Home

The 2009 Form 5500

1. 33 Federated WORLD CLASS INVESTMENT MANAGER Federated Investors Inc Federated Investors Tower 1001 Liberty Avenue Pittsburgh PA 15222 3779 Contact us at FederatedInvestors com or call 1 800 341 7400 41275 11 09 Federated Securities Corp Distributor Federated is a registered mark of Federated Investors Inc 2009 Federated Investors Inc
2. used to reimburse the plan sponsor for the pay ment of direct expenses Would revenue sharing payments among the plan s service providers be required to be reported on a Schedule C The instructions specifically provide that health and welfare plans that meet the conditions of the limited annual reporting exemption under 29 CFR 2520 104 44 or Technical Release 92 01 are not required to file a Schedule C Where the plan is eligible for that limited exemption the fact that there are revenue sharing payments among the plan s service providers would not mean that such a plan would be required to complete a Schedule C 24 26 1 l heard that I will have to start filing the annual return report Form 5500 or Form 5500 SF electronically Can you tell me if that s true and when I would need to start All pension and welfare plans and DFEs that are required to submit an annual return report under Title I of ERISA Form 5500 or Form 5500 SF must do so electronically for plan years beginning on or after January 1 2009 Beginning January 2010 an all electronic system called EFAST2 will receive those electronic annual returns reports Once the EFAST2 electronic system is on line and ready to receive filings 4 you must file the Form 5500 or Form 5500 SF elec tronically through EFAST2 for plan reporting year 2009 and for subsequent plan reporting years Prior year delinquent or amended Form 5500 annual return reports generally must be
3. 10 for pur poses of Schedule C reporting On the other hand this FAQ would not cover a gift that clearly has a value in excess of 10 such as a 400 golf club or an expensive luxury pen for example merely because it was embossed with a company logo This guidance is for purposes of Schedule C reporting only Filers are strongly cautioned that gifts and gratu ities of any amount paid to or received by plan fiduciar ies may violate ERISA and give rise to civil liabilities and criminal penalties Are all free business meals and entertainment received by persons who have business relation ships with ERISA plans indirect compensation to the recipient for purposes of Schedule C No It is the view of the Department that a reasonable reading of the Schedule C instructions supports the conclusion that the value of meals entertainment and other gifts other than cash or cash equivalents is not reportable compensation for purposes of the Schedule C if neither the amount of the gift nor eligibility to receive the gift is based in whole or in part on the recipient s position with one or more ERISA plans or the amount or value of services provided to or business conducted with one or more ERISA plans Thus if a brokerage firm invites employees of investment managers to a business conference including reimburse ment for travel meals and lodging where eligibility for the invitation or the value of gifts provided is not based in
4. 5500 5500 SF by a Transmitter Schedule Author Schedule Authors can complete one or more of the schedules that accompany Form 5500 5500 SE Schedules created by a Schedule Author are not associated with a filing For a schedule created by a Schedule Author to be used in a filing the schedule must be exported This exported file will then be imported by the Filing Author to the correct filing Schedule Authors cannot initiate sign or submit a filing If the Filing Author is using EFAST2 approved third party software to author your filing rather than IFILE then you do not need to check this box Transmitter Transmitters can transmit Form 5500 5500 SF filings to the EFAST2 system for processing on behalf of others Transmitters are responsible for the security of all filing information prior to and during its transmission A Transmitter can be a company trade business or individual Third Party Software Developer Third Party Software Developers make Form 5500 filing preparation or transmis sion software for use in the EFAST2 system They submit test cases using their software to the Participant Acceptance Testing System PATS Team The PATS Certification Team will then review their submissions and provide feedback or approve and certify the software A Third Party Software Developer can be a company trade business or individual If am completing a Form 5500 or Form 5500 SF using an EFAST2 approved third party software program
5. account MTIA Form 5500 report is required to be filed the fees and expenses would have to be allocated to the proper MTIA or MTIAs Being able to report fees and expenses at the MTIA level rather than at the plan level does not 20 21 22 change any fiduciary or other obligation under ERISA to allocate the fees and expenses properly among the plans using the master trust as a vehicle for investing and reinvesting plan assets Consistent with current practices fees and expenses reported on the MTIA level are not to be reported again on the plan level If a trade confirm is sent to the plan or to the participant with each participant directed trade made through a 401 k plan brokerage window does that meet the requirements of the eligible indirect compensation rule that requires disclo sure to the plan administrator Providing a participant rather than the plan administrator with a trade confirmation would not satisfy the eligible indirect compensation requirements relating to disclo sure to the plan administrator If a broker identifies for each plan with respect to which it receives 12b 1 fees shareholder service fees subtransfer agency fees charged against an investment fund and reflected in the value of the plan s investment the name of each fund and range of payments it receives e g from all these funds we get between 25 and 45 basis points and or up to 15 dollars per position will that satisfy the discl
6. company generally would not be reportable indirect compensation Fees or commissions received by an investment manager or investment adviser in connection with a plan investment in aVCOC REOC or other operating company would however be reportable indirect compensation This answer would not be affected by whether the VCOC REOC or other operating company were wholly owned by a plan such that the assets of the entity would be deemed to be plan assets A mutual fund pays eligible indirect compensa tion to a fund administrator advisor or distributor a fund agent In turn the fund agent pays fees to the recordkeeper for compliance services provided to one or more participating plans including discrimination testing QDRO adminis tration and Form 5500 preparation The record keeper is not an affiliate of the mutual fund or the fund agent Is the mutual fund payment to the recordkeeper reportable indirect compensa tion If it is reportable indirect compensation is the fee received by the recordkeeper eligible indirect compensation Plan record keepers may receive fees for shareholder services and recordkeeping services directly or indirectly from investment providers under a wide variety of arrangements Among others they may receive compensa tion from fund agents such as fund administrators advisers or distributors as well as other agents representatives or intermediaries such as mutual fund platform pr
7. compensation b Enter name and EIN or address of person who provided you disclosures on eligible indirect compensation For Paperwork Reduction Act Notice and OMB Control Numbers see the instructions for Form 5500 Schedule C Form 5500 2009 v 042407 Federal Register Vol 72 No 221 Friday November 16 2007 Notices 64789 Schedule C Form 5500 2009 Page 2 RL EEE LE eS SE PE PT P eE b Enter name and EIN or address of person who provided you disclosures on eligible indirect compensation cnan hh ANA ok ish el pei sh iether er renr EE fi bots SSS TRE ee en TEE HIRE Ler TTL 1S ee ee BST See es eer 1 65 b Enter name and EIN or address of person who provided you disclosures on eligible indirect compensation sed Madi pina aie Feri Teater re Ioa AOA Go D RNG AAA rannet ls cs Erna Sannan on daia nianon sas dec nats aad eiaeaen rE arr sia hc han tad DOVNE KODOK a plan ao Slash CAANG 64790 Federal Register Vol 72 No 221 Friday November 16 2007 Notices Schedule C Form 5500 2009 Page 3 2 information on Other Service Providers Receiving Direct or Indirect Compensation Except for those persons for whom you answered yes to line 1a above complete as many entries as needed to list each person receiving directly or indirectly 5 000 or more in total compensation 0 6 money or anything else of value
8. compensation and part direct compensation for purposes of Schedule C reporting Yes 15 If plan service providers or plan administrators make a good faith attempt to classify their serv ices and the fees they receive using the codes in the Schedule C instructions will the Department reject Form 5500s in 2009 due to inadvertent misclassifications No A reasonable good faith effort to properly classify services and fees is required but EBSA will not reject 2009 Form 5500s solely because the Department might have used a different service or fee code than did the service provider or plan administrator in a particular filing provided that a reasonable good faith effort was made to select the proper codes 16 Provider A has an alliance with Provider B Provider B has developed a program to assist participants in fund selection Provider A pays Provider B a flat fee of 20 000 to have access to the Provider B program regardless of whether any of Provider A s plan clients use it Plan Z pays a direct fee to Provider A of 5 000 that allows Plan Z participants to access Provider B s service Provider A shares 1 000 with Provider B The 5 000 paid by Plan Z to Provider A is reportable direct compensation to Provider A If the access to the Provider B program by Client Z is described as part of the services that Client Z gets for its 5 000 payment to Provider A the 1 000 Provider A pays to Provider B could be treated as part o
9. dealer effecting securities transactions with in the portfolio of a mutual fund or for the portfo lio of an investment fund that holds plan assets for ERISA purposes should be treated for Schedule C purposes as an operating expense of the investment fund not reportable indirect com pensation paid to a plan service provider or in connection with a transaction with the plan Are the requirements to report indirect compensation on Schedule C different for participant selected investments through open brokerage windows Open brokerage windows in self directed 401 k plans allow plan participants to invest in a wide range of funds stocks bonds and other investments offered through a designated broker for the brokerage window Although the requirement to report indirect compensation applies to participant selected investments from a range of investment alternatives under the plan in the absence of any other guidance Schedule C reporting can be limited to direct and indirect compensation received by the des ignated broker s and other brokerage window providers transaction fees in connection with the purchase sales or exchanges made through the brokerage window and any other plan related fees This limitation on reporting for Schedule C purposes does not relieve fiduciaries from obligations to prudently select and monitor designated brokers or other brokerage window providers in a bro kerage window option under the p
10. in connection with services rendered to the plan or their position with the plan during the plan year See instructions a Enter name and EIN or address see instructions Federal Register Vol 72 No 221 Friday November 16 2007 Notices 64791 Schedule C Form 5500 2009 Page 4 a Enter name and EIN of address see instructions a Enter name and EIN or address see instructions b Service Code s b Service Code s 64792 Federal Register Vol 72 No 221 Friday November 16 2007 Notices Schedule C Form 5500 2009 Page 5 Partt ice Provider Information continued 3 H you reported on line 2 receipt of indirect compensation other than eligible indirect compensation and the service provider is a fiduciary or provides contract administrator consulting custodial investment advisory investment management broker or recordkeeping services answer the following questions for a each source from whom the service provider received 1 000 or more in indirect compensation and b each source for whom the service provider gave you a formula used to determine the indirect compensation instead of an amount or estimated amount of the indirect compensation Complete as many entries as needed to report the required information for each source a Enter service provider name as it appears on line 1 b Service Codes C Enter amount of indirect see instructions compensatio
11. investments are not reportable compensation for Schedule C purposes This should not be read as expressing any view on the application of ERISA s fiduciary responsibility or other provisions to such an arrangement Do both proprietary soft dollar compensation e g research prepared by the entity providing brokerage services and non proprietary soft dollar compensation e g research prepared by independent third parties fall within the definition of eligible indirect compensation Yes Both proprietary and non proprietary soft dollar revenue can be treated as eligible indirect compensa tion for purposes of the alternative reporting option if the written disclosure requirements are also met Under what circumstances is a service provider expected to be identified on Schedule C for failing to provide information necessary to complete the Schedule C The Department recognizes that in order to furnish their employee benefit plan clients information necessary to comply with the new Schedule C annual reporting requirements certain service providers may have to modify their current recordkeeping and information management systems The Department also recognizes that it may be difficult for some service providers to make those adjustments sufficiently in advance so that their systems will be fully operational when employee benefit plan clients start to make requests for or other wise need Schedule C related data for filing
