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Reporting and disclosure.

61. What plans are subject to reporting rules?

The ERISA provisions governing reporting and disclosure are applicable to an employee benefit plan established or maintained by an employer engaged in commerce or in an industry affecting commerce. In addition, these provisions are applicable to employee organizations representing employees engaged in commerce or in an industry affecting commerce. (1)

62. What plans are exempt from the reporting rules?

The provisions of Title I of ERISA do not apply to an employee benefit plan if the plan is:

1. A governmental plan (as defined in ERISA Section 3(32));

2. A church plan (as defined in ERISA Section 3(33)) with respect to which no election has been made under IRC Section 410(d);

3. Maintained solely for the purpose of complying with applicable workmen's compensation, unemployment compensation, or disability insurance laws;

4. Maintained outside of the United States primarily for the benefit of persons substantially all of whom are nonresident aliens; or

5. An excess benefit plan (as defined in ERISA Section 3(36)), and is unfunded. (2)

In addition, individual retirement accounts and individual retirement annuities (IRAs, as defined in IRC Section 408), and Keogh plans that cover a single self-employed individual are also exempt from ERISA's reporting rules.

63. What reports are required to be provided to the Internal Revenue Service?

ERISA covered plans must comply with certain duties of disclosure and reporting, set forth in ERISA Section 101.

Annual Report, Schedules, and Supplemental Information

The reporting obligations include the furnishing of an annual report that satisfies the requirements of ERISA Section 103.3 ERISA Section 103 details the information on the characteristics and financial operations of the plan for which the annual report has been filed.

The Annual Report Form 5500 (i.e., the 5500) must be filed with the Employee Benefits Security Administration by the last day of the seventh month after the close of the plan year. The DOL will process these reports after receipt and provide a copy of the 5500 to the IRS (thereby eliminating the need for the plan administrator to file two copies of the same report). As detailed in Chapter XII, the DOL utilizes the 5500s it receives in enforcement and other program activities.

Under the recently revised 5500 format the prior Form 5500-C/R filed by small plans (those with fewer than 100 participants) was eliminated, and the Form 5500-EZ was retained. Under the revised format, there are 13 schedules that accompany the new Form 5500. A plan will complete and file only those schedules that apply. The 13 schedules include the prior eight schedules (A, B, C, E, F, G, P, and SSA) and five additional schedules (D, H, I, R, and T). Schedules A, C, and G have undergone substantial revisions. See Q 64 for details on these new schedules.

Plans with 100 or more participants are required to file a supplemental report prepared by an independent qualified public accountant that provides for the accountant's opinion (unqualified or qualified) on the financial statements and schedules contained in the 5500, the accounting principles and practices utilized in the preparation of the 5500, and any changes in the accounting principles that may have affected the information in the financial statements. This requirement is also subject to final rules issued by the DOL that require some plans with fewer than 100 participants to file supplemental reports prepared by independent qualified public accountants. See Q 110 for details of these small plan audit requirements.

Short Form 5500 for Certain Small Plans.

Form 5500-SF is retained for certain small plans (generally, fewer than 100 participants) with secure and easy-to-value investment portfolios. Potentially eligible plans include certain small pension plans that qualify for the audit waiver and small welfare plans that do not otherwise qualify for a filing exemption.

The two-page Form 5500-SF is to be used to satisfy the voluntary alternative reporting option imposed by the PPA for certain pension plans with fewer than 25 participants. (1)

Notice of Plan Changes

A plan administrator who is required to file an annual registration statement (known as Schedule SSA, see Q 64) is also required to notify the IRS of:

1. A change in the name of the plan;

2. A change in the name or address of the plan administrator;

3. The termination of the plan; or

4. The merger or consolidation of the plan with any other plan, or its division into two or more plans (on Form 5310-A). (2)

Furthermore, plan administrators are required to notify the IRS in the event of a plan termination. This notification may be made by checking the "Final Return" box at the top of the Form 5500 filed by the plan. Plan administrators may file Form 5310 with the IRS to seek a favorable opinion on the plan's qualification; however, such a filing is not required. It is recommended that terminating plans seek a favorable IRS determination to assure that funds distributed from the terminating plan and transferred to other qualified plans or individual retirement accounts will retain their tax deferred status.

Electronic Filing of Form 5500

Plan administrators may file the 5500 and related schedules via magnetic media (e.g., magnetic tapes, computer discs, etc.) or electronically. If the plan administrator files the 5500 electronically or on magnetic media, he must also file Form 8453-E, Employee Benefit Plan Declaration and Signature for Electronic/Magnetic Media Filing. This is the declaration and signature media return.

The DOL has posted computer scannable copies of the paper and electronic versions of the revised Form 5500 on its web site as a part of the DOL's new computerized system for processing the revised Form 5500. It is a priority of the DOL to increase the number of plans filing electronically through the new computerized system, known as "EFAST" (ERISA Filing Acceptance System). Under EFAST, Forms 5500 are required to be filed in one of two computer scannable formats: "machine print" and "hand print. "The EFAST system is designed to accept 5500 filings only on one of these two approved forms. All 5500 submissions were required to be in one of the two approved formats. The EFAST system may not properly process forms that do not meet the new specifications. This could result in non-standard form filings being rejected as deficient. For information on both EFAST approved forms, as well as a list of approved EFAST software providers, see the official DOL EFAST web site at http://www.efast.dol.gov. The DOL's EFAST website now contains 45 FAQs addressing EFAST2, the all-electronic filing system for Form 5500. These FAQs cover such topics as short plan years, third party software, registering for credentials and filing issues. This on-line assistance is available at: http://www.dol.gov/ebsa/faqs/faq-EFAST2.html

Anyone required to sign a Form 5500 must register online to obtain "Filing Signer" credentials, which will give them a PIN that serves as an electronic signature for Form 5500 purposes. Question 33 of the FAQs discusses whether a plan administrator can give its PIN to aTPA or other Form 5500 preparer, who can then use it to sign the filing before submitting it. The DOL says "no" and explains that since the plan administrator is required to examine any Form 5500 before it is submitted, use of the PIN--the plan administrator's electronic signature--attests to the fact that the Form 5500 has been examined and "to the best of [the plan administrator's] knowledge and belief, it is true, correct, and complete." As a result, the PIN must be used only by the plan administrator.

Employee benefit plan professionals can receive help in completing their Annual Report Form 5500 returns by calling the DOL's Employee Benefits Security Administration at (866) 463-3278. This is a toll-free number. "This new toll-free number will provide plan filers with easy access to technical assistance, the PWBA, the Internal Revenue Service and the Pension Benefit Guaranty Corporation" according to Acting Assistant Secretary of Labor, Alan Lebowitz, as quoted in the PWBA press release announcing the new toll-free assistance line.

As part of the DOL's efforts to update and streamline EFAST's current paper-based processing system, the DOL published a notice of final rulemaking establishing an electronic filing requirement for the Form 5500 Annual Return/Report for plan years or for direct filing entities' reporting years beginning on or after January 1, 2008 (Electronic Filing Rule). The effective date for mandatory electronic filing of Form 5500 has been postponed in a joint announcement by the DOL, IRS, and PBGC. Electronic filing is now applicable for plan years beginning on or after January 1, 2009. Under this effective date, the vast majority of plan filers will have until at least July 2010 to make the changes necessary to allow electronic filing (since Form 5500 is generally due by the end of the seventh month following the end of the plan year). (1)

The rule establishes an electronic filing requirement for the Form 5500Annual Return/Report and the proposed Form 5500-SF (Short Form 5500) under Title I of ERISA. The Electronic Filing Rule provides that any Form 5500 Annual Return/Report (including any Short Form 5500) to be filed with the DOL for any plan year or reporting year beginning on or after January 1, 2008, must be filed electronically in accordance with instructions and such other guidance as the DOL may provide, applicable to such annual report. The Electronic Filing Rule explains that electronic filing by the administrator of a pension or welfare benefit plan would constitute compliance with the applicable limited exemption, alternative method of compliance, and/or simplified reporting requirements, as applicable, prescribed in Labor Reg. Sec. 2520.103-1 et seq. and promulgated in accordance with sections 104(a) and 110 of Title I of ERISA. For purposes of the PBGC's annual filing and reporting requirements under section 4065 of Title IV of ERISA, a plan administrator's electronic filing of a Form 5500 Annual Return/Report or the proposed Short Form 5500, in accordance with the instructions, will be treated as satisfying the administrator's annual reporting obligation under section 4065 of Title IV of ERISA.

Similarly, for purposes of the annual filing and reporting requirements of the Internal Revenue Code, the IRS has advised the DOL that, although there are no mandatory electronic filing requirements for a Form 5500 Annual Return/Report or the proposed Short Form 5500 under the Code or the Treasury regulations, the electronic filing of a Form 5500 Annual Return/Report or the proposed Short Form 5500 (described below), in accordance with the instructions and other guidance the IRS may provide, will be treated as satisfying the annual filing and reporting requirements under Code sections 6058(a) and 6059(a). The IRS intends that plan administrators, employers, and certain other entities that are subject to various other filing and reporting requirements under Code sections 6033(a), 6047(e), 6057, and 6058(a) must continue to satisfy these requirements in accordance with IRS revenue procedures, regulations, publications, forms, and instructions.

The Form 5500-EZ is used by certain plans that are not subject to the requirements of section 104(a) of ERISA to satisfy the annual reporting and filing obligations imposed by the Code. To ease the burdens on these filers, the IRS has also advised the DOL that certain Form 5500-EZ filers will be permitted to satisfy the requirement to file the Form 5500-EZ with the IRS by filing the proposed Short Form 5500 electronically through the EFAST processing system.

Therefore, under the IRS's proposal, certain Form 5500-EZ filers will be provided both electronic and paper filing options. The electronic option will allow Form 5500-EZ filers to complete and electronically file selected information on the Short Form 5500. Form 5500-EZ filers will also have the option to file a paper Form 5500-EZ. Under the voluntary electronic filing option, 5500-EZ filers filing an amended return for a plan year must file the amended return electronically using the Form 5500-SF if they initially filed electronically for the plan year and must file with the IRS using the paper Form 5500-EZ if they filed for plan year with the IRS on a paper Form 5500-EZ.

At the same time as the Electronic Filing Rule was developed, the DOL and IRS undertook a comprehensive review of the current forms and instructions in an effort to improve the data collected and to determine what, if any, design or data changes should be made in anticipation of the new processing system. The proposed revision of the forms and instructions, in conjunction with the Electronic Filing Rule, is intended to streamline the return/report, facilitate the electronic filing requirement, and reduce the burden on plans that file the Form 5500 Annual Return/Report.

The preamble to the final rule states the DOL, in deciding whether to assess annual reporting civil penalties, will take into account technical and logistical obstacles experienced by plan administrators who acted prudently and in good faith in attempting to timely file a complete annual report in the first year of the wholly electronic filing system. The revised and streamlined data requirements for the Form 5500 Annual Return/Report as proposed are intended to be applicable for the reporting year for which the new e-filing system is implemented.

The proposed revisions to the annual return/report forms involve the following major categories of changes, along with other technical revisions and updates, to the current structure and content of the Form 5500 Annual Return/Report:

1. Establishment of the Form 5500-SF Annual Return/Report (Short Form or Short Form 5500) as a new simplified report for certain small plans;

2. Removal of the IRS-only schedules from the Form 5500 Annual Return/Report as part of the move to a wholly electronic filing system;

3. Elimination of the special limited financial reporting rules for Code section 403(b) plans;

4. Revision of the Schedule C (Service Provider Information) to clarify the reporting requirements and improve the information plan officials receive regarding amounts being received by plan service providers; and

5. Addition of new questions to improve information on pension plan funding and compliance with minimum funding requirements.

Because of the electronic filing requirement for the revised Form 5500 Annual Return/ Report, including the proposed Short Form 5500, copies of facsimile forms and schedules, will not be acceptable for filing under ERISA. Rather, the facsimile forms and schedules the Agencies anticipate publishing in conjunction with the final regulation will show the required format for satisfying disclosure obligations under ERISA, including the plan administrator's obligation to furnish copies of the annual report to participants and beneficiaries on request pursuant to section 104(b) of ERISA, but paper versions will not be able to be used for filing. (1)

64. What are the schedules that are filed with the Annual Report Form 5500?

A filed Form 5500 must be accompanied by the appropriate schedules that are designed to provide detailed information supporting the basic facts and figures reported on Form 5500. The following is a brief review of the schedules, the information they must contain, and which plans are required to file each schedule. These schedules are available for electronic and paper filing. (2)

The DOL, IRS, and PBGC have jointly issued final Form 5500 regulations and have adopted final revisions to the Form 5500 that will be applicable for 2009 and later plan year filings (although some of the form revisions apply on a transitional basis for the 2008 plan year). (3)

Schedule A

Schedule A is filed by those plans that provide benefits through an insurance company. It provides a statement from the insurance company that details the premium rate for subscription charge, the total subscription charges paid to each insurance carrier, and the number of individuals covered by each class of benefits. Schedule A also reports the total amount of premiums received by the insurance carrier, the number of individuals covered in each class of benefits, and the total amount of claims paid. The information provided in Schedule A is required by ERISA Section 103(e). Schedule A is designed to collect information on the types of insurance products, the types of coverage, and insured benefits being reported. It is also designed to conform required reporting to various accounting industry changes (Generally Accepted Accounting Principles) on current value financial reporting of investment-type contracts with insurance companies.

