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Form 5500 - out with the old, in with the new.

After several years of effort, the Department of Labor (DOL), the IRS and the Pension Benefit Guaranty Corporation jointly released an all-new Form 5500, Annual Return/Report of Employee Benefit Plan, earlier this year. The new form replaces the old Forms 5500 and 5500C/R, Annual Return/Report for Employee Benefit Plan (With fewer than 100 participants). (Form 5500-EZ, Annual Return/Report for One-Participant (Owners and Their Spouses) Retirement Plan, is still available for one-participant pension plans.) The first pension and welfare benefit plans to file the new form will be those with a 1999 calendar year-end whose returns will be due Oct. 16, 2000 (more on this due date later).

Although the new form and its related schedules request much of the same information required on the old form, much of the form has been reorganized. In addition, the entire format of the Form 5500 return has changed from being a relatively long, six-page form with 33 questions and up to eight schedules as attachments, to a slightly more than two-page form with 10 (sometimes multi-part) questions and up to 13 attached schedules. Every plan required to file a return must complete at least some portion of the new Form 5500; whether any of the various schedules must be attached depends on the type and size of plan involved.

Plans exempt from filing a Form 5500 series return in the past will generally still be exempt under the new reporting requirements. A list of the current filing exemptions is included on pages three and four of the revised Form 5500 instructions.

Changes in Filing Procedures

Scannable forms. With the switch to the new format, only computer-scannable versions of Form 5500 and the related schedules will be accepted for filing. As a result, there are two options for preparing a return. If data on the form is entered by hand or with a typewriter, the preparer must use an original copy of the form printed on special paper with green ink; photocopies will not be accepted. A sample of this special version of the form is in the 1999 Form 5500 package, mailed to most plan sponsors in late February. In addition, preparers can order extra copies from the Service by calling (800) 829-3676.

The second option is to use tax preparation software. The computer-prepared forms can then be printed and filed by mail or, with the right software, filed electronically. (Beginning next year, only a computer-generated return will be accepted, if prepared on software from an "approved software vendor." The DOL plans to publish a list of approved vendors at www.efast.dol.gov.)

New filing location. In another new development, all Form 5500 filers will send their returns to the DOL's Pension and Welfare Benefits Administration (PWBA), rather than to the IRS. The new filing address varies depending on whether the return is sent by U.S. mail or one of the approved private delivery services; see page five of the instructions for the addresses.

New and Revised Schedules

Five of the previous eight schedules that served as potential attachments to the old Form 5500 have either not changed or have undergone only minor modifications:

* Schedule B--Actuarial Information.

* Schedule E--ESOP Annual Information.

* Schedule F--Fringe Benefit Annual Information Return.

* Schedule P--Annual Return of Fiduciary of Employee Benefit Trust.

* Schedule SSA--Annual Registration Statement Identifying Separated Participants With Deferred Vested Benefits.

Three others (Schedules A, Insurance Information; C, Service Provider and Trustee Information; and G, Financial Transaction Schedules) that carried over from last year's form underwent substantial revisions. However, many of the changes simply involved moving the questions on the schedules.

The five new schedules are:

* Schedule D, DFE/Participating Plan Information, is used to report information about direct filing entities (DFEs) and participating plans. DFEs include master trust investment accounts (MTIAs), common or collective trusts (CCTs), pooled separate accounts (PSAs), 103-12 investment entities (103-12 IEs) and group insurance arrangements (GIAs).

* Schedules H, Financial Information for Large Plans and DFEs, and I, Financial Information for Small Plans, were developed from the financial statements in the old version of Form 5500 and 5500-C/R.

* Schedule R, Retirement Plan Information, is used to report certain information on plan distributions and funding, and on the adoption of amendments increasing the value of benefits in a defined benefit pension plan.

* Schedule T, Qualified Pension Plan Coverage Information, is used by certain qualified pension benefit plans to report on the plan's compliance with the Sec. 410(b) minimum coverage requirements.

Exhibit 1 (adapted from the new Form 5500 instructions) lists all 13 schedules and generally indicates which types of plans need to file a particular schedule.

[Exhibit 1 TABULAR DATA NOT REPRODUCIBLE IN ASCII]

Transition Year Relief

On March 22, 2000 (after the new Form 5500 and instruction packets had been printed and distributed), the PWBA announced that taxpayers whose 1999 Form 5500 returns would have been due on or before July 31, 2000 have been granted an automatic extension until Oct. 16, 2000. In other words, there is no need to file a Form 5558, Application for Extension of Time To File Certain Employee Plan Returns, in this situation. (However, taxpayers whose 1999 Form 5500 is due after July 31 will need to file a timely Form 5558 to obtain a two-and-one-half month extension.) In addition, the agencies charged with administering Form 5500 (the PWBA, the IRS and the Pension Benefit Guaranty Corporation) do not plan to impose late filing penalties for 1999 Form 5500 returns when a taxpayer has transition-year difficulties and misses the filing deadline, despite a good faith effort to meet it.

Return Preparation Process May Get Simpler--Just Not This Year

After the initial change year, the revised Form 5500 hopefully will take less time to prepare than the prior version of the form, at least for plans filing Form 5500 rather than Form 5500-C/R. However, for 1999 returns, preparation time will likely increase over last year, at least for the first few Forms 5500 and until CPAs get used to the new forms.

Editor's note: Mr. Puckett is a member of the AICPA Tax Forms and Taxpayer Education Task Force.

G. Douglas Puckett, CPA Practitioners Publishing Co. Fort Worth, TX
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Title Annotation:employee benefits
Author:Puckett, G. Douglas
Publication:The Tax Adviser
Geographic Code:1USA
Date:May 1, 2000
Words:1030
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