12. reporting indirect compensation on the Schedule C that is required to be specifically reported on Line 2 Yes The preamble to the final amendments to regulations relating to the annual reporting requirements states that f ilers generally have the option of reporting a formula used to calculate indirect compensation received instead of an actual dollar amount or estimate 72 Fed Reg 64710 64712 Nov 16 2007 It is permissible to use a formula for reporting indirect compensation even in cases where it may be possible for the service provider to cal culate a monetary amount or estimate The Department therefore would not expect service providers to be identified on the Schedule C as failing to provide infor mation necessary to complete the Schedule C merely because they provided a formula when disclosing their indirect compensation to plan administrators including for indirect compensation that is not eligible indirect compensation If a service provider discloses a formula used to determine its indirect compensation is the plan administrator required to calculate or estimate dollar amounts from the formula for purposes of Schedule C reporting to the extent that com pensation described by a formula is not eligible indirect compensation No Element g on Line 2 of Part I of Schedule C requires the plan administrator to enter the total of all indirect compensation that is not eligible indirect compensation a
13. signing electronically must be the person registering for the credentials Access to any computer with an Internet connection is all that is required to register Thus your client may come to your office use a personal computer at home or go to a public library or copying center with a computer and register for credentials using free email accounts or an email account provided by your company e g tpafirm com Do actuaries or accountants need to register for EFAST2 electronic filing signer credentials No EFAST2 does not require EFAST2 issued electronic signature credentials for anything other than for filing and submitting the Form 5500 and Form 5500 SE However the Schedule MB and Schedule SB if required must be completed printed and signed by the actuary An electronic image of the signed Schedule MB or Schedule SB with the actuary s signature must be attached to the annual return report The information from the actuary s Schedule MB or Schedule SB must also be entered into the appropriate location of the electronic Form 5500 or Form 5500 SF including the Schedule SB or Schedules MB being sub mitted When entering the information whether using EFAST2 approved third party software or EFAST2 s web based filing system all the fields required for the type of plan must be completed see instructions for fields that need to be completed The accountant must complete and sign their audit report on company letterhe
14. the eligible indirect compensa tion definition it would substantially undermine the bundled fee reporting option which requires transaction based fees to be reported separately from the bundle 11 12 FAQs About The 2009 Form 5500 Schedule C cont 9 10 A recordkeeper may enter into an alliance arrangement with a broker dealer to provide services offered together as a package sold by agents of the broker dealer The record keeper and broker dealer are not affiliated to one another and each has a separate contract or arrangement with the plan In connection with this alliance arrangement the broker dealer pays compensation to the recordkeeper The compensation may be flat per participant fees or asset based fees based on the value of plans investments in mutual funds or other investment vehicles offered to the plans by the broker dealer The broker dealer pays the com pensation for plan administration and record keeping services the recordkeeper provides to the broker dealer s plan clients Is the compen sation paid by the broker dealer to the record keeper eligible indirect compensation Unless the recordkeeper s fees are charged to the invest ment fund and reflected in the value of the plan s investment the fees received by a recordkeeper would not constitute eligible indirect compensation regardless of whether the fund agent determines the record keeper s compensation using an
15. transmitter sent There may be multiple returns reports in a single submission EFAST2 could not read or process any of the annual returns reports in this submission All returns reports in this submission are considered not received by the Government EFAST2 was able to process the submission or enve lope a transmitter sent There may be multiple annual returns reports in a single submission EFAST2 will next need to try to read and process each of the annual returns reports in this submission EFAST2 is currently trying to read and process each of the annual return report in the submission Annual returns reports should not remain in this status for more than 20 minutes EFAST2 could not read this annual return report This annual return report is not considered filed with the Government EFAST2 could read this annual return report but could not fully check the filing for errors because crucial information was not provided by the filer This annual return report must be corrected and resubmitted in its entirety as an amended filing EFAST2 discovered errors in the annual return report information provided by the filer This annual return report must be corrected and resubmitted in its entirety as an amended filing EFAST2 either found no errors or only identified possible errors in the annual return report information provided by the filer If corrections are warranted they should be made and the corrected filing resubmitte
16. 5 to an investment manager with which it has an established business relationship Ninety percent of the business the broker has with the investment man ager is non ERISA plan business A reasonable allocation method would be pro rata so the amount for any partic ular ERISA plan would be less than 10 for Schedule C 36 37 38 reporting purposes and would not be required to be reported on any plan s Form 5500 as indirect compensa tion received by the investment manager If a person receives compensation that is reportable on Schedule A and compensation that is reportable on Schedule C does the compensation that must be reported on Schedule A also be reported on Schedule C Compensation reported on Schedule A is not required to be reported again on Schedule C The amount of the compensation that must be reported on Schedule A must however be taken into account in determining whether the Schedule C only compensation plus the Schedule A compensation is 5 000 or more and thus required to be reported For example if a broker received 4 000 in insurance commissions from an insurance company in connection with policies pur chased by the plan and 2 000 from the plan for provid ing consulting services to the plan the plan s 5500 filing would include a Schedule A identifying the 4 000 in commissions and a Schedule C entry for the broker reporting the 2 000 for the consulting services provid ed to the plan If a plan sponso
17. EFAST2 The IQPA report image of the signed Schedule MB and image of the signed Schedule SB must be submit ted in Portable Document Format PDF All other attachments can be submitted in either PDF or plain text format TXT How do I turn an attachment into a PDF file Using software that will create a PDF file from another software application s data file often provides the best quality PDF and small file size There are many software options for creating PDFs by saving as a PDF file or printing to a PDF file rather than a printer When you are creating a PDF file using such software you often must have the application that created the original file installed on your computer You can also create a PDF file by using other free and paid software programs that you may already be using on your personal com puter regardless of your operating system Can l turn a paper document into a PDF file Scanners generally come with software that includes an option to save a scanned document as a PDE Look for menu items such as output type or settings to select PDF as the output file type Consult your scanner s user manual for specific instructions When creating a PDF file by scanning a paper document you need to be careful that the resulting file size is not too large There is a limitation on the size of submis sions sent to EFAST2 Scanning your document at 300x300 resolution and using True Gray Grayscale or B
18. Federated 2009 Form 5500 Schedule C What s New The annual ritual of filing the Form 5500 is a familiar one for the hundreds of thousands of plan administrators charged with this responsibility However 2009 introduced sweeping change for the Form 5500 and every one from plan administrators to plan service providers should take time to ensure the new requirements are understood This publication may help give you a head start by pulling together some of the significant guidance issued by the Department of Labor DOL includ ing new Frequently Asked Questions FAQs About Electronic Filing as well as the new FAQs on the revised and expanded Schedule C Both the content of the Form 5500 and its filing mechanism are signifi cantly changed for plan year 2009 Perhaps the most obvious difference is that the Form 5500 may only be filed electronically through the new EFAST2 filing system Though the new system is intended to be flexible allowing several different types of electronic filing plan administrators will need to take a number of new steps such as registering for the appropriate electronic credentials from DOL The new DOL FAQs About Electronic Filing help explain these logistical requirements Another major change likely requiring some discussions between plan administrators and plan service providers is the expanded reporting of direct and indirect service provider compensation on the new S
19. Not necessarily One purpose of the Schedule C report ing structure is to provide plan fiduciaries with better information regarding the flow of amounts that repre sent fees received in connection with services provided to the plan Accordingly it is possible that a person could receive a fee that would constitute indirect compensa tion and pass some of that fee on to another person for whom the amount passed on would also represent reportable indirect compensation In such a case the information reported regarding the first and second per son who received the fee could include a description of the total fee received and the portion of the fee passed on to the next level recipient Alternatively it may be that the consolidated bundled fee reporting option could be used instead of reporting revenue sharing com pensation received by individual members of the bundle Supplemental FAQs About The 2009 On the other hand if an intermediary fund agent is merely a conduit for transmission of the revenue sharing fee to the ultimate recipient the conduit would not itself be receiving any reportable compensation by acting as the conduit Are costs and expenses incurred by an insurance company in connection with a general account investment contract that promises a guaranteed rate of return reportable compensation for pur poses of the Schedule C The answer generally depends on whether plan services are included as part of the investment co
20. QPA report is not attached and must also leave line 3d blank because the reason the IQPA reports is not attached i e is was not completed on time is not a reason listed in any of the available check boxes You should still complete line 3c if you can identify the plan s IQPA Please note that failing to include the required IQPA report and leaving parts of line 3 blank however will result in the system status indicating that there is an error with your filing because as noted above submit ting your annual return report without a required IQPA report is an incomplete filing and the incomplete filing may be subject to further review correspondence rejection and assessment of civil penalties Thus if you find it necessary to file a Form 5500 without the required IQPA report you must correct that error as soon as possible 26 If I am filing for an extension of time based on a request for an extension submitted on Form 5558 with the Internal Revenue Service do need to attach a copy of the Form 5558 to my Form 5500 or Form 5500 SF You do not need to attach a copy of the Form 5558 that was filed with the Internal Revenue Service to the annual return report in EFAST2 You must however keep a copy of the Form 5558 that was filed with the Internal Revenue Service with the plan s records 27 What file format do I need to use for attachments to my filing to make sure they get transmitted to 29 30 28 29 and received by
21. a key service provider reports its compensation by a formula the amount of indirect compensation is pre sumed to meet the 5000 reporting threshold Also if any key service provider reports a formula for its indirect compensation that is not eligible indirect compensation information about that indirect compensation is reportable on Part I Line 3 of Schedule C Key service providers are those service providers for which Schedule C Part I Line 3 reporting is required i e service providers who are fiduciaries or who provide contract administrator consulting custodial investment advisory investment management broker or recordkeeping services In the case of service providers that are not key service providers a plan administrator must either assume that the 5000 reporting threshold is met if a service provider provides only a formula for its compensation or calculate an estimate from the formula to determine whether the 5000 reporting threshold is met Although the plan administrator is ultimately responsible for determining whether the 5 000 reporting threshold is met the plan administrator may rely for Schedule C reporting purposes on an estimate of compensation provided by a service provider in the absence of any information that should lead the administrator to question the estimate Plan administrators are not required to calculate estimates of service providers total direct and indirect compensation merely f
22. ad An electronic image of the signed accountant s opinion must be attached to the annual return report The actuary and accountant electronic signature images are not EFAST2 issued electronic signature credentials and do not require registration for Filing Signer credentials Submitting An Annual Return Report Form 5500 or Form 5500 SF And Checking Its Status 34 Can a third party preparer submit an annual return report for the sponsor electronically under EFAST2 Yes A third party preparer can submit an annual return report that a plan sponsor administrator has already signed electronically The plan sponsor administrator however retains legal responsibility for the timeliness of the submis sion as well as for its accuracy and completeness See ques tion 30 above regarding signing an annual return report 35 I tried submitting a Form 5500 annual return report and I received an Acknowledgement ID Does this mean my annual return report was received An Acknowledgement ID means EFAST2 received an elec tronic envelope but it does not necessarily mean EFAST2 received the filing 1 e the Form 5500 or Form 5500 SE including all required schedules and attachments inside the envelope You need to check the filing status to ensure EFAST2 received your filing 36 How do I check to see if a filing was received by EFAST2 The individual who transmitted the annual return report to EFAST2 or the signer s of that re