Under the 2007 final regulations, the DOL has retained the broad definition of fees and commissions required to be reported on Schedule A (as set out in Advisory Opinion 2005-02A). However, the new Schedule A contains a special rule under which compensation paid by an insurer to third parties for recordkeeping, claims processing, and other similar types of administrative services will not be required to be reported as fees and commissions on Schedule A, provided that certain detailed conditions are satisfied. Also, the new Schedule A will exclude "occasional and insubstantial non-monetary compensation" paid by insurers to brokers and others (similar to the rule also added to Schedule C, discussed below). (4)

Schedule A is not required from plans that file a Form 5500-EZ.

Schedule B

Schedule B is filed by defined benefit plans to provide details on the actuarial information for those plans to which the minimum funding standards of IRC Section 412 apply. It is prepared and signed by an enrolled actuary. Schedule B contains a description of the funding method and actuarial assumptions used to determine the costs of the plan and a certification of the contribution necessary to reduce the accumulated funding deficiency (if any) to zero.

Schedule B--Schedule SB, Schedule MB

Under the 2007 final regulations, the new Schedule B has been updated for certain Pension Protection Act of 2006 (PPA) changes that became effective in 2007. For plan years beginning in 2008, Schedule B is phased out and is replaced by Schedule SB for single-employer plans and by Schedule MB for multiemployer plans. In addition, defined benefit plans with 1,000 or more participants must file financial asset breakdown information on Schedule R, and multiemployer plans must provide supplemental information on Schedule R.

Plans that have a short plan year that begins in 2008 must wait until after the 2008 forms are released to file Form 5500 for that short plan year. However, the filing deadline is automatically extended to 90 days after the new form is released. This extension applies only to plans with short plan years beginning in 2008. (1)

Schedule C

Schedule C details the service provider and trustee information. It is used to report those service providers receiving, directly or indirectly, $5,000 or more in compensation for services provided to the plan during the plan year being reported. Schedule C also details information regarding service providers who have terminated (or were terminated from) services to the plan during the reporting year. Schedule C reports only the 40 top paid service providers. Terminated service provider reporting applies only to terminating accountants and enrolled actuaries.

The final regulations have expanded the compensation reporting obligations under Schedule C. The final Schedule C requires direct compensation paid by the plan to be reported on a separate line item from indirect compensation of various types from various sources other than the plan or the plan sponsor. This includes an expansion of the codes required to identify the types of services provided. It also requires expanded codes for the reporting of fees received by service providers (i.e., "float" revenue, securities brokerage commissions, and revenue sharing among affiliates and other "bundled service providers").

Schedule C will not require inclusion of compensation consisting of "ordinary business gifts" (i.e., meals, entertainment, and other gratuities) that are occasional and insubstantial--less than $50 in the case of a single gift from one source.

The Notice advises that the DOL is working on a regulation setting forth the standards applicable for the prohibited transaction exemption that permits a plan to make reasonable contractual arrangements with a party in interest for services.

Instructions for Schedule C are modified to clarify that welfare plans with 100 or more covered participants at the beginning of the plan year, that are exempt from filing Schedule H and an accountant's opinion because they rely on the trust non-enforcement policy of Technical Release 92-01, are also exempt from filing Schedule C to report service provider compensation paid by or received from the plan. (1)

The DOL has issued 40 frequently asked questions on Schedule C disclosures to be required for 2009 and later plans years. The DOL further issued 25 additional questions supplementing the 40 questions. This guidance is available for plan filing years 2009 and later at http://www.dol.gov/ebsa/faqs/faq-sch-C-supplement.html. As background, both pension and welfare plans required to file Form 5500 must include revised Schedule C to report compensation received by service providers in connection with services to the plan. (2) However, if Technical Release 92-01 is satisfied, insured welfare plans and those receiving participant contributions through a cafeteria plan will not be required to file Schedule C (even if service providers are paid from those contributions, which are plan assets by definition). The end result is that Schedule C will not be required for a welfare plan unless it has a trust (or should have a trust because Technical Release 92-01 does not apply). Here is a sampling of the guidance.

According to FAQ-6, commissions paid to an agent in connection with the sale of an investment, product, or service to a plan constitute reportable indirect compensation because that term includes payment of "finder's fees" or other payments by a service provider to an independent agent or employee for a transaction or service involving the plan.

Pursuant to FAQs-11 and -12, "float" income is indirect compensation whether it is received on the account of a single plan or on an omnibus account involving multiple plans. Disclosures satisfying DOL Field Assistance Bulletin 2002-03 (regarding float disclosures in the prohibited transactions context) will generally be sufficient to allow float income to be reported as eligible indirect compensation under the alternative reporting option.

Fees that must be broken out and reported separately are discussed under FAQ-14. They detail that any person in the bundle receiving separate fees charged against a plan's investment (e.g., investment management fees, float revenue, and other asset-based fees, such as shareholder 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; and 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." Examples of separate fees charged against a plan's investment for purposes of this exception are revenue sharing payments for shareholder services, record keeping 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.

FAQ-23 states that the spread earned by a broker on principal transactions involving the plan is not "eligible indirect compensation." Securities commissions for Schedule C purposes 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 conditions that provide independent and objective verification of the transaction price subject to self-regulatory organization oversight. Fees paid for eligible riskless principal transactions that are reported under NASD Rule 4632, 4642, or 6420 would fall within this interpretation.

FAQ's 32, through 35 discuss the reporting rules regarding the receipt of gifts, meals, entertainment, and attendance at conferences and seminars.

Whenever the plan sponsor seeks reimbursement for fees paid a service provider, FAQ-37 states that the Schedule C should reflect a direct payment from the plan to the provider and not a payment to the employer.

Service providers who fail to provide necessary Schedule C information must be identified on the new Schedule C. FAQ-40 excuses the identification requirement if the plan administrator receives a statement from the service provider that (1) it made a good faith effort to make any necessary record keeping and information system changes in a timely fashion, and (2) despite such efforts, was unable to complete the changes for the 2009 plan year.

Schedule D

Schedule D serves two purposes:

1. Part I provides a standardized reporting format for any Direct Filing Entity (DFE) (the primary plan reporting); and

2. Part II provides a standardized reporting form for plans participating in the primary plan reporting (including Master Trust Investment Accounts, or MTIAs).

Schedule E

Schedule E details employee stock ownership information for the reporting year and is completed by the plan sponsor or plan administrator of a qualified plan that provides benefits through an employee stock ownership program. Schedule E is required to be filed with Forms 5500 and 5500-EZ.

Schedule F

Schedule F is required to be filed by cafeteria plans and educational assistance programs.

Schedule G

This schedule is required to be filed by all large plans (100 or more participants) and DFEs and MTIAs. The financial schedules provided in Schedule G are designed to provide a uniform method for the reporting of investment and asset information, including loans and fixed income obligations in default or determined to be uncollectible and non-exempt prohibited transactions (see Q 66 for details).

Schedule H

Schedule H contains required reporting of financial information for larger plans and DFEs. It reports financial details about the plan, including asset and liability, and income and expense information.

Schedule I

Schedule I serves the same function as Schedule H, however, it is required filing for smaller plans. The new Schedule I closely resembles the simplified financial statements contained in the old Form 5500-R.

Schedule P

Schedule P is the Annual Return of Fiduciary of Employee Benefit Trust. It is filed by a trustee or custodian with either Form 5500 or 5500-EZ.

Schedule P (Annual Return of Fiduciary of Employee Benefit Trust) was removed from Form 5500 filings beginning with the 2006 plan year (2005 plan year for Form 5500-EZ) in anticipation of the move to electronic filing. (1)

Schedule R

Schedule R is required for both tax qualified and nonqualified pension benefit plans (large and small) that are required to file Form 5500 (except for Section 403(b) plans). Schedule R reports certain information about the plan's participants, asset distribution, and funding. It also requires the reporting of any plan amendments that have the effect of increasing the value of benefits in a defined benefit plan.

Schedule SSA

The plan administrator of a plan to which the vesting standards of the Code and ERISA apply for the plan year must file a registration statement (Schedule SSA) that sets forth:

1. The name of the plan;

2. The name and address of the plan administrator;

3. The name and taxpayer identification number of each participant in the plan:

a) who, during the plan year, separated from service covered by the plan,

b) who is entitled to a deferred vested benefit under the plan as of the end of the plan year, and

c) with respect to whom retirement benefits were not paid under the plan during the plan year;

4. The nature, amount, and form of the deferred vested benefit to which the participant is entitled; and

5. Any other information the Secretary of Treasury may require. (1)

Schedule T

Schedule T (Qualified Pension Plan Coverage Information) was removed from Form 5500 filings beginning with the 2005 plan year. The IRS notes that this change was not intended to affect the applicable required or optional nondiscrimination testing (including the testing options described in Revenue Procedure 93- 42 (2)).

65. What is the proper format and place for reporting delinquent participant contributions in the Annual Report Form 5500?

The DOL has stated that amounts paid by a plan participant or beneficiary or withheld by an employer from a participant's wages for contribution to a plan are plan assets on the earliest date that they can reasonably be segregated from the employer's general assets, but in no event later than:

(i) For pension plans, the 15th business day of the month following the month in which the participant contributions are withheld or received by the employer; and

(ii) For welfare plans, 90 days from the date on which such amounts are withheld or received by the employer. (3) (See Q 583 for further details on participant contributions as plan assets.)

Plan administrators are required to report in their annual Form 5500 schedules delinquent participant contributions (4) on the financial schedules (Schedule H for large plans and Schedule I for small plans).

When an employer is delinquent in forwarding participant contributions and holds them commingled with its general assets, the DOL states that the employer will have engaged in a prohibited transaction under ERISA Section 406. Plans filing Schedule H that report nonexempt prohibited transactions on Line 4d also are required to file a Schedule G to report detailed information regarding the nonexempt prohibited transactions.

The Form 5500 instructions state that delinquent participant contributions reported on Line 4a should be treated as part of the supplemental schedules for purposes of reporting on the plan's financial statements by the independent qualified public accountant (IQPA). The instructions also advise that if the information contained on Line 4a is not presented in accordance with the DOL's regulatory requirements, the IQPA report must make the appropriate disclosures in accordance with generally accepted accounting standards (a summary paragraph detailing the matter and if it results in the IQPA issuing a "qualified" report). (1)

For delinquent contributions that are corrected in a subsequent plan year, the information reported in the 5500 Schedule H or I for the year of the initial delinquency will be carried over into subsequent year reporting until corrected.

In Advisory Opinion 2002-02A, the Department stated that participant loan repayments paid to or withheld by an employer for purposes of transmittal to a plan are sufficiently similar to participant contributions to justify, in the absence of regulations providing otherwise, the application of principles similar to those underlying the participant contribution regulations. Delinquent forwarding of participant loan repayments is eligible for correction under the Voluntary Fiduciary Correction Program (VFCP) and PTE 2002-51 (see Q 408 for details regarding the correction of delinquent contribution violations through VFCP). Accordingly, the DOL advises that it will not reject a Form 5500 report based solely on the fact that delinquent forwarding of participant loan repayments is included on Line 4a of the Schedule H or Schedule I. (2)

66. What are the required contents of the financial statements filed with Form 5500?

Schedule G to the Annual Report Form 5500 is used for the reporting of financial statements. Schedule G is used to report the following:

1. A statement of assets and liabilities;

2. A statement of changes in the fund balance;

3. A statement of changes in financial position; and

4. A statement of changes in net assets available for plan benefits.

The financial statement with respect to an employee welfare benefit plan provides a statement of assets and liabilities, changes in the fund balance, and changes in the financial position of the plan. In the notes to the financial statements, disclosures concerning the following items must be considered by the accountant:

1. A description of the plan, including any significant changes in the plan made during the period and the impact of such changes on benefits;

2. A description of material lease commitments, other commitments, and contingent liabilities;

3. A description of agreements and transactions with people known to be parties in interest;

4. A general description of priorities upon termination of the plan;

5. Information concerning whether or not a tax ruling or determination letter has been obtained; and

6. Any other matters necessary to fully and fairly present the financial statements of the plan. (1)

The financial statement with respect to an employee retirement benefit plan will contain a statement of assets and liabilities and a statement of changes in net assets available for plan benefits that must include details of revenues and expenses and other charges aggregated by general source and application. In the notes to financial statements, disclosures concerning the following items must be considered by the accountant:

1. A description of the plan, including any significant changes in the plan made during the period and the impact of those changes on benefits;

2. The funding policy (including the policy with respect to prior service cost), and any changes with respect to those policies during the year;

3. A description of any significant changes in plan benefits made during the period;

4. A description of material lease commitments, other commitments, and contingent liabilities;

5. A description of agreements and transactions with people known to be parties in interest;

6. A general description of priorities upon termination of the plan;

7. Information concerning whether or not a tax ruling or determination letter has been obtained; and

8. Any other matters necessary to fully and fairly present the financial statements of the retirement benefits plan. (2)

All employee benefit plans must have attached the following information in separate schedules:

1. A statement of the assets and liabilities of the plan aggregated by categories and valued at their current value, and the same data displayed in comparative form for the end of the previous fiscal year of the plan;

