Compliance November 21, 2017

Regulators Release Informational Copies of 2017 Form 5500

The new forms include important modifications.

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The U.S. Department of Labor’s (DOL)’s Employee Benefits Security Administration (EBSA), the Internal Revenue Service (IRS), and the Pension Benefit Guaranty Corporation (PBGC) released advance informational copies of the 2017 Form 5500 annual return/report and related instructions.

They are for informational purposes only and cannot be used to file a 2017 Form 5500 annual return/report.

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The “Changes to Note” section of the 2017 instructions highlight important modifications to the Form 5500 and Form 5500-SF and their schedules and instructions. 

Modifications include:

  • IRS-Only Questions. IRS-only questions that filers were not required to complete on the 2016 Form 5500 have been removed from the Form 5500, Form 5500-SF and Schedules, including preparer information, trust information, Schedules H and I, lines 4o, and Schedule R, Part VII, regarding the IRS Compliance questions (Part IX of the 2016 Form 5500-SF).
  • Authorized Service Provider Signatures. The instructions for authorized service provider signatures have been updated to reflect the ability for service providers to sign electronic filings on the plan sponsor and Direct Filing Entity (DFE) lines, where applicable, in addition to signing on behalf of plan administrators.
  • Administrative Penalties. The instructions have been updated to reflect an increase in the maximum civil penalty amount assessable under the Employee Retirement Income Security Act section 502(c)(2) required by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015. Department regulations published on January 18, 2017, increased the maximum penalty to $2,097 a day for a plan administrator who fails or refuses to file a complete or accurate Form 5500 report. The increased penalty under section 502(c)(2) is applicable for civil penalties assessed after January 13, 2017, whose associated violation(s) occurred after November 2, 2015—the date of enactment of the  2015 Inflation Adjustment Act.
  • Form 5500/5500-SF-Plan Name Change. Line 4 of the Form 5500 and Form 5500-SF have been changed to provide a field for filers to indicate the name of the plan has changed. The instructions for line 4 have been updated to reflect the change. The instructions for line 1a have also been updated to advise filers that if the plan changed its name from the prior year filing(s), complete line 4 to indicate that the plan was previously identified by a different name.
  • Schedule MB.  The instructions for line 6c have been updated to add mortality codes for several variants of the RP-2014 mortality table and to add a description of the mortality projection technique and scale to the Schedule MB, line 6 – Statement of Actuarial Assumptions/Methods.
  • Form 5500-SF-Line 6c. Line 6c has been modified to add a new question for defined benefit (DB) plans that answer “Yes” to the existing question about whether the plan is covered under the PBGC insurance program. The new question asks PBGC-covered plans to enter the confirmation number—generated in the “My Plan Administration Account system”—for the PBGC premium filing for the plan year to which the 5500-SF applies. For example, the confirmation number for the 2017 premium filing is reported on the 2017 Form 5500-SF.
Filers should monitor the EFAST website for the availability of the official electronic versions for filing using EFAST-approved software or directly through the EFAST website.
Compliance November 21, 2017

DOL Issues ERISA Guidance for Plans Impacted by Hurricane Maria, Wildfires

The guidance covers verification procedures, timely loan and hardship withdrawal repayments, and health care coverage.

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Following the Internal Revenue Service’s (IRS’s) relaxation of loans and hardship withdrawals from 401(k) plans for victims of Hurricane Maria and the October wildfires in California, the Department of Labor (DOL) has issued guidance on how these plans can still remain in compliance with the Employee Retirement Income Security Act (ERISA).

If a plan sponsor and participant comply with IRS Announcement 2017-15 on the relaxed verification procedures for loans or hardship withdrawals, DOL says they will not treat them as having violated Title I of ERISA.

When repaying the loan, the DOL says that those payments constitute plan assets and that employers must forward the money “to the plan on the earliest date on which such amounts can reasonably be segregated from the employer’s general assets, but in no event later than the 15th business day of the month following the month in which the amounts were paid to or withheld [from a participant’s wages] by the employer.”

However, the DOL “recognizes that some employers and service providers, such as payroll processing services, located in identified covered disaster areas will not be able to forward participant payments and withholdings to employee pension benefit plans within the prescribed time frame.” Instead, the DOL will expect those employers and service providers to forward the repayments “as soon as practical.”

If any of the retirement plans in the affected areas are unable to receive investments, issue loans or issue other distributions within three business days, they will have fallen into a blackout period, DOL says. ERISA normally requires plans to issue 30 days’ notice to participants prior to a blackout period, but given the fact that Hurricane Maria is a natural disaster, plans affected by the hurricane fall under the regulation’s exception to the advance notice requirement, DOL says.

With respect to health care for participants, beneficiaries and sponsors of plans affected by Hurricane Maria, DOL and IRS will be extending the deadlines for them to “make critical coverage and other decisions affecting benefits.” The deadlines will be published in the Federal Register on November 21.

DOL also says that health care plans should accommodate participants and beneficiaries impacted by both Hurricane Maria and the California wildfires by minimizing the “possibility of individuals losing benefits because of a failure to comply with pre-established time frames.” Likewise, the DOL says it will take into consideration whether the physical disruption of a service provider’s place of business renders them unable to process a claim.

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Further details on how employers and advisers can handle retirement and health care plans in areas affected by these and other disasters is available on this section of the DOL’s website. Workers and families can find additional information here. IRS guidance on its relief for victims of these disasters is available here.

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