23. and the fund or investment company Should these fees be reported as redemption fees using code 57 on Schedule C as direct compensation to the fund company A redemption fee described in SEC Rule 22c 2 is a type of fee that some funds charge their shareholders when the shareholders redeem their shares Although a redemption fee is deducted from redemption proceeds just like a deferred sales load it is not considered to be a sales load Unlike a sales load such a redemption fee is used to defray fund costs associated with a shareholder s redemption and is paid directly to the investment fund Such redemption fees paid directly to an investment fund are neither direct nor indirect compensation to a service provider reportable on Schedule C On the other hand a person could not avoid Schedule C reporting merely by labeling a fee a redemption fee for example calling a deferred sales charge or back end load a redemption fee Record keepers may receive revenue sharing payments from fund companies in the form of shareholder servicing fees In some cases the plan and the record keeper may agree to an ERISA fee recapture account where the rev enue sharing exceeds a fee level negotiated between the record keeper and the plan sponsor How are the following two common approaches treated for Schedule C purposes a All revenue sharing received by the record keeper or the amount in excess of the fees 21 22 Schedule C con
24. asset based formula or a flat per participant fee A recordkeeper and an unaffiliated insurance company enter into an alliance arrangement similar to the alliance arrangement described in 9 Under this version of an alliance arrange ment an insurance company agent offers the plan investments through a group variable annuity or other insurance products and also introduces the recordkeeper s service offering to prospective plan clients The plan has a separate contract or arrangement with the insurance company and with the record keeper The insurance company pays from its general assets compensation to the record keeper for plan administration and recordkeep ing services the recordkeeper provides to plans with investments in insurance contracts issued by the insurance company which may be flat per participant fees or asset based fees based on the value of plans investments in the insur ance contracts Do the amounts paid to the recordkeeper by the insurance company constitute eligible indirect compensation No For the same reasons described above the amounts paid by the insurer to the recordkeeper in connection with a plan s investments do not constitute eligible indirect compensation If the amount paid to the recordkeeper is reported on a Schedule A filed for the plan and the recordkeeper did not receive any other 11 12 13 compensation reportable on the Schedule C the amounts would not have to be report
25. ation continues to be correct If any of the required information has changed updated disclosures would be required to take advantage of the alternative reporting option Also the plan administrator must retain for the period required under section 107 of ERISA documentation sufficient to demonstrate the results of this review Will post trade confirmation serve as adequate written disclosure of brokerage fees and commissions for purposes of the alternative reporting option Accurately reconciled post trade confirmations may be relied upon to satisfy the written disclosure require ments for eligible indirect compensation if either alone or in conjunction with other disclosures the plan administrator receives the required information For Schedule C reporting purposes where a service provider has received free attendance at a conference or seminar the constitutes reportable indirect compensation is it adequate to report payments for meals hotel transporta tion costs and other individual expenses Must the plan administrator also report that portion of the expenses attributable to every conference attendee for costs such as guest speaker fees and other conference overhead Payments for meals hotel transportation costs tickets to a sporting or entertainment event and other individual expenses would be reportable indirect compensation Waiver of any conference registration fee would also be reportable indirect compensation Conf
26. ce fees however the amount the record keeper retains would be reportable indirect compensation for Schedule C purposes Amounts paid to persons out of the plan s ERISA fee recapture trust account for services rendered to the plan are considered direct compensation to the receiving service provider If the record keeper retains the revenue sharing income but reflects some or all of it on the record keeper s accounts as a credit to the plan as opposed to depositing in the plan s trust account payments by the record keeper to other persons for rendering services to the plan that reduce the plan s credit balance would be reportable indirect compensation to the persons receiving the payments Nothing in this answer should be read as expressing a view on when ERISA accounts and similar revenue sharing arrangements may present prohibited transaction issues under section 406 of ERISA Supplemental FAQs About The 2009 14 Many recordkeeping service arrangements apply some portion of a shareholder servicing fee charged by an investment fund in which its client plans invest toward the payment of the record keepers fees In cases where such revenue sharing payments from the investment fund do not cover the full amount of the record keeper fee an additional direct payment is made by the plan to the record keeper to cover the total recordkeeping fee Under such circum stances can part of the recordkeeping fee be reported as indirect
27. ceived in connection with a plan s direct investment in a pooled investment fund top tier fund would be subject to Schedule C reporting to the extent the fees constitute reportable direct or indirect compensation If a top tier investment fund makes an investment in another investment fund lower tier fund fees received by persons at the lower tier fund level in con nection with the top tier fund s investment in the lower tier fund would not be reportable compensation for Schedule C purposes Compensation received directly or indirectly by persons at the top tier from the lower tier fund in connection with the investment of an ERISA plan or plans would however be subject to Schedule C reporting requirements This FAQ does not cover situations where the top tier fund is a separately managed investment account that contain assets of an individual plan a master trust or is merely a vehicle through which participants in participant directed plans make investments in lower tier funds For purposes of reporting indirect compensa tion on Schedule C must a limited partnership hedge fund that is not holding plan assets pur suant to the less than 25 benefit plan investor exception under section 3 42 of ERISA be treated as an investment fund Yes The 2009 Form 5500 instructions provide that persons who provide investment management services to investment funds in which plans invest are treated for Schedule C repor
28. chedule C The concept of indirect compensation in the new Schedule C is very differ ent than in the past and generally will require close attention from plan administrators especially during this first year The attached DOL FAQs on the Schedule C may help service providers and plan administrators understand how the new instructions apply to their particular arrangements While the DOL signals its enforce ment efforts will take into account the difficulties inherent in the transition to the new Form 5500 and electronic filing system plan administrators are well advised to begin planning now to ensure they and service providers are ready and to seek legal counsel as necessary to ensure their compliance with the new rules Though filing the Form 5500 may not be the most exciting part of plan administration it is important The Form 5500 is the only comprehensive source of data about nearly one million employee benefit plans holding nearly 5 trillion on behalf of more than 100 million American workers and their families I hope you will find this publication useful during the filing season for plan year 2009 Thank you for all you do to provide for the bene fit security of America s workers RADA Bradford P Campbell is a nationally recognized figure in employer sponsored retirement health and other welfare benefit plans From 2006 to 2009 he served as the Assistant Secretary of Labor for Employee Benefits t
29. cluding those expenses as reportable compensation for Schedule C purposes Further the fact that the formula for the fees is based on overall operating costs of the insurance company would not affect that conclusion Expenses netted in this fashion may be treated as fees charged against the plan s investment and reflected in the value of the plan s investment for purposes of the Schedule C alternative reporting option for eligible indirect compensation Is the spread earned by a broker on principal transactions involving the plan eligible indirect compensation No For this purpose the Department will follow the definition of commission used by the Securities and Exchange Commission under Section 28 e of the Exchange Act as described in SEC Release No 34 45194 Thus securities commissions for Schedule C pur poses would include a markup markdown commission equivalent or other fee paid by a managed account to a dealer for executing a transaction where the fee and transaction price are fully and separately disclosed on the confirmation and the transaction is reported under condi tions that provide independent and objective verification of the transaction price subject to self regulatory organi zation oversight Fees paid for eligible riskless principal transactions that are reported under NASD Rule 4632 4642 or 6420 would fall within this interpretation 24 25 26 May a plan administrator use a formula for
30. d on a general business relationship that includes both ERISA and non ERISA business is it required to be reported on the Schedule C It depends The Schedule C instructions state that indirect compensation would not include compensation that would have been received had the service not been rendered to the plan or the transaction had not taken place with the plan and that cannot be reasonably allocated to the service s performed or transaction s with the plan However if a person s eligibility for receipt of a gift such as meals travel or entertainment is based in whole or in part on the value e g assets under management contract amounts premiums of contracts policies or transactions or classes thereof placed with ERISA plans the gift would constitute reportable indirect compensation for Schedule C pur poses Where the eligibility for or amount of the gift is based on an book of business including ERISA plan business a pro rata share of the value of the gift should be treated as indirect compensation for the ERISA plans involved A determination of whether non monetary compensa tion is reportable indirect compensation is not necessary if the allocable dollar value of the gift is below the thresholds for Schedule C reporting on non monetary compensation even if the service provider received other reportable compensation that is at or above the 5 000 threshold For example a broker sends a holiday gift basket worth 7
31. d and formatted If you are developing software that will be used to transmit filings you will need to seek certification for filing transmission software The certification for filing transmission software checks that the web requests using the third party software can be correctly sent by trans mitters to EFAST2 and received from EFAST2 by the transmitter Initial third party software developer specifications have been provided to prospective developers If you have not received these and are interested in being an EFAST2 approved third party software developer please call 1 866 GO EFAST I already have a PIN and ID for electronic filing in EFAST Can I use that for submitting my filing electronically in EFAST2 No EFAST2 is a completely separate system from EFAST You will need to register for and obtain new electronic credentials under EFAST2 How can I update my email address or other contact information after I ve registered After successfully logging into the EFAST2 web site click on the Profile link in the navigation bar and you will be able to change any of your contact information including email address Completing An Annual Return Report Form 5500 or Form 5500 SF 17 18 19 am filing a Form 5500 SF for a plan covered by Title of ERISA and the plan invested in a direct filing entity don t see a way to complete a Schedule D for a Form 5500 SF Do have to attach a Schedule D The on
32. d in its entirety as an amended filing No This submission must be corrected and re submitted No The annual return report s may not have been processed No The annual return report has not yet been processed Please check the filing status at a later time to determine the annual return report s processing outcome No This annual return report must be corrected and resubmitted Yes Yes Yes By looking closer at the Filing Status you can see specific error messages applicable to the transmitted filing 32 38 How do I submit an amended annual return report Form 5500 or Form 5500 SF for Plan Years 2009 and later in EFAST2 For plan years 2009 and later starting with the original ver sion you submitted make the necessary amendments check the box for amended return report in Part I and resubmit the entire annual return report including all needed sched ules and attachments 39 am amending my Form 5500 or Form 5500 SF filing Can I just submit the portion of the retum report which am amending No You will need to resubmit the entire Form 5500 or Form 5500 SF with all required schedules and attachments through EFAST2 You cannot submit just the parts of the filing that are being amended 40 I need to submit an amended return for a Form 5500 that was previously submitted on paper to EFAST How do file an amended return report under EFAST2 You would have to s