2. A statement of receipts and disbursements during the preceding 12-month period aggregated by general sources and applications;

3. A schedule of all assets held for investment purposes aggregated and identified by issuer, borrower, lessor, or similar party to the transaction (including a notation as to whether the party is known to be a party in interest), maturity date, rate of interest, collateral, par or maturity value, cost, and current value;

4. A schedule of each transaction involving a person known to be a party in interest and each nonexempt transaction he is involved in;

5. A list of all leases that were in default or were classified as uncollectible;

6. A list of all loans or fixed income obligations that were in default as of the close of the plan year;

7. If some or all of the assets of a plan or plans are held in a common or collective investment trust maintained by a bank or similar institution or in a separate account maintained by an insurance carrier or a separate trust maintained by a bank as trustee, the report must include the most recent annual statement of assets and liabilities of the common or collective trust; and

8. A schedule of each reportable transaction (see Q 67 for details on reportable events). (1)

67. What is a reportable transaction for purposes of filing Form 5500?

A reportable transaction required to be detailed in Form 5500 for a reporting year is a transaction, or series of transactions, with or in conjunction with the same person which, when aggregated, regardless of the category of the asset and the gain or loss on any transaction, involves an amount in excess of 5% of the current value of plan assets. (2)

The schedule of reportable transactions will apply to any series of transactions (other than transactions with respect to securities) within the plan year or with or in conjunction with the same person which, when aggregated (regardless of the category of asset and the gain or loss on any transaction), involves an amount in excess of 5% of the current value of plan assets. It also includes any transaction within the plan year involving securities of the same issue if within the plan year any series of transactions with respect to the securities, when aggregated, involves an amount in excess of 5% of the current value of plan assets. (3)

Plans whose assets are held in whole or in part in a common or collective trust or a pooled separate account (as provided under Labor Regulation Section 2520.203-3 and Labor Regulation Section 2520.103-4 and that satisfy the requirements of those sections) are not required to prepare schedules of reportable transactions with respect to the individual transactions of the common or collective trust or pooled separate account. (1)

The schedule of reportable transactions requires the following information as to each transaction or series of transactions:

1. The name of each party, except that in the case of a transaction or series of transactions involving a purchase or sale of a security on the market, the schedule need not include the person from whom it was purchased or to whom it was sold (a purchase or sale on the market is a purchase or sale of a security through a registered brokerdealer acting as a broker under the Securities Exchange Act of 1934);

2. A brief description of each asset;

3. The purchase or selling price in the case of a purchase or sale, the rental cost in the case of a lease, and the amount of principal, interest rate, payment schedule (e.g., fully amortized, partly amortized with balloon), and maturity date in the case of a loan;

4. Expenses incurred, including, but not limited to, any fees or commissions;

5. The cost of any asset;

6. The current value of any asset acquired or disposed of at the time of acquisition or disposition; and

7. The net gain or loss. (2)

The term "current value" is defined as the fair market value where available, and otherwise the fair value as determined in good faith by a trustee or a named fiduciary pursuant to the terms of the plan and in accordance with the ERISA's regulations, assuming an orderly liquidation at the time of the determination. (3)

There is an exemption from the 5% reportable transaction requirements for any plan assets held in common or collective trusts maintained by a bank, trust company, or similar institution, or assets held in an insurance company pooled separate account. The plan is not required to include in the annual report any information concerning the individual transaction of the common or collective trust or pooled separate account. (4)

68. What actuarial information is required to be provided in Schedule SB or Schedule MB of Form 5500?

Schedule SB (single-employer) or Schedule MB (multiemployer) of Form 5500 is required to be filed on an annual basis by a defined benefit plan that is subject to the minimum funding standards of ERISA. The completed Schedule B must be signed by an enrolled actuary and based upon an actuarial valuation of the plan, which must be made at least once every three years. The information reported on Schedule B includes:

1. A description of the funding method and actuarial assumptions used to determine the plan costs;

2. A certification of the contribution necessary to fully fund the plan;

3. A statement that the report is complete and accurate and that the actuarial assumptions are reasonable and represent the actuary's best estimate of anticipated experience under the plan; and

4. Any other information necessary to fully and fairly disclose the actuarial position of the plan.

69. What is the due date for filing Form 5500?

Form 5500 is required to be filed (with its accompanying schedules) on or before the last day of the seventh month following the close of the plan year. For plans operating on a calendar year basis, that date is July 31. Form 5500 is filed with the IRS. A plan being absorbed in a merger has a short plan year ending on the date of the merger, for which the accountant's report is required to be filed with Annual Report Form 5500. (1)

Where the plan requires an extension of time beyond the filing date, the plan sponsor may receive an automatic extension if the plan year is the same as the plan sponsor's tax year, and the plan sponsor has been granted an extension to file its federal income tax return. In order to receive the automatic extension, a copy of the extension to file the federal income tax return must be attached to Form 5500 when it is filed.

An extension for filing may also be requested by filing Form 5558 prior to the initial due date for filing. This form requires a detailed statement that explains why the extension is necessary. If granted, the extension may be for up to two and one-half months beyond the original filing deadline. If refused, the plan will receive a 10-day grace period beyond the original filing deadline in order to timely file the annual report.

70. What is the Delinquent Filer Voluntary Compliance Program (DFVCP)?

The Delinquent Filer Voluntary Compliance Program (DFVCP) was adopted by the Department of Labor's Employee Benefits Security Administration (formerly the Pension and Welfare Benefits Administration) on April 27, 1995 (1) in an effort to encourage delinquent filers to voluntarily comply with the annual reporting requirements under Title I of ERISA. As adopted, the DFVCP permitted eligible plan administrators the opportunity to avoid the assessment of civil penalties otherwise applicable to administrators who failed to file timely annual reports (commonly referred to as the Form 5500) by voluntarily complying with the filing requirements Under Title I of ERISA and paying reduced civil penalties specified in the DFVCP

In an effort to further encourage and facilitate voluntary compliance by plan administrators with the annual reporting requirements of Title I of ERISA, the DOL updated the DFVCP in 2002 by simplifying the procedures governing participation and lowering the civil penalty assessments thereunder.

According to DOL guidance, the penalty structure under the DFVCP is as follows:

* Reduced per day penalty: The basic penalty under the program was reduced from $50 to $10 per day for delinquent filings.

* Reduced per filing cap: The maximum penalty for a single late annual report was reduced from $2,000 to $750 for a small plan (generally a plan with fewer than 100 participants at the beginning of the plan year) and from $5,000 to $2,000 for a large plan.

* Per plan cap: The DFVCP's "per plan" cap is designed to encourage reporting compliance by plan administrators who have failed to file an annual report for a plan for multiple years. The "per plan" cap limits the penalty to $1,500 for a small plan and $4,000 for a large plan regardless of the number of late annual reports filed for the plan at the same time. There is no "per administrator" or "per sponsor" cap. If the same person is the administrator or sponsor of several plans required to file annual reports under Title I of ERISA, the maximum applicable penalty amounts would apply for each plan.

* Small plans sponsored by certain tax-exempt organizations: A special "per plan" cap of $750 applies to a small plan sponsored by an organization that is tax-exempt under Internal Revenue Code Section 501(c)(3). The $750 limitation applies regardless of the number of late annual reports filed for the plan at the same time. It is not available, however, if as of the date the plan files under the DFVCP, there is a delinquent annual report for a plan year during which the plan was a large plan.

* Top hat plans and apprenticeship and training plans: The penalty amount for "top hat" plans and apprenticeship and training plans was reduced to $750.

Questions about the DFVCP should be directed to EBSA by calling 202.693.8360 or through its website at www.dol.gov/ebsa.

The modified DFVCP, as adopted in 2002, superseded and replaced the DFVCP as adopted on April 27, 1995. (1)

71. Who is eligible to participate in the DFVCP?

The DOL has stated that:

Plan administrators are eligible to pay reduced civil penalties under the program if the required filings under the DFVCP are made prior to the date on which the administrator is notified in writing by the department of a failure to file a timely annual report under Title I of the Employee Retirement Security Act of 1974 (ERISA).

Participation under the DFVCP is not available to all Form 5500 series filers. The relief under the DFVCP is available only to the extent that a Form 5500 is required to be filed under Title I of ERISA. For example, Form 5500-EZ filers and Form 5500 filers for plans without employees (as described in 29 CFR [section] 2510.3-3(b) and (c)) are not eligible to participate in the DFVCP because such plans are not subject to Title I of ERISA. Plan administrators may call (202) 693-8360 if they have questions about whether the program applies to their filings. (2)

72. What civil penalties may be assessed by the DOL against plan administrators who fail to file a timely annual report and do not participate in the DFVCP?

The DOL has the authority, under ERISA Section 502(c)(2) to assess civil penalties of up to $1,100 a day against plan administrators who fail or refuse to file complete and timely annual reports (Form 5500 Series Annual Return/Reports) as required under ERISA Section 101(b)(4), and the DOL regulations. (3) Pursuant to the regulations, EBSA has maintained a program for the assessment of civil penalties for noncompliance with the annual reporting requirements. (4) Under this program, plan administrators filing annual reports after the date on which the report was required to be filed may be assessed $50 per day for each day an annual report is filed after the date on which the annual report(s) was required to be filed, without regard to any extensions for filing. Plan administrators who fail to file an annual report may be assessed a penalty of $300 per day, up to $30,000 per year, until a complete annual report is filed. Penalties are applicable to each annual report required to be filed under Title I of ERISA. The DOL may, in its discretion, waive all or part of a civil penalty assessed under ERISA Section 502(c)(2) upon a showing by the administrator that there was reasonable cause for the failure to file a complete and timely annual report.

The DOL states that "the following penalties may be assessed by the DOL against plan administrators:

* Late filers. Plan administrators filing a late annual report (i.e., after the date the report was required to be filed, including extensions) may be assessed $50 per day, with no limit, for the period they failed to file, determined without regard to any extensions for filing.

* Non-filers. Plan administrators who fail to file an annual report may be assessed a penalty of $300 per day, up to $30,000 per year, until a complete annual report is filed.

For example, assume an administrator for a plan with a calendar plan year files the annual report for the 2009 plan year on October 31, 2010, and does not participate in the DFVCP. The administrator would receive a written notice indicating the department's intent to assess a penalty of $4,600 ($50 X 92 days delinquent). If there are other annual reports that either have not been filed or have been filed late, the plan administrator may be subject to the assessment of additional penalties because the penalties are separately calculated for each filing.

Pursuant to the department's regulations, upon issuance by the department of a notice of intent to assess a penalty, the plan administrator may file a statement of reasonable cause why the penalty, as calculated, should not be assessed. A showing of reasonable cause must be in the form of a written statement setting forth all the facts alleged as reasonable cause and must contain a declaration by the administrator that the statement is made under penalty of perjury." (1)

73. How does a plan administrator file a delinquent Form 5500 under the DFVCP?

The DOL has published guidance stating that participation in the DFVCP is a two part process:

Step 1. File a complete Form 5500 Annual Return/Report, including all schedules and attachments, for each year the plan administrator is requesting relief. See Q 74. This filing should be sent to EBSA at the appropriate ERISA Filing Acceptance System (EFAST) address listed in the instructions for the most current Form 5500 Annual Return/Report, or electronically in accordance with the EFAST electronic filing requirements. The EFAST addresses are as follows:

Employee Benefits Security Administration

P.O. Box 7043

Employee Benefits Security Administration

P.O. Box 7041

Employee Benefits Security Administration/NCS

Attn: EFAST

3833 Greenway Drive

Step 2. Submit paper copy of the completed Form 5500, without schedules or attachments, and a penalty check for the applicable penalty amount, made to the Department of Labor to:

By Mail:

DFVCP

P.O. Box 70933

Charlotte, NC 28272-0933

By Private Delivery Service:

DFVC DOL

Wachovia QLP Lockbox--D1113-022

Lockbox #70933

1525 West WT Harris Blvd

Charlotte, NC 28262

It is recommended that all filings for a plan be submitted to the DFVCP in the same envelope or package in order to ensure that those filings count towards the "per-plan" capped penalty amount." See Q 75, Q 76. (1)

If a joint employer-union board of trustees or committee is the administrator, at least one employer representative and one union representative must sign the form.

74. Which version of the Form 5500 should be filed?

According to guidance published by the DOL, The plan administrator must file either:

* The most current Form 5500 Annual Return/Report form issued (and, if necessary, indicate in the appropriate space on the first page of

the Form 5500 the plan year for which the annual return/report is being filed), or

* The Form 5500 Series Annual Return/Report form issued for the plan year for which the relief is sought (but not a Form 5500-R if the filing is for a 1998 plan year or a prior year)." (1)

75. What is the applicable penalty amount under the DFVCP?

Under the 1995 DFVCP, plan administrators filing the Form 5500-C (plans with fewer than 100 participants at the beginning of the plan year or plans filing the Form 5500-C pursuant to the "80-120" participant rule in Labor Reg. [section] 2520.103-1(d) ("small plans")) were subject to a civil penalty assessment of $50 per day up to $1,000 when the annual report was twelve months or less late, and $2,000 when the annual report was more than twelve months late. Plan administrators filing the Form 5500 (plans with 100 or more participants at the beginning of the plan year other than a plan filing pursuant to the "80-120" participant rule ("large plans")) were subject to a civil penalty assessment of $50 per day up to $2,500 when the annual report was one year or less late, and $5,000 when the annual report was more than one year late. A civil penalty assessment of $2,500 applied to late filings by plan administrators for apprenticeship and training plans described in Labor Reg. [section] 2520.104-22 and "top hat" plans described in Labor Reg. [section] 2520.104-23(a). Under the terms of the DFVCP, the Department reserved the right to modify or terminate the Program upon publication of a notice in the Federal Register.

