model notice for plans changing from single-employer to multiemployer status, and issuing guidance about cross-trading. Over the next 12 months, the DOL will be issuing a model notice about a plan's funded status, releasing information about quarterly statements, providing a standard for selecting the safest available annuity, and providing guidance about qualified domestic relations orders (QDROs).
The DOL also will be issuing guidance about computer programs that provide investment advice. The agency needs to collect data before it can issue guidance for the advisers who will certify computer programs designed to give investment advice. One of the aspects that the DOL must consider involves the fees that advisers can reasonably charge for this certification, Mr. Campbell explained. In a separate but related topic, the DOL must conduct a study of all investment advice programs that are available to assist owners of individual retirement accounts and notify Congress of its findings. The legislation is less clear in this area, he noted.
Vince Snowbarger, interim Director of the PBGC, expressed confidence that the funding reforms implemented by PPA will decrease total plan underfunding among single-employer defined benefit plans. However, noting that the amount of underfunding will remain large, he cautioned that, irrespective of PPA, a pension plan system that is based on reliance on the minimum funding rules remains in trouble. Snowbarger was also critical of the transition rules in the PPA's funding provisions, which he suggested will allow some plans to remain short of fully funded status after seven years.
For more information on this and related topics, consult the CCH Pension Plan Guide.
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