33. d party software is approved A list of EFAST2 approved third party software will be posted on www efast dol gov There will be two types of software certification in EFAST2 certification for software to prepare filings and certification for software to submit filings Make sure the software you are using is approved for the function s you will need to have performed by the software i e filing preparation and or submission What are the benefits of using EFAST2 approved third party software instead of IFILE Historically 90 percent of filers have used approved third party software Continuing to use approved third party software will provide you with continuity in the switch to the new system which should help minimize the possibility of technical issues IFILE can not be used to transmit batches of filings it can only be used to transmit single filings Many third party preparers benefit from transmitting batches of filings Some EFAST2 approved third party software may support transmission of batches of filings IFILE does not help you prepare an annual return report Some EFAST2 approved third party software may integrate with your systems to automatically populate some of the information required IFILE does not contain filing assistance or integrated instruc tions Some EFAST2 approved third party software may provide such value added support IFILE does not allow more than one individual to edit a filing without
34. e person who will submit the filing needs to import it into IFILE as explained below 1 If you expect to submit the filing you would need to export the annual return report from your EFAST2 approved third party software to an XML file You can import the XML file into IFILE After the file is imported into IFILE you would need to specify the plan administrator plan sponsor as the signer by entering the plan administrator plan sponsor s email address If the plan administrator plan sponsor had not yet registered in EFAST2 as a Filing Signer you will be alerted at this time The plan administrator plan sponsor would login to IFILE using their EFAST2 electronic credentials The plan administrator plan sponsor would not be able edit the filing but would be able to view and sign the filing Once the filing is signed you could then submit it The Filing Signer however retains legal responsibility for the timeliness of the submis sion as well as for its accuracy and completeness 2 If the plan administrator plan sponsor wants to submit the filing you would need to export the annual return report from your EFAST2 approved third party software to get an XML file that you would send to the plan administrator plan sponsor The plan administrator plan sponsor would need to have already registered in EFAST2 as a Filing Author and as a Filing Signer The plan administra tor plan sponsor can login to IFILE and import the XML file generated by th
35. e third party software into IFILE The plan administrator plan sponsor can then review and edit the annual return report in IFILE Then the plan administrator plan sponsor would identify himself when registering as the Filing Signer Once the plan administrator plan sponsor signs the filing he or she could then submit it If an annual return report is signed and then exported 31 32 33 or edited the signatures are erased If you export or edit it after it was signed the plan sponsor or plan administrator will need to sign it again before the annual return report is submitted This applies whether you are using IFILE or EFAST2 approved third party software Do you need a separate registration for the Employer Plan Sponsor and for the Plan Administrator two separate signature lines if the Employer Plan Sponsor and the Plan Administrator are the same person No you only need to register one time for both purposes The credentials that you get can be used for multiple years and on multiple filings If the same person serves as both the Plan Sponsor and Plan Administrator that person only needs to sign as the Plan Administrator on the Plan Administrator line am a third party preparer that represents small businesses that do not have their own computers Can I register for Filing Signer credentials on their behalf No The EFAST2 process for obtaining Filing Signer cre dentials is designed so that the person
36. ed again on the Schedule C Should float income on an account holding the assets of one plan be treated as direct or indi rect compensation for Schedule C reporting purposes Float income is specifically listed as a form of indirect compensation in the Schedule C instructions The fact that the float revenue is received as transaction float or check float on the account of a single plan rather than at an omnibus account level would not require it to be treated as direct compensation for Schedule C reporting purposes Will disclosure of float income sufficient to satisfy the guidance in Field Assistance Bulletin 2002 03 meet the requirements of the alterna tive reporting option Disclosure of float income sufficient to satisfy the guidance under Field Assistance Bulletin 2002 03 will generally be sufficient to satisfy the disclosure require ments for the Schedule C alternative reporting option In order to satisfy the Schedule C alternative reporting option the disclosure must disclose the existence of the indirect compensation the amount or estimate or a description of the formula used to calculate or deter mine the compensation an explanation of the reason for the payment of float income and the parties paying and receiving the float income What rules govern the determination of the services or providers included in the scope of a bundled arrangement for purposes of Schedule C reporting The instructions for Sch
37. ed as eligible indirect compensation assuming the required disclosures are provided The Department would apply similar treatments to exchange fees impose on shareholders if they exchange transfer to another fund within the same fund group account fees imposed on investors in connection with the maintenance of their accounts and purchase fees imposed to defray some of the fund s 12 13 costs associated with a purchase of fund shares Market value adjustments or similar surrender or ter mination charges that are adjustments to the value of the investment in accordance with the contract would not be reportable compensation for Schedule C purposes where the market value adjustment or surrender charge reflects only the contractual difference in the value of the plan s investment because it was not held for the stated duration of the contract Some mutual funds have imposed short term trading fees as a result of SEC Rule 22c 2 These are commonly known in the industry as redemption fees Other investment products collective trust funds separate accounts etc may impose similar fees to curb short term trading Such fees are generally assessed when a participant transfers out of an invest ment fund within a certain timeframe often 30 60 days after investment in the fund The fees flow back into the fund trust or account through a reporting and remittance process developed between the record keeper or inter mediary
38. edule C provide that for Schedule C reporting purposes a bundled service arrangement includes any service arrangements where the plan hires one company to provide a range of serv ices either directly from the company through affiliates or subcontractors or through a combination which are priced to the plan as a single package rather than a service by service basis The instructions further state that a bundled service arrangement would also include an investment transaction in which the plan receives a range of services either directly from the investment provider through affiliates or subcontractors or through a combination As long as all the compensation required to be reported is identified on the Schedule C or dis closed in accordance with the rule for eligible indirect compensation there is flexibility in determining what services or providers are included as part of a bundled arrangement 14 What is an example of fees that are required to be broken out regardless of whether they are part of a bundle The Schedule C instructions include a general rule that in the case of bundled service arrangements revenue sharing within the bundled group generally does not need to be separately reported with two exceptions The first exception is that any person in the bundle receiving separate fees charged against a plan s invest ment e g investment management fees float revenue and other asset based fees such as sha
39. ee Benefits Security Administration EBSA published final form revisions and a final regula tion generally effective for plan years beginning on or after January 1 2009 providing new require ments for reporting service provider fees and other compensation on the Schedule C of the 2009 Form 5500 Annual Return Report of Employee Benefit Plan The purpose of these FAQs is to provide guidance to plan administrators and service providers on complying with the requirements of the 2009 Form 5500 Schedule C Questions concerning this guidance may be directed to EBSA s Office of Regulations and Interpretations at 202 693 8523 Is the Schedule C information on service provider indirect compensation require to be reported based on the plan s year or can the information reported be based on the service provider s fiscal year Although direct compensation paid by the plan should be reported based on the plan s year the amount or estimate of indirect compensation or the formula used to calculate indirect compensa tion may be based for Schedule C reporting pur poses on a service providers fiscal or other report ing year that ends with or within the plan year as long as the selected method is used consistently from year to year This is similar to the Schedule A rule that allows information on insurance contracts or policies including fee and commission informa tion to be reported either on the basis of the plan year or the insurance c
40. ensation Furnishing the plan administrator with a separate document that identifies the other already provid ed documents that contain the required information also would satisfy the eligible indirect compensation disclosure requirement provided the separate document includes ref erences to pages or sections of the document that contain the required information For purposes of satisfying the written disclosure requirement for the alternative reporting option is electronic disclosure such as e mail or other web based technology satisfactory Yes Electronic disclosures can be used satisfy the written disclosure requirement for the alternative reporting option There must be some record that affirmatively indicates that the written materials were received by the plan administrator and those records must 15 16 FAQs About The 2009 Form 5500 Schedule C cont 31 32 33 34 be retained in accordance with ERISA s recordkeeping requirements Do the disclosures regarding eligible indirect compensation need to be provided at least annually in order for the alternative reporting option to be available There is no specific requirement that the disclosures be provided annually In order to take advantage of the alternative reporting option however the plan adminis trator must review the disclosures at least annually in connection with the preparation of the Form 5500 and confirm that the inform
41. erence overhead expenses such as guest speaker fees conference space rental continental breakfast and other refreshment expenses normally included in the cost of the confer ence registration fee are not reportable indirect compensation for Schedule C reporting purposes If a plan is required to report non monetary compensation received by a service provider because the amount involved exceeds the Schedule C exclusion for occasional non 35 monetary compensation of insubstantial value do gifts of less than 10 need to be included Administrators are allowed to exclude non monetary compensation of insubstantial value such as gifts or meals of insubstantial value which is tax deductible for federal income tax purposes by the person providing the gift or meal and would not be taxable income to the recipient The gift or gratuity must be valued at less than 50 and the aggregate value of gifts from one source in a calendar year must be valued at less than 100 If the 100 aggregate value limit is exceeded then the value of all the gifts will be reportable compensa tion The instructions state that for this purpose gifts of less than 10 do not need to be counted toward the 100 limit Gifts of less than 10 also do not need to be included in calculating the aggregate value of all gifts required to be reported if the 100 limit is exceeded If a person providing services to the plan is provided a meal or other entertainment base
42. exporting downloading importing etc see question 20 and 30 whereas some EFAST2 approved third party software may provide such file sharing functionality With file sharing as part of the software different people can work on a single filing in a coordinated and streamlined manner 9 I currently use EFAST approved software to prepare my Form 5500 and then print and mail the annual return report to EFAST What will need to do differ ently for my plan year 2009 annual return report You may be able to use the same type of third party soft ware that you have been using to prepare your Form 5500 but you need to ensure that the version you use is approved for the 2009 plan year by EFAST2 A list of EFAST2 approved third party software will be posted on www efast dol gov Instead of printing and mailing the annual return report to EFAST the plan administrator must electronically sign it and then the electronically signed annual return report must be submitted over the Internet to EFAST2 Your EFAST2 approved third party software will transmit the filing to the EFAST2 system and subsequently provide you with your filing status Registering For EFAST2 Credentials 10 When can I register for EFAST2 electronic creden tials to sign a Form 5500 or Form 5500 SF Once EFAST2 is operational in January 2010 you can begin registering for electronic credentials through the EFAST2 web site www efast dol gov 11 When I register for electron
43. f a bundled arrangement and not separately treated as indirect compensation received by Provider B Assuming Provider B does not receive any other direct or indirect compensation related to Plan Z Provider B would not be required to be sepa rately listed on Plan Z s Schedule C 17 By what date must the disclosure materials necessary to satisfy the written disclosures requirement for treating indirect compensation 18 19 as eligible indirect compensation be presented to the plan administrator The instructions to Schedule C do not specify the date by which the materials necessary to satisfy the written disclosure requirement must be provided to the plan administrator Under ERISA section 103 a 2 if some or all of the information necessary to enable the admin istrator to comply with the annual reporting require ments of Title I of ERISA is maintained by an insurance carrier that provides benefits under the plan or holds assets of the plan in a separate account a bank or similar institution that holds assets of the plan in a common or collective trust or a separate trust or custodial account or the plan sponsor the insurer bank or sponsor must transmit and certify the accuracy of such information to the administrator within 120 days after the end of the plan year In other cases the Department would expect that the written materials would have to be provided by whatever date is agreed upon with the administrator or i