The applicable penalty amount under the DFVCP was revised by the DOL under the 2002 DFVCP by reducing the per day penalty from $50 to $10 per day for delinquent filings, reducing the per maximum penalty for a single late annual report from $2,000 to $750 for a small plan and from $5,000 to $2,000 for a large plan, and including a new "per plan" cap which applies to plan administrators who have failed to file an annual report for a plan for multiple years. The new "per plan" cap limits the penalty to $1,500 for a small plan and $4,000 for a large plan regardless of the number of late annual reports filed for the plan at the same time (e.g., a submission-by-submission basis). There is no "per administrator" or "per sponsor" cap under the DFVCP.

The DOL also revised the applicable penalty structure under the 2002 DFVCP for apprenticeship and training plans and "top hat" plans, and added another class of plans that are eligible to pay special reduced penalties under the Program. The penalty amount for "top hat" plans and apprenticeship and training plans was reduced to $750 from $2,500. A special "per plan" cap of $750 applies to a small plan sponsored by an Internal Revenue Code Section 501(c)(3) organization (including small Code section 403(b) plans). The $750 limitation applies regardless of the number of late annual reports filed for the plan at the same time. It is not available, however, if as of the date the plan files under the DFVC Program, there is a delinquent annual report for a plan year during which the plan was a large plan.

Guidance by the DOL states that the applicable penalty amounts under the 2002 DFVCP are now determined as follows:

Small Plan Filers: In the case of a plan with fewer than 100 participants at the beginning of the plan year (i.e. "small plan"), the applicable penalty amount is $10 per day for each day the annual report is filed after the date on which the annual report was due (without regard to any extensions), not to exceed $750. In the case of a DFVCP submission relating to more than one delinquent annual report filing for the same plan, the maximum penalty amount is $750 for each annual report, not to exceed $1,500 per plan.

Note:The "80/120" participant rule described in 29 CFR [Sec.] 2520.103 1(d) is applicable in determining whether a plan is a small or large plan.

Large Plan Filers: In the case of a plan with 100 or more participants at the beginning of the plan year and which is not eligible for the "80/120" participant rule (hereinafter "large plan"), the applicable penalty amount is $10 per day for each day the annual report is filed after the date on which the annual report was due (without regard to any extensions), not to exceed $2,000. In the case of a DFVCP submission relating to more than one delinquent filing for the same plan, the maximum penalty amount is $2,000 for each annual report, not to exceed $4,000 per plan.

It is recommended that all filings for a plan be submitted to the DFVCP in the same envelope or package in order to ensure that those filings count towards the "per-plan" capped penalty amount.

Example 1. An administrator of a large plan with a calendar year plan year files the annual report for the 2001 plan year on August 6, 2002. The administrator failed to properly extend the filing due date of July 31, 2002. Under the DFVC Program, the applicable penalty amount would be $60 (6 days X $10).

Example 2. Assume the same facts as in Example 1, except that the filer filed the annual report on March 31, 2003. Under the DFVC Program, the applicable penalty amount is $2,000 (though the penalty amount calculated at $10 per day would be $2,430 for 243 days, the "per-filing" cap of $2000 applies).

Example 3. Assume the same facts as in Example 2, except that the filer filed annual reports for the same plan for the 1999, 2000 and 2001 plan years on March 31, 2003. Under the DFVC Program, the applicable penalty amount is $4,000, which is the "per-plan" filing cap for large plans.

Example 4. Assume the same facts as in Example 3, except that the filer is also submitting an additional plan year 2001 filing under the DFVC Program for another plan. Under the DFVC Program, the penalty amount is $6,000 ($4,000 applicable to the three filings discussed in Example 3, plus $2,000 for the Form 5500 filed for the other plan)." (1)

The DOL has announced that it has implemented an on-line tool for employers and plan administrators that will facilitate payment of civil penalties under the DFVCP. (2) Employers and plan administrators can access the new feature that allows them to electronically pay civil penalties at www.dol.gov/ebsa/calculator/dffvcpmain.html. The calculator uses the Department of the Treasury's pay.gov financial management system. This allows employers and plan administrators the option to pay DFVCP penalties electronically with a credit or debit card.

76. A plan administrator for a plan is delinquent on Form 5500 filings for multiple years. If during that period, the plan's classification has shifted between being a "large" and "small plan," which penalty cap applies to the plan's DFVC Program submission?
   DOL guidance explains that:

   If, during the years of non-filing, there is at least one year
   where the plan is a large plan, for purposes of the DFVCP the
   plan must use the large plan penalty amounts of $10 per day up
   to a maximum of $2,000 per filing, not to exceed $4,000 per
   plan. (1)


77. Is there a different "per-plan" penalty cap that applies to administrators of small plans sponsored by Internal Revenue Code section 501(c)(3) organizations (including Code section 403(b) small plans)?
   Guidance from the DOL states that:

   Yes. In the case of a small plan sponsored by a Code section
   501(c)(3) organization (including a Code section 403(b) small
   plan), the applicable penalty amount is $10 per day for each
   day the annual report is filed after the date on which the
   annual report was due (without regard to any extensions), not
   to exceed $750 regardless of the number of delinquent annual
   reports for the plan submitted as part of the same DFVCP
   submission.

   This "per-plan" penalty cap, however, will not be available if,
   as of the date the plan files under the DFVCP, there is a
   delinquent or late annual report due for a plan year during
   which the plan was a large plan. [See Q 75, Q 76.]

   Small plan filings that are eligible for this special "per-plan"
   penalty cap must bear the notation "501(c)(3) Plan" in the
   upper-right corner of the first page of the Form 5500 that is
   submitted to the DFVCP in Charlotte, North Carolina. This
   notation should not be included in the filing made with EBSA in
   Lawrence, Kansas. (2)


78. Are extensions considered when calculating penalties under the DFVC Program?

The DOL states that:

No. All penalties under the DFVCP are calculated at $10 per day, beginning on the day after the date the filing was due, without regard to any extensions. (3)

79. Does a plan administrator waive any rights upon filing under the DFVCP?

The DOL has answered this question as follows:

"Yes. Payment of the penalty amount under the terms of the DFVCP constitutes, with regard to the filings submitted under the Program, a waiver of the right both to receive notice of the assessment from the department and to contest the department's assessment of the DFVCP penalty amount." (1)

80. If a filing has been made under the DFVCP, will the plan administrator be liable for any other Department of Labor annual reporting civil penalties?

The DOL answers this question as follows:

"Annual reports that are filed under the DFVCP are subject to the usual edit checks. Plan administrators will have an opportunity to correct deficiencies in accordance with the procedures described in 29 CFR [section] 2560.502c-2.The failure to correct deficiencies in accordance with these procedures may result in the assessment of further deficient filer penalties." (2)

81. Can plan assets be used to pay the civil penalties assessed under ERISA Section 502(c)(2)?

Guidance on this question from the DOL says:

"No. The plan administrator is personally liable for the payment of civil penalties assessed under ERISA Section 502(c)(2). Therefore, civil penalties, including penalties paid under the DFVCP, may not be paid from the assets of an employee benefit plan." (3)

82. May an administrator of an apprenticeship and training plan, as described in 29 CFR Section 2520.104-22, or an administrator of a "top hat" plan, as described in 29 CFR Section 2520.104-23, participate in the DFVCP?
   DOL guidance states:

   Yes. Administrators of apprenticeship and training plans and
   administrators of pension plans for a select group of
   management or highly compensated employees ("top hat plans"),
   may file the applicable notice and statement described in
   regulation Sections 2520.104-22 and 2520.104-23, respectively,
   under the DFVCP in lieu of filing any past due annual reports.
   By properly filing these statements and meeting the other
   applicable DFVC Program requirements [see Q 83, 85],
   administrators will be considered as having elected compliance
   with the exemption and/or alternative method of compliance
   prescribed in Sections 2520.104-22 or 2520.104-23, as
   appropriate, for all subsequent plan years. (4)


83. How does an administrator of an apprenticeship and training plan participate

in the DFVCP?

In this situation, guidance from the DOL states that:

[T]he plan administrator must prepare the statement described in ... 29 CFR Section 2520.104-22 and file it at the following address:

U.S. Department of Labor

Employee Benefits Security Administration

Apprenticeship and Training Plan Exemption

200 Constitution Avenue, NW, Suite N-1513

Washington, DC 20210

The plan administrator must also complete the most current Form 5500 Annual Return/ Report (without schedules or attachments), items 1a-1b, 2a-2c, 3a-3c, and use plan number 999 for all apprenticeship and training plans. The paper copy of the form must be signed and dated, and be accompanied by a check for $750 made payable to the U.S. Department of Labor, and sent to:

By Mail:

DFVCP

P.O. Box 70933

Charlotte, NC 28272-0933

By Private Delivery Service:

DFVC DOL

Wachovia QLP Lockbox-D1113-022

Lockbox #70933

1525 West WT Harris Blvd

Charlotte, NC 28262

The applicable $750 penalty amount is for each DFVCP submission, without regard to the number of plans maintained by the same plan sponsor for which the notices and statements are being filed or the number of participants covered by the plan or plans. (1)

84. How does an administrator of a "top-hat" plan participate in the DFVCP?

The DOL has stated that the plan administrator must prepare the statement described in regulation section 29 CFR [section] 2520.104-23 and file it at the following address:

U.S. Department of Labor

Employee Benefits Security Administration

Top Hat Plan Exemption

200 Constitution Avenue, NW, Suite N-1513

Washington, DC 20210

Note: A plan sponsor maintaining more than one "top hat" plan is not required to file a separate statement for each such plan. (1)

The plan administrator must also complete the most current Form 5500 Annual Return/ Report (without schedules or attachments), items 1a-1b, 2a-2c, 3a-3c, and use plan number 888 for all "top hat" plans. The paper copy of the form must be signed and dated, and be accompanied by a check for $750 made payable to the U.S. Department of Labor, and sent to:

By Mail:

DFVCP

P.O. Box 70933

Charlotte, NC 28272-0933

By Private Delivery Service:

DFVC DOL

Wachovia QLP Lockbox--D1113-022

Lockbox #70933

1525 West WT Harris Blvd

Charlotte, NC 28262

The applicable $750 penalty amount is for each DFVC submission, without regard to the number of plans maintained by the same plan sponsor for which the notices and statements are being filed or the number of participants covered by the plan or plans." (2)

85. Is the DFVCP applicable to filings made by direct filing entities (DFEs) (i.e., master trusts, pooled separate accounts, common/collective trusts, 103-12 IEs, and group insurance arrangements)?

The DOL answers this question as follows:

"The DFVCP is not applicable to DFE filings made for master trusts, pooled separate accounts, common/collective trusts and 103-12 IEs. The Form 5500 filed by these DFEs is an integral part of the annual report of the participating employee benefit plans. If a Form 5500 was timely filed for the participating employee benefit plans, a failure to timely file a DFE Form 5500 for these entities may cause the plan's annual report to be incomplete or inaccurate, but it does not result in the plan being a late or non-filer. The plan's Form 5500, however, may be subject to rejection for being incomplete or inaccurate, and, if rejected, a plan administrator who failed to correct the problem would be subject to penalty assessments by the department.

A Form 5500 filed for a group insurance arrangement (GIA) under the department's regulations relieves the plan administrators of the individual plans participating in the GIA from the requirement to file a separate Form 5500 for each plan. The department will allow a GIA that failed to file a GIA Form 5500 on time to use the DFVCP to correct the late filing. GIAs participating in the DFVCP are subject to the conditions applicable to large plan filers." See Q 75. (1)

86. Is it possible to obtain a waiver from the applicable penalty amount under the DFVCP if the plan administrator can demonstrate that there is reasonable cause why the penalty should not be assessed?
   According to the DOL:

   No. Payment of a penalty under the terms of the DFVCP
   constitutes a waiver of an administrator's right both to
   receive a notice of assessment from the department and to
   contest the department's assessment of the penalty amount.
   If the plan administrator chooses not to waive these rights,
   the plan administrator must file with EFAST in Lawrence,
   Kansas in the regular manner and not pursuant to the DFVCP


See Q 72 regarding possible civil penalties that may be assessed by the department under ERISA section 502(c)(2), and the department's regulations that provide the plan administrator with the opportunity to file a statement of reasonable cause. (2)

87. Does participation in the DFVCP protect the plan administrator from other civil penalties that may be assessed by the Internal Revenue Service (IRS) or the Pension Benefit Guaranty Corporation (PBGC) for failing to timely file a Form 5500 Annual Return/Report?
   The DOL answers this question as follows:

   Both the IRS and PBGC have agreed to provide certain penalty
   relief under the Code and Title IV of ERISA for delinquent
   Form 5500s filed for Title I plans where the conditions of
   the DFVCP have been satisfied. (3)


88. What reports and disclosures are plans required to submit to the Department of Labor?

Employee benefit plan administrators are required to file the following documents with the Department of Labor:

1. Summary Plan Description (only upon request of the DOL) (see Q 89);

2. Annual Reports (actual filing is made to the IRS) (see Q 63 through Q 69);

3. Notice of Material Modifications (only upon request of DOL) (see Q 90);

4. Terminal Reports (see Q 91); and

5. Notice of Plan Amendments (see Q 92).

The DOL has issued proposed rules that would implement certain amendments to ERISA made under the Taxpayer Relief Act of 1997 that impact the responsibility of third party administrators to comply with DOL requests for disclosure of plan records. The proposed rule details the procedures for the DOL to follow in requesting documents and assessing penalties for which third party administrators can be held personally liable for non-compliance.

The DOL may request copies of SPDs and other relevant plan documents from third party administrators only on behalf of requesting participants, fiduciaries, alternate payees under a QDRO (or prospective alternate payees under a QDRO), qualified COBRA beneficiaries, alternative recipients under a qualified medical child support order (or prospective alternate payees under a qualified child medical support order), or a duly authorized representative of any of the foregoing. Failure to comply with a DOL request may result in the imposition of penalties for each such failure up to $110 per day from the date of such failure (not to exceed $1,100).

The DOL can waive all or a part of the penalty if the third party administrator can show that the failure or refusal to comply was due to matters reasonably beyond the control of the third party administrator. The third party administrator has 30 days from receipt of a notice of intent to assess the penalty to provide an explanation as to why it should not be assessed. (1)

89. What are the Summary Plan Description (SPD) filing requirements?

ERISA Section 104(a)(6) provides that a plan administrator must file a copy of the plan's SPD with the Department of Labor (DOL) only if it is requested by the DOL.

For a detailed review of the format and content requirements of an SPD, as well as the obligations to provide them to participants and beneficiaries, see Q 98.

90. What are the filing requirements regarding the Summary of Material Modifications (SMM)?

A plan administrator is required to provide an SMM to the DOL only upon the request of the DOL. (1) The DOL may impose a civil penalty of up to $110 per day (up to a maximum of $1,100) against a plan administrator for failure to respond within 30 days to a DOL request for an SMM. (2)

91. What are the filing requirements regarding terminal reports?

Each administrator of a defined benefit plan that is winding up its affairs and terminating must file "such terminal reports as the Secretary [of Labor] may consider necessary." A copy of the terminal report is also required to be filed with the Pension Benefit Guaranty Corporation. (3) The terminal report is required to be filed regardless of the number of people actively participating in the plan.

The Department of Labor may also require a terminal report to be filed on behalf of a welfare benefit plan that is terminating.

92. What are the filing requirements regarding a notice of plan amendments?

Any amendment applying to a plan year that reduces the accrued benefits of a participant may not take effect unless the plan administrator files a notice with the Department of Labor. (4)

93. What reports and disclosures are required to be submitted to the Pension Benefit Guaranty Corporation?

The Pension Benefit Guaranty Corporation (PBGC) is a corporation wholly owned by the federal government. It is charged with the administration of the defined benefit plan termination rules detailed in Title IV of ERISA. The PBGC is also charged with establishing and maintaining the defined benefit plan benefit insurance program. See Chapter XII for a detailed review of the PBGC and its operations regarding defined benefit plans.

Defined benefit plans subject to PBGC jurisdiction are required to file the following forms with the PBGC:

1. PBGC Form 1, Annual Premium Payment;

2. PBGC Form 1-ES (Annual Premium Payment Form for plans with 500 or more participants that must pay an estimated premium by the last day of the second full calendar month after the close of the prior plan year);

3. Notice of Reportable Events (see Q 794 for a detailed review of the contents of a Notice of Reportable Events);

4. Notice of Intent to Terminate (see Q 803 for a detailed review of the contents of a Notice of Intent to Terminate);

94. What reports and disclosures are required to be furnished under the Multiemployer Pension Plan Amendments Act of 1980?

The Multiemployer Pension Plan Amendments Act of 1980 provides that a multiemployer plan in reorganization may be amended to reduce or eliminate accrued benefits in accordance with ERISA Section 4244A where the contributions are not eligible for the Pension Benefit Guaranty Corporation's (PBGC's) guarantee. Accrued benefits may not be reduced unless a notice has been given to the following at least six months before the first day of the plan year in which the amendment reducing benefits is adopted:

1. Plan participants and beneficiaries;

2. Each employer who has an obligation to contribute under the plan; and

3. Each employee organization that, for purposes of collective bargaining, represents plan participants employed by the employer. (1)

The notice must advise recipients that the plan is in reorganization and that if contributions under the plan are not increased, accrued benefits under the plan will be reduced or an excise tax will be imposed on the employers.

The plan sponsors should include in any notice issued to plan participants and beneficiaries information as to the rights and remedies of plan participants and beneficiaries, as well as how to contact the Department of Labor for further information and assistance where appropriate.

If the plan sponsor of a plan in reorganization determines that the plan may become insolvent, the plan sponsor must notify the following that if the insolvency occurs, certain benefit payments will be suspended but basic benefits will continue to be paid:

1. The Secretary of the Treasury;

2. The PBGC;

3. Each employer who has an obligation to contribute under the plan;

4. Each employee organization that represents plan participants employed by that employer; and

5. The plan participants and beneficiaries. (2)

95. What are the disclosure requirements applicable to multiemployer plans under the Pension Protection Act of 2006?

Section 502(a)(1) of the Pension Protection Act of 2006 added Section 101(k) to ERISA. That provision mandates that the plan administrator of a multiemployer plan must, upon written request, furnish within 30 days, a copy of certain actuarial, financial, and funding-related documents to any plan participant, beneficiary, employee representative, or any employer that has an obligation to contribute to the plan.

Pursuant to ERISA Section 101(k) a plan administrator must furnish the following documents:

1. a copy of any periodic actuarial report (including sensitivity testing) received by the plan for any plan year that has been in the plan's possession for at least 30 days;

2. a copy of any quarterly, semi-annual, or annual financial report prepared for the plan by any plan investment manager or advisor or other fiduciary that has been in the plan's possession for at least 30 days; and

3. a copy of any application filed with the Secretary of the Treasury requesting an amortization extension under Section 304 of ERISA and the determination of the Secretary pursuant to such application.

Under the Proposed Regulations, in general, the administrator of a multiemployer pension plan must furnish copies of actuarial, financial, and funding-related documents detailed below to

1. any participant within the meaning of Section 3(7) of the Act (See Q 15 for details),

2. any beneficiary receiving benefits under the plan,

3. any labor organization representing participants under the plan,

4. any employer that is a party to the collective bargaining agreement(s) pursuant to which the plan is maintained or who otherwise may be subject to withdrawal liability. (1)

The administrator of a multiemployer pension plan must, not later than 30 days after receipt of a written request for a document or documents described below from an eligible party, furnish the requested document or documents to the requester. The documents must be furnished in a manner consistent with existing ERISA disclosure rules, including those applicable to electronic disclosures. (2)

Under the Proposed Regulations, the requesting party is entitled to receive a copy of any

a. periodic actuarial report (including any sensitivity testing) received by the plan for any plan year that has been in the plan's possession for at least 30 days prior to the date of the written request;

b. quarterly, semi-annual, or annual financial report prepared for the plan by any plan investment manager or advisor (without regard to whether such advisor is a fiduciary within the meaning of Section 3(21) of the Act) or other fiduciary that has been in the plan's possession for at least 30 days prior to the date of the written request; and

c. application filed with the Secretary of the Treasury requesting an extension under Section 304 of this Act or IRC Section 431(d) and the determination of such Secretary pursuant to such application. (1)

The mandated disclosures do not include the provision of any information or data that served as the basis for any report or application required to be disclosed; although, there is nothing restricting the right that a requesting person may have to review or obtain such information under other applicable provisions of ERISA. Nor shall such mandated disclosures include any information that the plan administrator reasonably determines to be either

1. individually identifiable information regarding any plan participant, beneficiary, employee, fiduciary, or contributing employer, or

2. proprietary information regarding the plan, any contributing employer, or entity providing services to the plan. (2)

A plan administrator must inform the requester if it withholds any such information included within a request under the proposed regulations.

Individuals may make such disclosure requests only once in any 12-month period. The plan administrator is entitled to charge a reasonable fee to cover the costs of furnishing the requested documents. Such fee may not exceed the lesser of the actual cost to the plan for the least expensive means of acceptable reproduction of the document(s) or 25 cents per page, plus the cost of mailing or delivery of the document. (3) These charges include costs for furnishing statements or documents, including the latest updated summary plan description; the latest annual report; and any terminal report, the bargaining agreement, trust agreement, contract, or other instruments under which the plan is established or operated. (4)

96. What are the reports and disclosures that plans must provide to participants?

In the ongoing operation of an ERISA covered employee benefit plan, the plan administrator is required to provide participants certain reports and disclosures. At various points in time and upon the occurrence of specific events, the plan administrator is required to provide participants the following documents:

1. Summary Plan Description (see Q 98);

2. Notice of Material Plan Changes (see Q 103);

3. Summary of Annual Reports (see Q 104);

4. Written Explanation of Joint and Survivor Annuity Option (see Q 105) and the Preretirement Survivor Annuity Option (see Q 106);

5. Rollover Distribution Notice (see Q 107);

6. Statement of Participant's Rights (see Q 109);

7. Statement of Participant's Accrued and Vested Benefits (see Q 111);

8. Notice to Participants in Underfunded Plans (see Q 114);

9. Notice of Failure to Fund (see Q 115);

10. Notice to Missing Participants (see Q 116); and

11. COBRA Notices (see Q 188).

ERISA Section 104(b) requires the plan to produce only the "latest" annual report and summary plan description. It does not require plans to produce documents that simply do not exist. (1)

97. What are the fiduciary requirements for disclosure in participant-directed individual account plans?

On July 23, 2008, the DOL issued proposed regulations that require the disclosure of certain plan and investment related information, including fee and expense information, to participants and beneficiaries in participant-directed individual account plans. The proposed regulations are intended to ensure that all participants and beneficiaries in participant directed individual account plans have the information they need to make informed decisions about the management of their individual accounts and the investment of their retirement savings. The proposed regulations require that uniform, basic disclosures be provided regardless of whether or not the plan is an ERISA Section 404(c) plan. (3)

The regulations, when finalized, are effective for plan years beginning after December 31, 2008. (4)

Where the governing documents of an individual account plan provide for the allocation of investment responsibilities to participants or beneficiaries, fiduciaries must take steps consistent with their general fiduciary duties under ERISA to ensure that participants and beneficiaries, on a regular and periodic basis, are made aware of their rights and responsibilities with respect to the investment of assets held in, or contributed to, their accounts and are provided sufficient information regarding the plan, including fees and expenses, and regarding designated investment alternatives, including fees and expenses attendant to them. (5)

On, or before, the date of plan eligibility, and at least annually thereafter, a fiduciary (or person designated by the fiduciary) shall provide to each participant or beneficiary, the following (based on the latest information available to the plan);

1. An explanation of the circumstances under which participants and beneficiaries may give investment instructions;

2. An explanation of any specified limitations on such instructions under the terms of the plan, including any restrictions on transfers to or from a designated investment alternative;

3. A description of or reference to plan provisions relating to the exercise of voting, tender, and similar rights appurtenant to an investment alternative as well as any restrictions on such rights;

4. An identification of any designated investment alternatives offered under the plan; and

5. An identification of any designated investment managers. (1)

In the event of an adoption of a material change of the five items above, each participant and beneficiary must be provided with a description of such change within 30 days of its adoption. (2)

On or before the date of plan eligibility and, at least annually thereafter, an explanation must be provided of any fees and expenses for plan administrative services (legal, accounting, record keeping, etc.) that, to the extent not otherwise included in investment related fees and expenses, may be charged to the plan and the basis on which such charges will be allocated (e.g., pro-rata or per capita) to, or affect the balance of each individual account. (3)

At least quarterly, participants and beneficiaries must receive a statement that includes the dollar amount actually charged during the preceding quarter to their account for administrative services, and a description of the services provided to the participant or beneficiary for such amount. (4)

The third category of mandatory disclosures is for individual expenses. On or before the date of plan eligibility and at least annually thereafter, an explanation of any fees and expenses that may be charged against an individual account for services provided on an individual (rather than a plan) basis (e.g., plan loan or QDRO processing fees or fees for investment advice); and a quarterly statement that includes the dollar amount actually charged during the preceding quarter to an individual account for individual services, and a description of those services. (5)

The fourth category requires the automatic disclosure of investment related information, on or before the date of plan eligibility and at least annually thereafter,

1. Identifying information such as the name of the designated investment alternative;

2. Website addresses for these investments;

3. The type or category of the investment (e.g., money market fund, balanced fund, large cap fund, etc.); and

4. The type of management utilized by the investment (passive or active). (6)

For designated variable return investment alternatives the average annual total return of the investment for 1, 5, and 10 years (if available) must be disclosed, as well as a statement indicating that an investment's past performance is not an indication of future performance. For fixed rate return investment alternatives, the fixed rate of return and the term it is applicable to must also be disclosed. (1) Comparable benchmark information for designated variable rate investment alternatives described above must also be disclosed (the name and returns of an appropriate broad based securities market index) over 1, 5, and 10 year periods comparable to the performance data periods above and that are not administered by an affiliate of the investment provider, its investment advisor, or a principal underwriter, unless the index is widely recognized and used. (2)