44. f no such date has been established the administrator would need to obtain the materials sufficiently in advance of the date the related Form 5500 is due or filed whichever comes first so as to enable the adminis trator to conclude that the conditions for using the alternative reporting option have been met and timely file a complete and correct Form 5500 If it is difficult to ascertain the Employer Identification Number EIN for some service providers that are part of a group of affiliated companies would it be sufficient to provide the EIN of a parent company The Department recognized in the Schedule C instructions that EINs may not always be available to plan administrators to use to identify service providers The Schedule C thus allowed use of a service provider s address as an alternative to providing an EIN If a service provider is part of an affiliated group of companies use of a parent company EIN would also be acceptable If an EIN is used to identify a service provider the Department would expect the same EIN to be used consistently from year to year and on different schedules that identify the same service provider May reporting of fees and expenses for plans with assets invested in a Master Trust Investment Account MTIA be reported on the Form 5500 filing for the MTIA rather than the Form 5500 filing for each plan involved Yes but in the case of a master trust for which more than one master trust investment
45. fee mug calendar greeting cards plaques certificates trophies or similar items intended solely for the purpose of presentation and displaying a company logo reportable Schedule C indirect compensation to the recipient Generally no The Department explained in its July 2008 FAQ 34 that administrators are allowed to exclude from Schedule C non monetary compensation of insubstantial value which is tax deductible for federal income tax purposes by the person providing a gift or meal and that would not be taxable income to the recipient The non monetary gift or gratuity must be valued at less than 50 and the aggregate value of gifts from one source in a calendar year must be valued at less than 100 If the 100 aggregate value limit is exceeded then the value of all the gifts will be reportable compensation The instructions state that for this pur pose non monetary gifts of less than 10 do not need to be counted toward the 100 limit Non monetary gifts of less than 10 also do not need to be included in calculating the aggregate value of all gifts required to be reported even if the 100 limit is otherwise exceeded In the Department s view it is permissible to presume that ordinary promotional gifts such as a coffee mug calendar greeting cards plaques certificates trophies and similar items of insubstantial value that display a company logo of the person or entity providing the promotional gift have a value of less than
46. filed electronically through EFAST2 See question 4 The Form 5500 EZ cannot be submitted electronically A one participant plan see the instructions for the Form 5500 SF that is eligible to file Form 5500 EZ and is not required to file under Title I of ERISA may elect to file Form 5500 SF electronically with EFAST2 5 rather than filing a Form 5500 EZ on paper with the IRS Such a one participant plan that is not eligible to file Form 5500 SF must file Form 5500 EZ on paper with the IRS For more information on filing the Form 5500 EZ see the instructions for Form 5500 EZ 6 go to www irs gov or call 1 877 829 5500 How can I file my timely plan year 2008 annual return report if it is due after January 1 2010 7 You have several options A You can electronically file a plan year 2008 annual return report using EFAST2 approved third party software or IFILE beginning January 2010 EFAST2 is the new filing system B You can electronically file a plan year 2008 annual return report using EFAS T approved third party soft ware until June 30 2010 EFAST is the current filing system C You can file a plan year 2008 annual return report on paper through the current EFAST filing system 8 using EFAST approved software or government issued hand print forms until October 15 2010 Short plan year 2009 annual returns reports Form 5500 or Form 5500 SF may be due before EFAST2 can receive them in January 2010 How do file
47. he head of the Employee Benefits Security Administration EBSA In this position he was responsible for overseeing private sector employee benefit plans covering more than 150 million Americans and holding as much as 6 trillion in assets As ERISA s former top cop and primary federal regulator Mr Campbell provides his clients at Schiff Hardin LLP with insight and knowledge across a broad range of ERISA plan related issues Mr Campbell held a number of other senior positions in the government including Deputy Assistant Secretary of Labor for Employee Benefits Senior Legislative Officer for the Department of Labor and Senior Legislative Assistant for then Congressman later SEC Chairman Christopher Cox He received his JD cum laude from Georgetown and his AB from Harvard 64788 Federal Register Vol 72 No 221 Friday November 16 2007 Notices SCHEDULE C Service Provider Information Form 5500 2009 Deparment of the Treasury This schedule is required to be filed under section 104 of the Employee internal Revere Retirement income Security Act of 1974 ERISA A Deparment ot Lator gt File as an attachment to Form 5500 This Form is Open to Public For calendar pt r 2009 or fiscal p ar beginning and ending A Name of plan B Three digit plan number PN C Pian sponsor s name as shown on line 2a of Form 5500 D Employer Identification Number EIN Parth js Provider Information see instructions Yo
48. ible indirect compensation There is no specific form or method of disclosure required for disclosures to satisfy the alternative reporting option requirements and the disclosures do not have to come from a particular party Plans and plan service providers thus have substantial flexibility in establishing programs to provide the necessary disclosures 23 Are group health plans and other welfare benefit plans that are required to file a Schedule C subject to the indirect compensation reporting requirements Yes Group health plans and other welfare plans required to file a Schedule C are subject to the indirect compen sation reporting rules 24 In the health plan context and specifically with regard to health care claims what fees will be considered as charged on a per transaction basis A fee charged on a per claim basis would be considered charged on a transaction basis for Schedule C reporting purposes Similarly fees charged for each benefit eligibility inquiry and response claim status request and response and other similar fees could be treated as transaction based fees for Schedule C reporting purposes 25 Assume that a plan sponsor pays all direct expenses relating to the administration and funding of benefits of an unfunded self insured welfare plan such as the third party claims administration expenses under an employer pay all disability plan No plan assets are used to pay any direct expenses nor are plan assets
49. ic credentials through the EFAST2 web site what are the different user types and what type s of user should I select There are five user types under EFAST2 You can check as many as apply to you You may associate more than one user type under your registration if you will be performing multiple functions Filing Author Filing Authors can complete Form 12 5500 5500 SF and the accompanying schedules submit the filing and check filing status Filing Authors cannot sign fil ings unless they also have the Filing Signer role If you are using EFAST2 approved third party software to author your filing rather than IFILE you do not need to check this box Filing Signer Filing Signers can sign Form 5500 5500 SF filings Signers must ensure that the filing information is correct prior to its submission The signer s signature indi cates that to the best of the signer s knowledge and belief the filing is true correct and complete Signers include Plan Administrators Employers Plan Sponsors and Direct Filing Entities No other filing related work may be done by the Filing Signer if this is the only user type selected Further for purposes of Title I of ERISA the plan administrator either as the Filing Signer or if a non individual entity on whose behalf an individual authorized to sign on behalf of the plan administrator has signed as a Filing Signer remains legally responsible for the timeliness of the submission of the Form
50. iding services such as investment manage ment services for an investment fund portfolio in which the plan invests Payment of commissions and other compensation to agents brokers and other persons in connection with the placement or retention of the insurance contract would however be reportable compensation to the recipients regardless of how they are characterized See 2008 FAQ 6 For example fees and commissions would still be reportable even if they were characterized as being within a mortality and expense charge used to establish the crediting rate The instructions for the Schedule C provide that insurance fees and commis 10 11 sions received by agents brokers and other persons in connection with a plan s purchase of or investment in an insurance contract that are reported on Schedule A do not need to be reported again on Schedule C The July 2008 guidance in FAQ 40 provides limited transition relief where a service provider makes reasonable good faith efforts to develop systems to track information regarding its reportable indirect compensation in a timely fashion but despite such efforts is unable to collect the necessary information for the 2009 plan year reports Will the Department reject the Form 5500 or impose penalties if the Schedule C does not include information that was not provided to the plan administrator or the plan s Form 5500 preparer by a service provider that gives the plan administ
51. in file size It is possible that a filer would not be able to transmit a submission under the EFAST2 limit of 2GB due to issues on their end of the network or due to their Internet Service Provider Submissions may include a batch of up to 100 filings If a batch submission is over 2GB the transmitter should break up the batch so that there are fewer filings in each batch submission Based on the amount of data required to be submitted a single filing should not exceed the 2GB size limit even if the filing has multiple attachments If a filing is bigger than 16MB it is likely because the PDF attachments were scanned with too high of a resolution or color depth Filers need to be aware of this when creating their attachments as PDE See question 28 and 29 for ways to minimize file size when creating a PDF document In the rare event a filing is over 2GB and you cannot reduce the file size of the attachments please call the EFAST2 Help Line at 1 866 GO EFAST 1 866 463 3278 and they will work with you to get the filing transmitted 44 Could pop up blockers stop the display of acknowl edgement or any other messages that might be provided through the filing process Yes Please consider turning off pop up blockers in your web browser when using the EFAST2 web site 45 Who can we contact about Form 5500 filing or EFAST2 if we have questions or problems Please begin by calling the EFAST2 Help Line at 1 866 GO EFAST 1 866 463 3278
52. ives eligible indirect compensation for which the disclosures have been made and either direct compensation or indirect compensation that is not eligible does Line 2 h of Part I apply to the portion that is eligible indirect compensation No Line 2 h is a follow up question to line 2 g and only need be completed with respect to indirect com pensation excluding eligible indirect compensation Must the service provider receiving eligible indirect compensation be the person who provides the disclosures needed to meet the alternative reporting option No Any person can provide the required disclosures If more than one person provides the same required disclosure for eligible indirect compensation must all persons providing the disclosure be identified No Multiple persons can be listed on the Schedule C as providing different required disclosures but if multi ple persons provide the same disclosures only one person must be listed for the disclosure or disclosures 20 When identifying the person who provided the required disclosures for the Schedule C alternative reporting option must the name of an individual be provided No The person listed may be an individual or entity that actually furnished the disclosures to the plan If a mutual fund prospectus is used to provide required disclosures for eligible indirect compensation however it would not be sufficient to identify the mutual fund as providing the prospec
53. lack and White color depth can help to minimize the resulting file size of the PDE If you are scanning multiple pages and your scanner does not have a document feeder you will need to scan each page and then combine them into one PDF file for each attachment type Check that your pages appear in the order you want them prior to saving and submit ting them You are encouraged to use software that will create a PDF from another application s data file as this often produces a better quality PDF file and small file size as described in the previous question Signing A Return Report 30 If I am using EFAST2 approved third party software to prepare a filing for a client how do I provide the plan sponsor administrator signa ture PIN in the submission There are a few alternatives A Your EFAST2 approved third party software may have a file sharing function see question 8 that allows a plan sponsor to view and apply their signa ture to the filing Check with your software vendor or user s manual to see if the software vendor offers this function B You can use IFILE as a medium to share the filing with the plan administrator plan sponsor How you do that depends on whether you want to submit the filing or whether the plan administrator plan sponsor wants to submit the filing It also depends on whether the plan administrator plan sponsor wants the ability to make changes to the annual return report before submission Th