Further, for variable rate investment alternatives, the amount and a description of each shareholder type fee (i.e., fees charged directly against a participant's investments) such as sales loads, sales charges, deferred sales charges, redemption fees, surrender charges, exchange fees, account fees, purchase fees, and mortality and expense fees. Total annual operating expenses of the investment expressed as a percentage (expense ratio) and a statement indicating that fees and expenses are only one of several factors that participants and beneficiaries should consider when making investment decisions. In regard to fixed rate designated investment alternatives the amount and a description of any shareholder-type fees that may apply to a purchase, withdrawal, or transfer must also be disclosed. (3)

Finally, certain information must be provided only upon request, including prospectuses, financial statements or reports, a statement of an investment share's value (and valuation date), and a list of the assets comprising the portfolio of each designated investment alternative and the value of each such asset. (4)

The proposed regulations contain a model disclosure form for fees and rates of return that, if utilized by plan fiduciaries, will result in their being deemed to have satisfied their disclosure requirements for the items contained within it. The plan based disclosure requirements such as investment instructions and the type and nature of fees that may be charged against accounts may be disclosed in the plan's SPD or as a part of a pension benefit statement. (5)

98. What information must be contained in the Summary Plan Description (SPD)?

The requirement that a plan administrator file a copy of the SPD with the Department of Labor (DOL) has been eliminated, unless he is specifically requested by the DOL to do so.6 The SPD must accurately reflect the contents of the plan as of a date not earlier than 120 days prior to the date that the SPD is disclosed. (7)

The following information must be included in the SPD of both employee welfare benefit plans and employee pension benefit plans:

1. The name of the plan, and, if different, the name by which the plan is commonly known by its participants and beneficiaries;

2. The name and address of:

a) in the case of a single employer plan, the employer whose employees are covered by the plan;

b) in the case of a plan maintained by an employee organization, the employee organization that maintains the plan;

c) in the case of a collectively bargained plan established or maintained by one or more employee organizations, the representative organization of the parties that established or maintain the plan, as well as: (i) a statement that a complete list of the employer and employee organizations sponsoring the plan may be obtained by participants and beneficiaries upon written request, and the list is available for examination by participants and beneficiaries in accordance with the appropriate regulations, or (ii) a statement that participants and beneficiaries may receive from the plan administrator, upon written request, information as to whether a particular employer or employee organization is a sponsor of the plan, and, if the employer or employee organization is a plan sponsor, the sponsor's address;

d) in the case of a plan established or maintained by two or more employers, the representative organization of the parties who established or maintain the plan, as well as: (i) a statement that a complete list of the employers sponsoring the plan may be obtained by participants and beneficiaries upon written request to the plan administrator, and the list is available for examination by participants and beneficiaries, as required by applicable regulations, or (ii) a statement that participants and beneficiaries may receive from the plan administrator, upon written request, information as to whether a particular employer is a sponsor of the plan, and if the employer is a plan sponsor, the sponsor's address;

3. The employer identification number assigned by the Internal Revenue Service to the plan sponsor and the plan number assigned by the plan sponsor;

4. The type of pension or welfare plan (e.g., for pension plans--defined benefit, money purchase, profit sharing, ERISA Section 404(c), etc., and for welfare plans--hospitalization, disability, prepaid legal service, etc.);

5. The type of administration of the plan, (e.g., contract administration, insurer administration, etc.);

6. The name, business address, and business telephone number of the plan administrator (as defined in ERISA Section 3(16));

7. The name of the person designated as agent for service of legal process, the address at which process may be served on that person, and a statement that service of legal process may be made upon a plan trustee or the plan administrator;

8. The name, title, and address of the principal place of business of each trustee of the plan;

9. If a plan is maintained pursuant to one or more collective bargaining agreements, a statement that the plan is so maintained and that a copy of the collective bargaining agreement may be obtained by participants and beneficiaries upon written request to the plan administrator, and that it is available for examination by participants and beneficiaries, as required by applicable regulations;

10. The plan's requirements respecting eligibility for participation and for benefits; the SPD must describe the plan's provisions relating to eligibility to participate in the plan, such as the age or years of service requirements, and the following items (as appropriate):

a) for employee pension benefit plans, it must also include a statement describing the plan's normal retirement age (as defined in ERISA Section 3(24)), and a statement describing any other conditions that must be met before a participant will be eligible to receive benefits; the benefits must be described or summarized; and

b) for employee welfare benefit plans, it must also include a statement of the conditions pertaining to eligibility to receive benefits and a description or summary of the benefits;

11. In the case of an employee pension benefit plan, a statement describing any joint and survivor benefits provided under the plan, including any requirement that an election be made as a condition to select or reject the joint and survivor annuity;

12. For both pension and welfare benefit plans, a statement clearly identifying circumstances that may result in disqualification, ineligibility, denial, loss, forfeiture, or suspension of any benefits that a participant or beneficiary might otherwise reasonably expect the plan to provide on the basis of the benefits required by (10) and (11), above;

13. For an employee pension benefit plan the following information:

a) if the benefits of the plan are not insured by the Pension Benefit Guaranty Corporation (PBGC), a statement of this fact, and the reason for the lack of insurance; and

b) if the benefits of the plan are insured by the PBGC, a statement of this fact, a summary of the Pension Benefit Guaranty Corporation provisions of Title IV of ERISA, and a statement indicating that further information on the provisions of Title IV can be obtained from the plan administrator or the PBGC; the address of the PBGC must be provided;

14. In the case of an employee pension benefit plan, a description and explanation of the plan provisions for determining years of service for eligibility to participate, vesting, breaks in service, and years of participation for benefit accrual; the description must state the service required to accrue full benefits and the manner in which accrual of benefits is prorated for employees failing to complete full service for a year;

15. In the case of an employee pension benefit plan that will use the "cutback" rule of Revenue Ruling 76-378, 1976-2 CB 112, to make retroactive changes in the vesting or accrual provisions described in the SPD, a statement that certain provisions of the plan are subject to amendment that directly or indirectly modifies certain plan rights and benefits, the nature of those modifications, and the identification by reference of the portions of the SPD where those provisions are described; the statement may be either printed within the text of the SPD or it may be printed in a separate sheet and disclosed together with the SPD;

16. The sources of contributions to the plan--for example, employer, employee organization, employees--and the method by which the amount of contributions is calculated; defined benefit pension plans may state without further explanation that the contribution is actuarially determined;

17. The identity of any funding medium used for the accumulation of assets through which benefits are provided; the SPD must identify the insurance company, trust fund, or any other institution, organization, or entity that maintains a fund on behalf of the plan or through which the plan is funded or benefits are provided;

18. The date of the end of the year for purposes of maintaining the plan's fiscal records; and

19. The procedures to be followed in presenting claims for benefits under the plan and the remedies available under the plan for the redress of claims that are denied in whole or in part. (1)

Final rules also require the SPD for welfare benefit plans to include a description or summary of the benefits and service providers available under the plan. If the schedule of benefits and/or service providers is extensive, the plan sponsor may provide the lists under separate documents if such documents are referenced in the SPD and participants are advised in the SPD that such lists are available without cost to any participant or beneficiary who requests one. (2) Such welfare benefit plans are also required to disclose to participants and beneficiaries such cost-sharing measures as the plan may have in place with insurance providers (premiums, deductibles, coinsurance, etc.), as well as any annual or lifetime caps, which preventative services are offered, whether, and under what circumstances existing and new drugs are covered, and any other conditions or limits on the type and availability of coverage offered. (3) These final rules became effective as of the first day of the second plan year beginning on or after January 22, 2001.

Other provisions of the final rules include a requirement that plans include a description of the procedures governing QDROs, or a statement that participants and beneficiaries can obtain, without charge, a copy of such procedures.1 A description of the procedures governing qualified medical child support orders is also required to be disclosed in the SPD of welfare benefit plans.2 In addition, welfare plans are required to disclose COBRA rights and any model language required as a result of the Newborns' and Mothers' Health Protection Act. (3)

SPDs must be written in a manner calculated to be understood by the average plan participant, and they must be sufficiently accurate and comprehensive to reasonably apprise participants and beneficiaries of their rights and obligations under the plan. (4)

A non-English language notice of assistance must be displayed prominently in the summary plan description (SPD) of any plan that:

(1) covers fewer than 100 participants at the beginning of the plan year, and under which at least 25 percent of all plan participants are literate only in the same non-English language; or

(2) covers 100 or more participants at the beginning of the plan year, and under which the lesser of:

i. 500 or more participants, or

ii. at least 10 percent of the plan participants are literate only in the same non-English language. (5)

99. What are the Summary Plan Description (SPD) requirements in a successor plan situation?

The ERISA regulations establish an alternative method of SPD compliance for certain successor pension plans. (6) Where a portion of plan participants and beneficiaries have rights established under a successor plan, while continuing to be eligible for benefits under the former plan that has been merged into the successor plan, the plan administrator is not required to describe the relevant provisions of the old plan in the SPD of the successor plan.

The provisions of this alternative compliance method are applicable only to plan mergers that occur after the issuance by the successor plan of the initial SPD under ERISA.

The alternative method of compliance is available only if the plan administrator of the successor plan furnishes to the participants covered under the merged plan and beneficiaries receiving pension benefits under the merged plan, within 90 days after the effective date of the merger, the following:

1. A copy of the most recent SPD of the successor plan;

2. A copy of any summaries of material modifications to the successor plan not incorporated in the most recent SPD; and

3. A separate statement containing a brief description of the merger; a description of the provisions of, and benefits provided by, the merged and successor plans that are applicable to the participants and beneficiaries of the merged plan; and a notice that copies of the merged and successor plan documents, as well as the plan merger documents (including the portions of any corporate merger documents that describe or control the plan merger), are available for inspection and that copies may be obtained upon written request for a duplication charge (in accordance with the provisions of Labor Regulation Section 2520.104b-2(a)).

After the merger, the plan administrator in all subsequent summary plan descriptions must clearly and conspicuously identify the class of participants and beneficiaries affected by the provisions of the merged plans, and state that the documents above are available for inspections and that copies may be obtained upon written request for a duplication charge.

100. What are the distribution requirements for the Summary Plan Description?

A plan administrator is required to furnish to each plan participant and beneficiary receiving benefits under the plan a copy of the Summary Plan Description as well as a statement of ERISA rights. These documents must be provided within 90 days after a person becomes a participant, or (in the case of a beneficiary) within 90 days after he first receives benefits or, if later, within 120 days after the plan becomes subject to the reporting and disclosure provisions of ERISA. (1)

Where a plan is made prospectively effective to take effect after a certain date or after a condition is satisfied, the date upon which the plan becomes subject to the reporting and disclosure provisions of ERISA is the day after the date the condition is satisfied. Where a plan is adopted with a retroactive effective date, the 120-day period begins on the day after the plan is adopted. Where a plan is made retroactively effective dependent on a condition, the day on which the plan becomes subject to the reporting and disclosure provisions of ERISA is the day after the day on which the condition is satisfied. Where a plan is made retroactively effective subject to a contingency that may or may not occur in the future, the day on which the plan becomes subject to the reporting and disclosure provisions of ERISA is the day after the day on which the contingency occurs. (2)

ERISA also requires a plan administrator to provide a copy of the latest Summary Plan Description upon the written request of a participant or beneficiary. (3) The penalty for failure to comply with such a written request is $110 per day. (4) The Ninth Circuit Court of Appeals has held that a participant's request for a Summary Plan Description under this provision (5) did not have to be in writing for this penalty to apply, because the Summary Plan Description was something the participant is entitled to receive automatically, without any request. (6)

According to a district court ruling, a plan sponsor's established administrative practices may serve as evidence that an SPD was timely furnished. (1) In that case, a participant applied for disability retirement benefits five years after termination. However, the claim was denied because the plan document and SPD clearly spelled out that such claims must be filed within two years. The plaintiff claimed that she never received the SPD. Two employees of the plan sponsor's human resources department testified that it was standard practice to personally provide the SPD to new hires and employees who change employment status. The plaintiff had such a change in employment status and the records clearly indicated that she received other documents regarding her benefits. In light of this, and the evidence of the plan sponsor's administrative practice, the Court held that it was "more likely true than not" that the plaintiff had actually received the SPD.

The Court of Appeals for the Fourth Circuit has ruled that the failure of an employer to deliver the SPD to an employee is not a breach of fiduciary duty where the employer was able to demonstrate that it had "by sufficiently reliable means" submitted materials adequate to inform the participant of the plan's conditions for enrollment. (2)

The Court of Appeals for the Fifth Circuit has issued an opinion stating that information in a plan's "Enrollment Guide" that conflicted with the plan's SPD was not controlling because the SPD is the primary disclosure document. (3)

101. What information regarding plan termination must be contained in the Summary Plan Description?

A Summary Plan Description (SPD) is required to include information regarding the provisions of the plan that relate to the termination of the plan. It is the position of the Department of Labor that since a plan termination may result in the denial or loss of benefits to participants and beneficiaries, the SPD must include the following:

1. A summary of any plan provisions on the rights of the plan sponsor, or other entity, to terminate the plan, and the circumstances, if any, under which the plan may be terminated;

2. A summary of plan provisions that govern the benefits, rights, and obligations of participants and beneficiaries, including provisions on the accrual and vesting of benefits under the plan upon termination; and

3. A summary of those provisions of the plan that deal with the allocation and disposition of plan assets upon termination. (4)

102. What are the plan's obligations regarding the updating of the Summary Plan Description?

The administrator must furnish to each participant, and to each beneficiary receiving benefits under the plan, an updated Summary Plan Description (SPD) that integrates all plan amendments made within a 5-year period. The updated SPD must be distributed every fifth year after the plan becomes subject to the reporting and disclosure provisions of ERISA. If no amendments have been made during the 5-year period, this requirement does not apply. The administrator must furnish to each participant, and to each beneficiary receiving benefits under the plan, the SPD every tenth year after the plan becomes subject to the reporting and disclosure provisions of ERISA. (1)

Updated SPDs must be provided to each participant and beneficiary receiving benefits under the plan no later than 210 days following the end of the plan year in which a 5-year or 10-year period (described above) ends. (2)

103. What information regarding material plan changes must be provided to participants?

A Summary of Material Modifications (SMM) in plan provisions is required to be provided to participants and beneficiaries. The SMM must be provided within 210 days after the close of the plan year in which the modification was adopted (even for the adoption of amendments that take effect on a date in the future), and must be written in a manner calculated to be understood by the average participant. (3)

The disclosure date is not affected by retroactive applications to a prior plan year of an amendment that makes a material modification to the plan; a modification does not occur before it is adopted. (4)

The SMM is not required where it has been rescinded or otherwise does not take effect. (5) Also, an SMM is not required if the changes or modifications are described in a timely summary plan description. (6)

Where an SPD has been provided to participants in accordance with ERISA, it must be accompanied by all SMMs or changes in information required to be included in the SPD that have not been incorporated into that SPD.

Any change in the name of a plan trustee is a modification or change that must be disclosed to participants and beneficiaries through an SMM. (7)

For plan changes in a group health plan that is subject to the provisions of HIPAA '96, changes must be disclosed to participants and beneficiaries no later than 60 days after the first day of the first plan year. (1)

Plan changes to maternity and newborn infant hospital coverage in a group health plan that is subject to the provisions of the Newborns' and Mothers' Health Protection Act of 1996 (NMHPA) must be disclosed to participants and beneficiaries no later than 60 days after the first day of the first plan year. (2)

104. What are the Summary Annual Report requirements?

The plan administrator is required to furnish annually to each participant and beneficiary receiving benefits a Summary Annual Report (SAR). (3) Regulations dictate the content, style, and format requirements for SARs and even provide prototype formats to be reproduced for pension and welfare benefit plans. Plan administrators may not vary the format of the SAR; however, information that is not applicable to the plan may be omitted. Also, plan administrators may elaborate upon information contained within the SAR. The information used to complete the forms must be based upon information contained in the most recent annual report of the plan. (4)

The SAR is required to be provided to participants and beneficiaries receiving benefits under the plan no later than nine months after the close of the plan year. In the case of welfare benefit plans that use group health insurance arrangements, the SAR is required to be provided within nine months of the close of the fiscal year of the trust or other entity that files the report. (5)

A plan that covers fewer than 100 participants at the beginning of a plan year in which 25% or more of the plan participants are literate only in the same non-English language, or a plan that covers 100 or more participants in which 500 or more participants or 10% or more of all plan participants, whichever is less, are literate only in the same non-English language must provide to these non-English language participants an English language SAR that prominently displays a notice, in the non-English language common to these participants, offering them assistance. The actual assistance provided need not be in writing. The notice must clearly set forth any procedures participants must follow to obtain the assistance. Further, plans that provide an explanatory notice accompanying Form 5500-R or the notice of the availability of Form 5500-R must also provide a notice, in the non-English language common to these participants, offering assistance. (6)

The following plans are exempted from the SAR provisions of ERISA:

1. Totally unfunded welfare benefit plans;

2. Small unfunded or insured welfare benefit plans (that satisfy these definitions in Labor Regulation Section 2520.104b-20(b));

3. An apprenticeship or other training plan;

4. A pension or welfare plan for selected employees;

5. A day care center; and

6. A dues financed pension or welfare plan. (1)

It is the opinion of the Department of Labor that ERISA and its attendant regulations require SARs to be distributed to affected participants and beneficiaries for the plan year in which the plan terminates. This information is necessary to assist participants and beneficiaries in evaluating the financial information relating to the distribution of residual assets of the plan. (2)

For defined benefit plans, if the current value of the assets of the plan is less than 70% of the current liability under the plan, this must be disclosed in a statement in the annual report that indicates the level to which the plan is underfunded (see Q 116 for further details). (3) A similar notice of underfunding is required to be placed in the SAR. (4)

105. What are the plan disclosure obligations regarding the joint and survivor annuity option?

A plan that provides a qualified joint and survivor annuity must provide to each participant, within a reasonable period of time before the annuity starting date, a written explanation of:

1. The terms and conditions of the qualified joint and survivor annuity;

2. The participant's right to make, and the effect of, an election to waive the joint and survivor annuity form of benefits;

3. The rights of the participant's spouse; and

4. The right to make, and the effect of, a revocation of an election. (5)

The provision of a written notice is not required if the plan fully subsidized the cost of the benefit and the plan does not permit a participant to waive the benefit or designate another beneficiary.6 The Pension Protection Act of 2006 (PPA) amended ERISA Section 205(c)(7)(A) to require that, beginning January 1, 2007, distribution notices must be furnished to participants no less than thirty days and no more than 180 days before the date of distribution.

The PPA also amended ERISA Sections 205(c) and (d) providing that, beginning January 1, 2008, if a plan's mandatory joint and survivor annuity is less than 75%, the plan must offer as an option a survivor annuity that equals 75% of the annuity payable during the joint lives of participants and their spouses. If the plan's joint and survivor annuity is equal to or exceeds 75%, the plan must offer a 50% survivor annuity.

106. What is the plan disclosure obligation regarding the qualified pre-retirement survivor annuity?

A plan must provide a written explanation of the qualified pre-retirement survivor annuity to each participant that details:

1. The terms and conditions of the qualified pre-retirement survivor annuity;

2. The participant's right to make, and the effect of, an election to waive the qualified pre-retirement survivor annuity;

3. The rights of the participant's spouse; and

4. The right to make, and the effect of making, a revocation of an election. (1)

This information must be provided no later than whichever of the following periods ends last:

1. The period beginning with the first day of the plan year in which the participant attains age 32 and ending with the close of the plan year preceding the plan year in which the participant attains age 35;

2. A reasonable period after the individual becomes a participant;

3. A reasonable period of time after the end of the subsidization by the plan of a survivor benefit with respect to a participant;

4. A reasonable period of time after the survivor benefit provisions of ERISA Section 205 become applicable to a participant; or

5. A reasonable period of time after separation from service in the case of a participant who separates from service before the age of 35. (2)

The provision of a written notice is not required if the plan fully subsidized the cost of the benefit and the plan does not permit a participant to waive the benefit or designate another beneficiary. (3)

The Pension Protection Act of 2006 amended ERISA Sections 205(c) and (d) providing that, beginning January 1, 2008, if a plan's mandatory joint and survivor annuity is less than 75%, the plan must offer as an option a survivor annuity that equals 75% of the annuity payable during the joint lives of participants and their spouses. If the plan's joint and survivor annuity is equal to, or exceeds 75%, the plan must offer a 50% survivor annuity.

107. What is the plan obligation regarding the rollover distribution notice?

The plan administrator of a plan must, within a reasonable period of time before making an eligible rollover distribution from an eligible retirement plan, provide a written explanation to the recipient of:

1. The provisions under which the recipient may have the distribution directly transferred to another eligible retirement plan, and that the automatic distribution by direct transfer applies to certain distributions;

2. The provisions that require the withholding of tax on the distribution if it is not directly transferred to another eligible retirement plan;

3. The provisions under which the distribution will not be subject to tax if transferred to an eligible retirement plan within 60 days after the date on which the recipient received the distribution; and

4. If applicable, the tax on lump sum distributions (of IRC Section 402(d)) or related taxability rules (of IRC Section 402(e)). (1)

108. What guidance has the DOL provided concerning rollovers of mandatory cashouts?

The DOL has issued final regulations providing a safe harbor for plan fiduciaries handling automatic rollovers to IRAs of mandatory cash-outs from qualified plans. The regulations finalized proposed regulations issued in 2004 and expanded the availability of the safe harbor to also cover mandatory distributions of $1,000 or less. For details on this safe harbor, see Q 273 and Q 274. (2)

In conjunction with the final regulations, the DOL also finalized a prohibited transaction class exemption (PTE 2004-16) that allows financial institutions (or their affiliates) who are plan administrators to designate themselves (or their affiliates) as the IRA provider to receive the automatic rollover of the cash-outs. For more information on this PTE, see Q 456.

109. What information is required to be contained in the statement of ERISA rights?

A plan administrator is required to furnish, in the Summary Plan Description (SPD), to each participant and beneficiary receiving benefits under the plan, a statement of ERISA rights of participants and beneficiaries. The statement of rights must appear as one consolidated statement. (3) A model statement of ERISA rights is contained in the regulations. (4) An SPD will be deemed to comply with the statement of rights requirements if it includes the model statement (excluding inapplicable material).The statement of rights must disclose that participants and beneficiaries are entitled to certain rights, including the rights to:

1. Examine, without charge, all plan documents, supporting documents, and documents filed with the Department of Labor (DOL);

2. Obtain copies of the plan documents upon written request to the plan administrator (who may make a reasonable charge for these copies);

3. Receive the plan's Summary Annual Report;

4. Obtain a statement of any right to receive a pension upon the attainment of normal retirement age, and what that pension would be at normal retirement age should the employee terminate employment now;

5. Obtain a statement, upon written request, of how many more years an employee must work to obtain a pension benefit upon the attainment of normal retirement age;

6. An explanation of the fiduciary duties imposed upon plan fiduciaries (including the prohibition against discriminating against participants and beneficiaries for seeking to enforce their rights under ERISA);

7. A written explanation of any reason for the denial of a claim for benefits under the plan;

8. Appeal the denial of a claim for benefits; and

9. Enforce their rights by taking certain specified steps (i.e., civil action or seeking DOL assistance). (1)

The style and format of the statement must not have the effect of misleading, misinforming, or failing to inform participants and beneficiaries. All information contained in the statement of rights must be written in a manner calculated to be understood by the average plan participant, taking into account factors such as the level of comprehension and education of typical participants in the plan and the complexity of the items required in the statement of rights. Inaccurate, incomprehensible, or misleading explanatory material will fail to meet the requirements of the statement of rights. If the plan administrator finds it desirable to make additional mention of certain rights elsewhere in the SPD, it may do so. The SPD may state that the statement of ERISA rights is required by federal law and regulations. (2)

For group health plans, the model statement of ERISA rights may be modified under the regulations to require group health plans to instruct participants and beneficiaries to contact the nearest DOL field office, or the DOL Division of Technical Assistance and Inquiries, with questions regarding their rights. (3)

110. Does ERISA provide additional protection to small business retirement plans?

ERISA Section 103(a)(3)(A) requires qualified plans to engage an independent qualified public accountant and to file the opinion of the accountant with the plan's Annual Report Form 5500. Regulations provide a waiver of the annual examination and report of an independent qualified public accountant for plans with fewer than 100 participants as of the beginning of the plan year. (1) The Department of Labor (DOL) has issued final regulations that are designed to increase the security of assets in small business retirement plans. The regulations apply to retirement plans covering less than 100 participants and impose additional requirements in order to remain exempt from having an annual audit of the plan.