54. lan Are commissions paid to an agent in connection with the sale of an investment product or serv ice to a plan reportable indirect compensation Yes Indirect compensation for Schedule C reporting purposes includes among other things payment of finder s fees or other fees and commissions by a service provider to an independent agent or employee for a transaction or service involving the plan Thus commis sions received from a person other than those received directly from the plan or plan sponsor in connection with the sale of an investment product or service to a plan would be reportable indirect compensation The treatment of the commission as reportable indirect compensation is not dependent on whether the seller or the agent has any other relationship to the plan other than the sale itself Is compensation received in connection with the management and operation of venture capital operating companies VCOCs real estate oper ating companies REOCs and other operating companies reportable indirect compensation No Although the requirement to report indirect com pensation is not limited to fees received by persons managing plan assets unlike investment funds e g mutual funds collective investment funds fees received by third parties from operating companies including real estate operating companies REOC or venture capital operating companies VCOC in connection with man aging or operating the operating
55. ly schedules required to be filed with the Form 5500 SF for a plan that is covered by Title I are the Schedule SB actuarial information for defined benefit pension plans or Schedule MB actuarial information for money purchase plans that are amortizing funding waivers No other schedule should be submitted with the Form 5500 SE If you are filing the Form 5500 you must submit all required schedules and attachments including the Schedule D if applicable I don t see a way to complete a Schedule SSA in EFAST2 How do file my SSA information with the Government Beginning with the 2009 plan year the Form 5500 series does not include the Schedule SSA Do not find a prior year Schedule SSA fill it out and attach that to your 2009 Form 5500 filing Do not try to create your own Schedule SSA and attach that to your Form 5500 filing SSA information will be collected by the IRS If you include a social security number on your annual return report such as appears on the old Schedule SSA or in any of the attachments including PDF or other forms of attachments your filing may be reject ed Because your filing including any attachments will be posted on the Internet it must not contain any Schedule SSA information or social security numbers For more information on the form that replaces the Schedule SSA please contact the IRS www irs gov How can I see what my annual return report will look like before it is filed Using y
56. n d Emer name and EIN address of source of indirect compensation 161 Describe the indirect compensation including any formula used to determine the service provider s for of the amount of the indirect compensation a Enter service provider name as i appears on ine 1 gt see instructions compensation d Enter name and EIN address of source of indirect compensation Describe the indirect for or the amount of the indirect a Emer service provider name as N appears on ine 1 IRI Service Codes C Enter amount of indirect see instructions compensation d Emer name and EIN address of source of indirect compensation 161 Describe the indirect compensation including any formula used to determine the service provider s eligibility for of the amount of the indirect compensation Federal Register Vol 72 No 221 Friday November 16 2007 Notices 64793 Schedule C Form 5500 2009 Page 6 Parti Service Providers Who Fail or Refuse to Provide Information 4 Provide to the extent possible the following information for each service provider who failed or refused to provide the information necessary to complete this Schedule Ta Enter name and EIN or address of service provider see b Nature of C Describe the information that the service provider failed or refused to instructions Service provide ode s a Enter name and EIN or address of service provider soa C Describe the information tha
57. nd Element c on Line 3 of Part I of Schedule C states that the plan administrator should Enter amount of indirect compensation Where a plan administrator receives a formula from a service provider for amounts reportable on Line 2 the plan administrator may enter 0 if that is the only indirect compensation reportable in element g on Line 2 The plan administra tor must check yes in element h of Line 2 and attach a statement describing the formula s that is labeled Schedule C Line 2 h formula description Where a plan administrator receives a formula from a service provider for amounts reportable on Line 3 the plan administrator may enter 0 if that is the only indirect compensation reportable in element c on Line 3 The plan administrator must include in element e on Line 3 a description of the formula s Plan administrators are not required to report on Schedule C information with respect to service providers receiving less than 5000 in total compensation direct and indirect from the plan Schedule C Part I Line 2 states that service providers should be reported in descending order of compensation Are plan administrators 27 28 required to estimate a service provider s compen sation for purposes of determining whether to include information about a service provider on Form 5500 or for purposes of reporting service providers in descending order of compensation on Part I Line 2 If
58. ntract FAQ 22 in the July 2008 guidance dealt with Schedule C reporting for a stable value contract that is combined with plan recordkeeping trusteeship and similar servic es In the FAQ the insurer reduced the crediting rate on the contract to account for the insurer s expenses and costs for providing services such as recordkeeping and similar services to investing plans The FAQ was intended to describe an insurance based situation where plan services were characterized as free because the compensation for those services was collected indirectly by in effect imposing a charge against the plan s invest ment The Department concluded that Form 5500 reporting on the compensation for providing plan services could not be avoided in such cases merely by incorporating the compensation for those services into a reduction in the crediting rate on an insurance invest ment contract A different situation is presented if an insurance compa ny general account investment contract is not combined with any plan services An insurance company general account investment that promises a guaranteed rate of return takes into account various factors including insurance company costs and expenses in establishing the guaranteed crediting rate Similar to the July 2008 FAQ on mutual fund operating expenses see 2008 FAQ 4 such insurance company costs and expenses do not involve the insurer receiving reportable compensa tion for prov
59. oms and audio visual equipment however does not need to be included The Department has decided that it will not require such educational conference expenses to be reported on Schedule C if a plan fiduciary other than the plan representative attending the conference reasonably determined in advance and without regard to whether such conference expenses will be reimbursed that a the plan s payment of educational expenses in the first instance would be prudent b the payment or reim bursement of the expenses would be consistent with a written plan policy or provision designed to prevent abuse c the conference had a reasonable relationship to the duties of the attending plan representative and d the expenses for attendance were reasonable in light of the benefits afforded to the plan by such attendance and unlikely to compromise the plan representative s ability to carry out his or her duties in accordance with ERISA The fiduciary s determination must be in writing This guidance is for purposes of Schedule C reporting only Filers are strongly cautioned that gifts and gratuities of any amount paid to or received by plan fiduciaries may violate ERISA and give rise to civil liabilities and criminal penalties In the context of a plan s investment in a look through investment fund is Schedule C report ing required for fees received by persons at the lower tier funds For Schedule C reporting purposes fees re
60. ontract or policy year that ends with or within the plan year Can the alternative reporting option for eligible indirect compensation be used to report compensation paid or received in separately managed investment accounts of a single plan Yes The Schedule C instructions state that eligible indirect compensation includes fees or expense reimbursement payments charged to investment funds and reflected in the value of the plan s investment or return on investment The instruc tions do not further define the term investment fund for this purpose Investment funds would include mutual funds bank common and collective trusts and insurance company pooled separate accounts In the Department s view the term would also include separately managed investment accounts that contain assets of an individual plan Thus so long as the other conditions for eligible FAQs About The 2009 Form 5500 indirect compensation are met the Schedule C alternative reporting option can be used for indirect compensation received in connection with separately managed investment accounts of employee benefit plans Are all the fees and expenses charged against an investment fund and reflected in the value of the plan s investment such as an investment fund s payments for legal services provided to the fund fees paid to the fund s accountant and expenses associated with SEC filing requirements reportable indirect compen
61. or the plan administrator in such circumstances to consider obtaining information about a dollar amount as part of monitoring the service arrangement e g to verify the reliability of an estimate or to confirm that a formula was correctly applied Can a recordkeeper satisfy the alternative report ing option for eligible indirect compensation by furnishing the plan administrator with prospec tuses brokerage fee schedules the SEC Form ADV or other already available documents prepared and provided to the administrator for separate purposes or must it create its own written disclosure document As long as the person who is identified on the Schedule C as providing the required disclosures for the eligible reporting option advises the plan administrator that dis closures in those documents are intended to satisfy the alternative reporting option in addition to serving the other purposes for which the documents were generated provision of existing documents will satisfy the alternative reporting option if a reasonable plan administrator can readily determine from the documents a the existence of the indirect compensation b the services provided for the indirect compensation or the purpose for the payment of the indirect compensation c the amount or estimate of the compensation or a description of the formula used to calculate or determine the compensation and d the identity of the party or parties paying and receiving the comp
62. or purposes of reporting service providers in descending order of compensation on Part I Line 2 The plan administrator should list the most highly compensated service providers first to the extent the plan administrator has total actual or estimated compensation data If total compensation data is not available however the plan admin istrator may list service providers in any reasonable order What guidelines apply where service providers elect to provide an estimate of compensation Service providers that provide an estimate of their indirect compensation may use any reasonable method for devel oping an estimate as long as the method 1s disclosed with the estimate Where more than one reasonable method is available for generating an estimate it would be appropri ate for the plan and the service provider to consider the relative costs involved in selecting a method If a service provider provided the plan administra tor with an estimate of its indirect compensation or a formula used to calculate its indirect com 29 30 pensation but later determines a dollar amount for the compensation it received does the plan administrator need to obtain an updated disclo sure of the dollar amount in order to be able to rely on the Schedule C alternative reporting option No A second disclosure with the actual dollar amount does not need to be obtained in order to rely on the alternative reporting option It may be appropriate f
63. osure requirements for the eligible indirect compen sation alternative reporting option No The required disclosures for eligible indirect compen sation include an identification of the services provided for which the broker is receiving indirect compensa tion It also would not be sufficient to provide a fee range as described in the question for multiple funds If the compensation with respect to any given fund may fluctuate over a range that would be difficult to describe with more precision than a range of basis points however it would be permissible to set forth for each separate fund such a range to describe the formula used to determine the broker s indirect compensation If an investment advisor has a standard disclo sure on soft dollar compensation that meets the requirements of the securities laws but would not meet the requirements of the alternative reporting option for eligible indirect compensa tion because it does not provide estimates or descriptions of eligibility criteria or the names of the brokers paying the soft dollar compensa tion do additional disclosures need to be provided If the disclosures that meet the securities laws require ments do not include the information necessary to meet the eligible indirect reporting option additional disclosures would be required for a plan to take advan 23 Supplemental FAQs About The 2009 Schedule C cont tage of the alternative reporting option for elig
64. ould be zero and then validate your annual return report for errors you will be notified that item must be completed Conversely if you enter zero in an item that should have been blank and then validate your annual return report for errors you may receive different error messages Consult the Form 5500 or 5500 SF instructions for guidance specific to each question on the forms Attachments 24 How do attach the report of the independent qualified public accountant IQPA report The IQPA report needs to be documented on letterhead signed and then saved as a single Portable Document Format PDF file That PDF file then needs to be attached to the Form 5500 annual return report When you submit the Form 5500 annual return report the attachments will be transmitted to EFAST2 along with the rest of the infor mation in the annual return report 25 Will the EFAST2 system still receive my filing if I do not attach the IQPA report with my Form 5500 annual return report when it is required The EFAST2 system will receive your filing but submitting the annual return report without the required IQPA report is an incomplete filing and the incomplete filing may be subject to further review correspondence rejection and assessment of civil penalties Also if you do not submit the required IQPA report you must still correctly answer the IQPA questions on Schedule H line 3 This means you must leave lines 3a and 3b blank because the I
65. our filing before you submit it to the Government If the errors warnings are not corrected before submission the Government will be alerted to the errors associated with your filing when it is submitted Please run the pre validation check and correct any errors warnings to the best of your ability before you submit your filing After a filing is submitted to EFAST2 the Government may perform additional checks of the annual return report and your filing may be rejected based on these additional checks Can a draft Form 5500 be submitted for viewing online and reviewing Please do not submit a draft annual return report to EFAST2 When you submit an annual return report you are sending it to the Government Do not submit a draft annual return report to EFAST2 simply because you or your client wish to see what the filing will look like after it is filed If you wish to view a completed annual return report in IFILE see the IFILE Users Guide Also see questions 20 and 21 for additional information on reviewing and checking your file before submission If the answer to a question seeking an amount is none or zero should fill the numeric fields with zero or leave it blank If the numeric answer to the question is zero or if the question provides that you cannot leave it blank then enter 0 Only leave a numeric field blank where the instructions specifically permit you to do so If you leave an item blank that sh
66. our filing preparation software you can view your annual return report as it would appear populated in a form facsimile In IFILE you can click the View as PDF button to see your annual return report in a facsimile format If you are using EFAST2 approved third party software check your user manual for instructions on how to view your annual return report in a facsimile format 20 Can l show my annual return report to other people for review before submit it to the Government 21 22 23 If you have a draft annual return report Form 5500 or Form 5500 SF that you wish for other people to review you can export the draft annual return report When you do that you will have an XML file that you can send to other individuals Those individuals can import the XML file into their EFAST2 approved third party software or into IFILE to review If they wish to make changes to the draft annual return report they can do so but they need to export the revised annual return report into an XML file and send that back to you for the changes to be included in the transmis sion to EFAST2 Is there a way I can check to see if there are errors in my filing before submit it Yes You can and should validate your filing before sub mitting it The automatic validation will perform an initial check for errors such as if Schedule H numbers are not consistent within Schedule H or with the Form 5500 This is a check of errors in y
67. oviders broker dealers banks and insurance companies The fees for compliance services received by the record keeper from the mutual fund agent are reportable indirect compensation The alternative reporting option for eligible indirect compensation would not apply to such payments because the payments are not among the categories listed in the Schedule C instructions for eligible indirect compensation Instructions to Schedule C define eligible indirect compensation as i ndirect compensation that is fees or expense reimbursement pay ments charged to investment funds and reflected in the value of the investment or return on investment of the participating plan or its participants finders fees soft dollar revenue float revenue and or brokerage commis sions or other transaction based fees for transactions or services involving the plan that were not paid directly by the plan or plan sponsor whether or not they are capitalized as investment costs Amounts received by a plan recordkeeper from fund agents would not constitute eligible indirect compensa tion on the basis of being other transaction based fees for transactions or services involving the plan merely because the plan had to make an investment in the mutual fund before the recordkeeper would receive any fees If such a broad interpretation of transaction based fees for transactions or services involving the plan were adopted for purposes of
68. r pays a third party service provider on the plan s behalf and seeks reim bursement from the plan should the Schedule C reflect a direct payment from the plan to the service provider and not a payment to the employer Yes When a plan sponsor pays a plan third party service provider and then seeks reimbursement from the plan the Schedule C for the plan should reflect a direct payment from the plan to the service provider In this regard direct compensation is defined in the instruc tions for purposes of Schedule C as p ayments made directly by the plan for services rendered to the plan or because of a person s position with the plan and excludes p ayments made by the plan sponsor which are not reimbursed by the plan The Department notes that if the plan sponsor pays a service provider directly and does not seek reimbursement from the plan such payment does not need to be reported on the Schedule C Where a plan service provider is providing non plan related investment services to participants and charging reduced fees for plan related services based on the anticipation of receiving fees from participants for non plan related services do the fees for non plan related investment services need to be reported on the Schedule C No Fees for non plan related investment services provided directly to participants that are not paid by the 39 40 plan charged to a plan account or reflected in the value of plan
69. rator the statement described in Q40 No In addition to the statement described in FAQ 40 the Department expects the service provider will provide the information on its reportable compensation that it was able to collect The Department also expects that plan administrators who receive such statements from service providers will communicate with the service provider regarding the statement and the steps the service provider is taking to be able to provide the necessary information in connection with future Schedule Cs the plan is required to file Are contingent deferred sales charges market value adjustments for annuity contracts or surrender termination charges reportable compensation and if so are they to be reported as direct or indirect compensation Contingent deferred sales charges are typically understood to be back end or deferred sales loads or commissions investors pay when they redeem mutual fund shares or other investments Although sales loads frequently are used to compensate outside brokers that distribute fund shares some funds that do not use outside brokers still charge sales loads To the extent paid by the plan or charged to a plan or participant s account such sales loads or commissions would be direct compensation to the person receiving the load or commission Such a deferred load or commission charged against an investment fund and reflected in the value of the plan s investment could be treat
70. reholder servicing fees 12b 1 fees and wrap fees if charged in addition to the investment management fee must be treated as receiving separately reportable compensation for Schedule C purposes Examples of separate fees charged against a plan s invest ment for purposes of this exception are revenue sharing payments for shareholder services recordkeeping or compliance services that are paid by an investment provider to a third party administrator TPA if they are charged against the plan s investment as a separate amount or pursuant to a separate formula Thus if the investment provider pays the TPA out of an overall investment management or shareholder services charge assessed against the plan s investment the payment to the TPA by the investment manager out of its fees would not be a separate fee for this purpose The second exception is that compensation must be separately reported if i the compensation is received by any person in the bundle who is one of the service providers enumerated on Line 3 of Schedule C and ii the compensation received is commissions and other transaction based fees finders fees float revenue soft dollars and other non monetary compensation 15 Where the only compensation received by a service provider is eligible indirect compensa tion and all of the disclosures necessary to satisfy the alternative reporting option have been provided is it necessary to complete any info
71. rmation on Schedule C regarding that service provider other than identifying the person providing the disclosures on Line 1 No The only information required when the alternative reporting option is being used with respect to a particu lar service provider is the identifying information on Line 1 However for a service provider who receives 5 000 or more in eligible indirect compensation and other reportable indirect compensation the service provider must be separately listed on line 2 and key service provider information must be reported on line 3 16 17 18 19 Does Part I Line 3 of the Schedule C require reporting with respect to sources of indirect compensation if the compensation is eligible indirect compensation No Line 3 of Part I of the Schedule C states that If you reported on line 2 receipt of indirect compensa tion other than eligible indirect compensation by a service provider emphasis added This instruction makes it clear that the Line 3 reporting only is required for indirect compensation that is not eligible indirect compensation For example if a service provider receives both eligible indirect compensation including satisfaction of the disclosure requirements and other indirect compensation Line 3 reporting only applies with respect to the portion of the service provider s compensation that does not constitute eligible indirect compensation If a service provider rece
72. sation for Schedule C purposes No The Schedule C Instructions provide a general rule that indirect compensation includes compensa tion received in connection with services rendered to the plan or a person s position with the plan A person will be considered to receive indirect compensation for Schedule C reporting purposes if the person s eligibility for a payment or the amount of the payment is based in whole or in part on 1 services that were rendered to the plan or 2 on a transaction or series of transactions with the plan In the case of charges against an invest ment fund reportable indirect compensation includes for example the fund s investment adviser asset based investment management fee from the fund fees related to purchases and sales of interests in the fund including 12b 1 fees brokerage com missions and fees charged in connection with purchases and sales of interests in the fund fees for providing services to plan investors or plan partici pants such as communication and other shareholder services and fees relating to the administration of the employee benefit plan such as recordkeeping services Form 5500 filing and other compliance services Amounts charged against the fund for other ordinary operating expenses such as attor neys fees accountants fees printers fees are not reportable indirect compensation for Schedule C purposes Also brokerage costs associated with a broker
73. t needed by the record keeper to administer the plan is deposited into a retirement plan trust account and used to pay administrative expens es of the plan Amounts remaining in the account at the end of the plan year are general ly allocated to participants in accordance with provisions in the plan document b All revenue sharing is retained by the record keeper and applied as a credit to the plan or plan sponsor to pay for or offset expenses of administering the plan Amounts in excess of the fees negotiated by the record keeper to administer the plan are available to pay plan administrative expenses as directed by the plan administrator This question describes fee recapture arrangements sometimes called ERISA fee recapture accounts ERISA accounts or ERISA budget accounts which are designed to help plans control costs by recapturing some revenue sharing dollars and allowing plans to use them to pay plan expenses If in the question above revenue sharing compensation is paid into the plan s trust account and the record keeper is merely serving as a conduit between the fund company and the plan trust then the excess amounts that flow directly through the record keeper from the fund company to the plan trust do not have to be reported as indirect compensation received by the record keeper for Schedule C purposes If the amount deposited into the plan s trust account by the record keeper is net of the record keeper s servi
74. t the service provider failed or refused to instructions provide a Enter name and EIN or address of service provider see NRT Nature of IGT Describe the information thal the service provider failed or relused to instructions Service provide b Nature of C Describe the information Servis odejs that the service provider failed or refused to provide a Enter name and EIN or address of service provider see instructions IST Erter name and EIN or address of service provider see instructions b Nature of IT Describe the information that the service provider failed or refused to Service provide s Ta Enter name and EIN or address of service provider see b Nature of C Describe the information that the service provider failed or refused to instructions Service provide s 64794 Federal Register Vol 72 No 221 Friday November 16 2007 Notices a E Schedule C Form 5500 2009 Page 7 Patt Termination Information on Accountants and Enrolled Actuaries see instructions comp as entres as needed a Name b EIN C Position TREE 3 d Address Telepho CE T a c Explanation a Name b EIN C __ Position Sopp d Address Telep 2 R otek tence E sy ree Explanation a Name b EIN c Position iin tera d Address eT 10 Schedule C What is the purpose of this FAQ guidance On November 16 2007 the Department of Labor s Employ
75. their 2009 plan year Form 5500 In an effort to address the concerns of both service providers and plans the Department has decided that with respect to those employee benefit plans which are dependent on service providers for information necessary to complete the Schedule C the plan administrator will not be required for 2009 plan year reports to list a service provider on line 4 of the Schedule C as failing to provide informa tion necessary to complete the Schedule C if the plan administrator receives from the service provider a state ment that i the service provider made a good faith effort to make any necessary recordkeeping and infor mation system changes in a timely fashion and ii despite such efforts the service provider was unable to complete the changes for the 2009 plan year 17 18 Supplemental FAQs About The 2009 Schedule C 1 What is the purpose of this FAQ guidance The Department of Labor is publishing these FAQs to supplement FAQs published in July 2008 and to provide further guidance in response to additional questions from plans and service providers on the requirements for reporting service provider fees and other compensation on the Schedule C of the 2009 Form 5500 Annual Return Report of Employee Benefit Plan Inquiries regarding these supplemental FAQs may be directed to EBSA s Office of Regulations and Interpretations at 202 693 8523 2 Are promotional gifts of little intrinsic value such as a cof
76. these Short 2009 plan year filers whose due date to submit their 2009 filing is before January 1 2010 will be given an automatic extension to electronically file their com plete Form 5500 annual return report within 90 days after the 2009 filing system is available on the DOL web site This special extension is being granted to encourage such filers to submit their 2009 returns reports electronically under EFAST2 Filers who choose not to take advantage of the special extension must use plan year 2008 forms and instructions and submit their annual return report on or before the due date for their filing under the current EFAST system before EFAST2 and the 2009 Forms and instructions are available for filing in January 2010 How can submit a delinquent or amended Form 5500 return report for years prior to 2009 once the EFAST2 system is available Beginning January 1 2010 delinquent and amended filings of Title I plans must be submitted through EFAST2 Further guidance on the exact steps required to submit delinquent or amended Form 5500 returns reports for years prior to 2009 will be provided later Filing Preparation Software What is IFILE IFILE is the Form 5500 and Form 5500 SF annual return report preparation and submission application that will be on DOL web site www efast dol gov Do I have to use IFILE No IFILE is offered as an alternative to EFAST2 approved third party software How do I know what thir
77. ting purposes as indirectly providing investment management services to those investing plans Thus fees that are paid out of an investment fund s assets to the fund s investment adviser or its affiliates for managing the fund s investment portfolio are reportable indirect compensation for Schedule C purposes The instructions are clear that investment funds for this purpose include registered investment companies commonly referred to as mutual funds that do not hold plan assets by reason of ERISA section 401 b The Department s July 2008 FAQs in explaining this requirement drew a line between investment funds and entities that would be treated as operating companies under the Department s plan asset regula tion at 29 C ER 2510 3 101 Definition of plan assets plan investments See 2008 FAQ 7 In the Department s view other investment funds that do not hold plan assets are similarly subject to the Schedule C compensation reporting requirements Thus for instance fees paid to persons for management of a real estate hedge fund that did not meet the requirements 19 20 Schedule C cont for being a real estate operating company under 29 C ER 2510 3 101 would be reportable Schedule C compensation but property management fees paid to persons managing the underlying properties owned by the funds could be treated as ordinary operating expenses of the fund See 2008 FAQ 4 Can mut
78. turn report can check the filing status using the software used to submit the annu al return report approximately 20 minutes after submission The transmitter and filing signer also can check the status of the returns reports they submitted or signed through the EFAST2 web site regardless of what software IFILE or EFAST2 approved was used to submit the filings Any person not just the transmitter or signer can check the status of a filing by calling the EFAST2 Help Line at 1 866 GO EFAST 1 866 463 3278 and using our automat ed voice system The automated system will provide you with the status of the filing but will not describe any errors specific to the filing 31 37 How does the filing status tell me if an annual return report is considered filed in EFAST2 If the filing status states Filing Received Filing Error or Filing Stopped then the annual with a status of Filing Error or Filing Stopped must be corrected through an amended filing On the following page is a chart summarizing the submission and filing statuses and what they mean return report is considered received However filings Status What It Means Return Report Considered A Filing Unprocessable Submission Processable Submission Processing Filing Unprocessable Filing Stopped Filing Error Filing Received EFAST2 was not able to process the submission or envelope a
79. tus unless the mutual fund itself provided the prospectus directly to the plan 13 14 FAQs About The 2009 Form 5500 Schedule C cont 21 22 23 Are insurance contract wrap fees considered eligible indirect compensation for purposes of the alternative reporting option on Schedule C Where the wrap fees are charged against the plan s invest ment or are transaction based fees for transactions or services involving the plan they can be treated as eligible indirect compensation Some insurance companies provide a net rate investment product where an investment contract is combined with plan recordkeeping trustee ship and similar services Instead of charging fees for those services the insurer credits the plan s investment in a stable value option with interest at a crediting rate that is net of the insurer s expenses and costs determined based on the overall experience of the insurer s general account Is the portion of the insurance compa ny s expenses and costs used to reduce the crediting rate reportable indirect compensation even though it is calculated based on the overall experience of the general account If so can these amounts be treated as eligible indirect compensation The fact that expenses that constitute reportable compen sation are netted against the crediting rate in determining the plan s rate of return on the stable value contract would not be a basis for ex
80. u musi complete this Part in accordance with the instructions to report the information required for each person who received directly or indirectly 5 000 or more in total compensation i e ara Rte en ores ferrer aerial Totes to the plan or the person s position with the plan during the plan year H a person received only eligible indirect compensation for which the plan received the required disclosures you are required to answer line 1 but are not required to include thal person when completing the remainder of this Part 1 Information on Persons Receiving Only Eligible Indirect Compensation a Check Yes or No to indicate whether you are excluding a person from the remainder of this Part because they received only eligible indirect compensation for which the plan received the required disclosures see instructions for definitions and conditions Dyes Jno b if you answered line 1a Yes enter the name and EIN or address of each person providing the required disclosures for the service providers who received only eligible indirect compensation Complete as many entries as needed see instructions b Enter name and EIN or address of person who provided you disclosures on eligible indirect compensation b Enter name and EIN or address of person who provided you disclosure on eligible indirect compensation b Enter name and EIN or address of person who provided you disclosures on eligible indirect
81. ual fund 12b 1 fees sub transfer agent fees and shareholder servicing fees received by a retirement plan record keeper be classified as eligible indirect compensation for purposes of the Schedule C alternative reporting option regardless of whether such fees were received from a mutual fund agent or directly from a mutual fund The Department would generally consider fees dis closed in a mutual fund prospectus such as 12b 1 fees sub transfer agent fees and shareholder servicing fees as charged against the mutual fund assets and reflected in the value of the investing plans shares for purposes of Schedule C s definition of eligible indirect compensa tion The fact that a 12b 1 fee for example is received by a record keeper through a conduit mutual fund agent would not prevent the fee from being treated as eligible indirect compensation On the other hand the fact that a revenue sharing fee received by a record keeper from a broker might ultimately have been derived from 12b 1 fees received by the broker and disclosed in a mutual prospectus does not mean that the revenue sharing payment would be eligible indirect compensation Revenue sharing payments often travel through the hands of several different service providers before getting to their ultimate intended recipi ent in a chain of plan service providers Does only the ultimate recipient of the compensation need to be identified as having received the compensation
82. ubmit an entire Form 5500 including any schedules and attachments electronically through EFAST2 See question 4 Online Disclosure 41 Will the general public be able to view all Form 5500 and Form 5500 SF filings online Nearly all filings submitted through EFAST2 including schedules and attachments will be available to the general public through the DOL web site www efast dol gov You do not need to register for electronic credentials or login to the EFAST2 web site to access the EFAST2 public disclosure web site There are some filings that will not be disclosed on the web site For example if EFAST2 recognizes that a filer amended their filing only the most recent the amended filing would be displayed on the web site The original filing would not be displayed Filings that are not shown on the EFAST2 web site will be available through the public disclosure room Filings that were submitted through the current EFAST system will not be disclosed on the EFAST2 web site but will continue to be available through the public disclosure system 42 How soon would EFAST2 filings become available to the public The EFAST2 web site generally will be able to display submitted filings within one day of receipt The public disclosure room will have filings in approximately that same amount of time Troubleshooting Problems With EFAST2 43 What should I do if the file size is huge EFAST2 should accept any submissions up to 2GB
83. ute indirect compensation to the recipient for purposes of Schedule C This guidance is for purposes of Schedule C reporting only Filers are strongly cautioned that gifts and gratuities of any amount paid to or received by plan fiduciaries may violate ERISA and give rise to civil liabilities and criminal penalties An entity that provides services to employee benefit plans conducts educational conferences designed to educate and explain employee ben efit issues and products at no cost to employee pension or welfare plan personnel e g plan sponsor s human resources staff and finance personnel In holding the conference the entity provides conference rooms speakers audio visual equipment and refreshments during conference breaks meals travel and lodging Do all of those expenses have to be reported as non monetary compensation Paying for or reimbursing plan personnel for travel meals and lodging expenses associated with the plan representative attendance at an educational conference generally constitutes reportable Schedule C compensa tion because it is provided due to the person s position with the plan Waiver of any conference registration fee would also be reportable indirect compensation The cost of the meals travel lodging and waived conference registration fee must be included in the calculation of Schedule C reportable compensation for the recipients An allocated share of the costs of the conference ro
84. whole or in part on whether the investment manag er does business with ERISA plans or on the value or amount of business conducted that includes ERISA covered plans the expenses for the conference travel meals and lodging would not constitute Schedule C reportable indirect compensation received by the invest ment managers or their employees Similarly if an investment platform provider hosts a hospitality suite including food other refreshments and entertainment at a business conference focused on ERISA issues and allows any person who attends the conference to visit the hospitality suite the value of the food refreshments and entertainment would not be reportable Schedule C compensation to persons who visit the hospitality suite merely because they may hold a position with an ERISA plan or have service provider relationships with ERISA plans An exchange of holiday gifts that is based solely upon a personal relationship between persons that happen to do business with ERISA plans is not Schedule C reportable indirect compensation The example in the Department s July 2008 FAQ 35 regarding a gift of a holiday basket was intended to illustrate the mechanics of allocating the value of a gift where eligibility for the gift was based on business done with multiple ERISA plans it was not intended to indicate that in all circum stances gifts exchanged among persons who have business relationships with ERISA plans necessarily constit
85. will need to register for EFAST2 electronic credentials You do not need to register for EFAST2 electronic creden tials just to complete the annual return report using third party software If you will be submitting the filing to EFAST2 however you will need to register for credentials 27 28 13 14 15 16 as a Transmitter user type If you will be signing the filing you will need to register for credentials as the Filing Signer user type When registering for EFAST2 credentials what s the difference between a Filing Author and a Transmitter A Filing Author is the person who initiates including filling out the Form 5500 or Form 5500 SF and the schedules and attachments on IFILE A Transmitter is the person or organization who actually submits the completed annual return report to EFAST2 What do I need to do to serve as a third party software provider under EFAST2 You will need to get Third Party Software Developer credentials see question 11 There are two separate credentials for third party software 1 for filing prepa ration software and 2 for filing transmission software If you are developing software that will be used to prepare annual return report filings you will need to seek certification for filing preparation software The certification for filing preparation software checks that the XML files designed to populate the annual return report and schedules are correctly assemble

The 2009 Form 5500

Contents

Download Pdf Manuals

Related Search

Related Contents