The regulations provide that the administrator of a qualified plan with fewer than 100 participants is not required to comply with the annual audit requirement if, with respect to each plan year, the following conditions are satisfied:

1. At least 95% of the assets of the plan constitute "qualifying plan assets," as defined below; or

2. Any person who handles assets of the plan that do not constitute qualifying plan assets is bonded under ERISA Section 412 with the amount of the bond being not less than the value of the non-qualifying assets. (2)

"Qualifying plan assets" are defined under the final regulations as:

1. Qualifying employer securities as defined in ERISA Section 407(d)(1);

2. Participant loans meeting the requirements of ERISA Section 408(b)(1);

3. Shares issued by a registered investment company (mutual fund);

4. Investment and annuity contracts issued by an insurance company; and

5. Any assets held by the following institutions: (a) a bank or similar financial institution as defined in Labor Regulation Section 2550.408b-4(c); (b) an insurance company; (c) a broker-dealer registered under the Security and Exchange Act of 1934; or (d) any other organization authorized to act as a trustee for individual retirement accounts under Internal Revenue Code Section 408. (3)

The summary annual report for the plan must also include the following enhanced disclosures:

1. The name of each institution holding qualifying plan assets and the amount of such assets held by each institution as of the end of the plan year (excluding employer securities, participant loans that satisfy ERISA Section 408(b)(1) and participant directed individual accounts);

2. The name of the surety company issuing any bond required under the regulation;

3. A notice indicating that participants and beneficiaries may, upon request and without charge, examine or receive copies of evidence of any bond required under the regulation and copies of the statements received from each institution holding qualified assets that describe the assets held by the institution as of the end of the plan year; and

4. A notice stating that participants and beneficiaries should contact the Pension and Welfare Benefits Administration of the DOL if they are unable to examine or obtain copies of the statements or evidence of the bond. (1)

Further, the plan administrator must, upon the request of a participant or beneficiary, make available for inspection, or provide copies of (at no charge), the evidence of any bond required by the regulation and the statement of assets from the financial institutions holding qualifying assets. (2)

111. What is the Statement of Participant's Accrued and Vested Benefits?

Each plan administrator of an employee pension benefit plan must furnish to any plan participant or beneficiary who so requests in writing, a statement indicating, on the basis of the latest available information, the total benefits accrued, and the nonforfeitable pension benefits, if any, that have accrued, or the earliest date on which benefits will become nonforfeitable. (3)

Plan sponsors must maintain records with respect to each of their employees sufficient to determine the benefits due or that may become due to those employees. The plan administrator must make a report, in such a form as required by regulations, to each employee who is a participant under the plan and who:

1. Requests the report, in the manner and at the time as is provided in the regulations;

2. Terminates his service with the employer; or

3. Has a 1-year break in service. (4)

Beginning January 1, 2007, The Pension Protection Act of 2006 amended ERISA Section 105(a) to require defined contribution plans (other than one participant plans) and tax-deferred annuities to provide:

1. Quarterly benefit statements to participants with a right to direct their own investments within individual accounts;

2. Annual statements to participants who do not have the right to direct investments within their individual accounts; and

3. Benefit statements upon written request (not to exceed more than one per year).

In addition, defined benefit plans would be required to furnish benefit statements every three years (or alternatively, annually furnish a notice of availability of statements) to vested participants, or provide benefit statements upon written request (not to exceed one per year).

These updated benefit statement requirements stipulate that they must include, among other things, information regarding accrued or vested benefits to date, the value of the participant's investments as of the most recent valuation date, an explanation of the importance of diversification, and a direction to the DOL's website for investment and diversification information. These statements may be delivered in either written or electronic format. The DOL was required to issue model benefit statements to reflect these changes no later than August 17, 2007. (1)

Failure to furnish benefit statements may result in penalties up to $100 per day per participant. (2)

112. What guidance has the DOL provided participants who wish to learn more about the fees and expenses of their 401(k) plan?

In 1998, the DOL released the results of its study on 401(k) plan fees and expenses. The study was undertaken on behalf of the DOL by an independent firm, in an effort to develop information allowing participants to understand the ways service providers charge for different services. The study also pointed out that many plan sponsors are not fully aware of how fees are calculated and where they may be charged against participant accounts.

Although the report makes no recommendations, it does provide a checklist for plan sponsors and participants to use in reviewing their 401(k) plan fees and expenses. This checklist helps the user to see how fees and expenses affect investment returns and impact retirement income. The checklist provides the following 10 questions for readers to ask in evaluating the fees and expenses of their 401(k) plan:

1. What investment options are offered under your company's 401(k) plan?

2. Do you have all available documentation about the investment choices under your plan and the fees charged to your plan?

3. What types of investment education are available to you under your plan?

4. What arrangement is used to provide services under your plan?

5. Do you and other participants use most or all of the optional services offered under your 401(k) plan, such as participant loan programs and insurance coverages?

6. If administrative services are paid separately from investment management fees, are they paid for by the plan, your employer, or are they shared?

7. Are the investment options tracking an established market index or is there a higher level of investment management services being provided?

8. Do any of the investment options under your plan include sales charges (such as loads or commissions)?

9. Do any of the investment options under your plan include any fees related to specific investments, such as 12b-1 fees, insurance charges or surrender fees, and what do they cover?

10. Does your plan offer any special funds or special classes of stock (which are generally sold to larger group investors)?

The full text of the DOL's release, titled "Study of 401(k) Plan Fees and Expenses," as well as its participant handbook entitled "A Look at 401(k) Plan Fees" are available on the DOL's website at: www.dol.gov/dol/pwba.

113. How can a plan sponsor understand and evaluate the fees and expenses related to its 401(k) plan?

Plan sponsors, or their assigned representatives, when establishing a 401(k) plan, are responsible for the selection of investment options from which participants will choose. They are also responsible for the selection of service providers to the plan, as well as the monitoring of the services provided and of the performance of the investment options. It is the stated view of the DOL that all of these duties require a fiduciary of the plan sponsor to consider the costs to the plan while complying with the fiduciary standards under ERISA.

In addition, the DOL advises in its pamphlet A Look at 401(k) Plan Fees for Employers that "understanding fees and expenses is important in providing for the services necessary for" a plan's operation. The DOL also says that "after careful evaluation during the initial selection, the plan's fees and expenses should be monitored to determine whether they continue to be reasonable."

As part of the evaluation process, the DOL offers 10 questions to assist in the evaluation and consideration of fees and expenses:

1. Have you given each of your prospective service providers complete and identical information with regard to your plan?

2. Do you know what features you want to provide (e.g., loans, number of investment options, types of investments, internet trading)?

3. Have you decided which fees and expenses you, as plan sponsor, will pay, which your employees will pay, and/or which you will share?

4. Do you know which fees and expenses are charged directly to the plan and which are deducted from investment returns?

5. Do you know what services are covered under the base fee and what services incur an extra charge? Do you know what the fees are for extra or customized services?

6. Do you understand that some investment options have higher fees than others because of the nature of the investment?

7. Does the prospective service arrangement have any restrictions, such as charges for early termination of your relationship with the provider?

8. Does the prospective arrangement assist your employees in making informed investment decisions for their individual accounts (e.g., providing investment education, information on fees, and the like) and how are you charged for this service?

9. Have you considered asking potential providers to present uniform fee information that includes all fees charged?

10. What information will you receive on a regular basis from the prospective provider so that you can monitor the provision of services and the investments that you select and make changes, if necessary?

The DOL recommends, in its 401(k) pamphlet described above, that the plan sponsor provide all prospective service providers "with complete and identical information about the plan" and to consider the specific services desired for the plan. The DOL cites as examples, "the types and frequency of reports to the employer, communications to participants, educational materials and meetings for participants and the availability and frequency of participant investment transfers, the level of responsibility you (the plan sponsor) want the prospective service provider to assume, what services must be included and what are possible extras or customized services, and optional features such as loans, Internet trading and telephone transfers."

To assist in gathering this information and in making equivalent comparisons, the DOL has developed a 401(k) Plan Fee Disclosure Form to help plan sponsors make informed cost-benefit decisions with a plan and compare investment product fees and plan administration expenses charged by competing service providers, regardless of how each service provider structures its fees. (1)

114. What is the Notice to Participants in Underfunded Plans?

The plan administrator of a plan that is less than 90% funded must provide, in a form and manner and at such time as prescribed in Pension Benefits Guaranty Corporation (PBGC) regulations, notice to plan participants and beneficiaries of the plan's funding status and the limits on the PBGC's guarantee should the plan terminate while underfunded. This notice must be written in a manner calculated to be understood by the average plan participant. (2)

The notice for a plan year must be issued no later than two months after the deadline for filing the plan's Form 5500. (3) The notice must explain the employer's obligation to fund the plan and indicate the percentage at which the plan is actually funded. The notice is also required to disclose the dollar amount the employer must pay in satisfaction of the minimum funding standards. (4)

The PBGC has established a model notice that plan administrators may use in providing notice to participants in underfunded plans. (1)

115. What is the Notice of Failure to Fund?

If an employer maintaining a plan (other than a multiemployer plan) fails to make a required payment, it must notify each participant and beneficiary (including alternate payees) of the failure to make a required installment or other payment required to meet the minimum funding standard to a plan. The notice must be made before the sixtieth day following the due date for the installment or other payment. (2)

In FAB 2007-03, the DOL modified prior guidance that provided a 45-day deadline for the annual benefit statement for defined contribution plans. FAB 2007-03 extends the deadline to the date the plan files its Form 5500 for the plan year to which the statement relates (but in no event later than the date, including extensions, on which the plan is required to file its Form 5500).

In issuing this extension, the DOL acknowledged the feedback from the benefits industry. The plan sponsors of many profit-sharing plans do not determine or contribute profit-sharing contributions until after the sponsor has completed its corporate (or partnership) tax return for the year. As such, the 45-day deadline was practically difficult to attain and was potentially a heavy expense for many of these plans to meet. Because the majority of the information required to be disclosed in the benefit statements is compiled as a part of the Annual report Form 5500 compilation, plan sponsors indicated to the DOL that it would be helpful to have the annual benefit statement and Form 5500 deadlines correspond. (3)

A plan administrator who fails to meet this notice requirement may be held liable to participants and beneficiaries in the amount of up to $110 a day from the date of the failure to provide notice. (4)

116. How can a plan distribute notices to missing participants?

The Department of Labor has advised that plan administrators must attempt to locate missing participants to satisfy their fiduciary obligations. (5) Where a plan administrator, after a diligent good faith effort, is having difficulty locating missing plan participants, he may seek the assistance of the Internal Revenue Service (IRS). The IRS will forward correspondence of a "humane nature" to taxpayers who have proven difficult to locate. The IRS considers information regarding participant retirement benefits to be of a humane nature. (6) For recent DOL guidance on rollovers of mandatory cash-outs for missing participants, see Q 269 to Q 274.

To seek the assistance of the IRS through their letter forwarding program, the plan administrator must forward a written request to the IRS that briefly explains the need for assistance in forwarding the letter. The request must provide the participant's Social Security number and identify the letter to be forwarded.

The IRS will make an attempt to forward the plan administrator's letter to the participant's last known address in its files. They will not, however, make any attempt to verify that the letter was successfully delivered. They also will not provide the plan administrator with any information they have on file regarding the missing participant. The request for assistance in locating fewer than 50 missing participants should be forwarded to the Disclosure Officer at the IRS district office that services the plan.

The IRS does not charge a fee for the letter forwarding assistance if the plan administrator is attempting to forward information to fewer than 50 participants. If the plan administrator is attempting to locate 50 or more missing participants, a request must be made through IRS Project 753, Computerized Mailout Program. Under this program, the plan administrator must submit a request that:

1. Briefly explains the need for forwarding the letters;

2. Contains the approximate number of recipients the plan is trying to locate;

3. Contains a statement that the plan administrator has a Social Security number for each missing participant (provided on magnetic tape) and that the administrator is aware that a fee will be charged for the service; and

4. Provides one copy of the letter to be forwarded.

The letter must contain a required disclosure, situated in a conspicuous place, that advises the participant of the IRS's limited role in forwarding the letter. Requests to locate 50 or more missing participants must be submitted to:

IRS Director of the Office of Disclosure, CP:EX:D Room 1603, 1111 Constitution Avenue, NW Washington, DC 20224

Under IRS Project 753, the plan administrator is required to submit a flat fee of $1,750 per request, along with $.50 for each letter to be forwarded and $.01 per address search. (1)

For defined benefit plans subject to Pension Benefit Guaranty Corporation (PBGC) coverage that are terminating, the PBGC advises that the plan must purchase an irrevocable commitment from an insurance company for the provision of benefits to any missing participant who is entitled to $5,000 or more in benefits. Missing participants who were married as of their separation from service must have a joint and survivor annuity purchased on their behalf.2

For further details on the PBGC's role in locating missing participants, see Q 816. Practitioner's Pointer: The extension of time for filing Form 5500 that has been granted through an automatic extension or through a Form 5558 filing does not provide the employer with an extension of time for the filing of PBGC Form 1.

Practitioner's Pointer: The ruling in Staib v. Vaughn Industries is important in that it minimizes the ability of attorneys and participants to conduct legal "fishing expeditions" in which they request "any and all documents" in an effort to discover any potential issue for litigation.

Federal courts have been increasingly active in ruling when plan fiduciaries must disclose plan amendments and other actions that may affect benefit levels within a plan (under the concept of "serious consideration"). In one such ruling, the Second Circuit ruled that the fiduciary duty to deal fairly and honestly with beneficiaries prohibits fiduciaries from making false or misrepresentative statements regarding future benefit enhancements wherein an inquiry seeking relevant, accurate information has been presented. (2)

The Ninth Circuit opined that there is no affirmative duty to provide considered changes in benefits after an amendment is under serious consideration, but where the employer has agreed to follow up with an inquiring employee, it must provide affirmative disclosure when the consideration later comes under serious consideration. (3)

Effective for violations occurring after March 24, 2003, the penalty under ERISA Section 5021(6) for a failure to furnish documents upon request as required under ERISA Section 104(a)(6) (SPD, governing documents, etc.) is increased. The penalty changes from $100 per day (but not greater than $1,000 per request) to $110 per day (but not greater than $1,100 per request). (4) A penalty of $35,000 under Section 502(I) was upheld for an employer's failure to respond timely to a document request made by a surviving spouse. (5)

The Sixth Circuit has ruled that a former participant was awarded $10,500 in civil penalties for a plan sponsor's failure to provide her with the plan documents she had requested in writing. The fine was calculated from the date on which the former employee filed suit, rather than thirty days after the documents were requested, because the plan administrator had in good faith believed that the request had been withdrawn. (1)

Conversely, the same Circuit has ruled that a failure to furnish enrollment forms and other specifically requested related documents does not trigger the $110 daily fine for failure to timely provide mandated information. In arriving at this decision, the Sixth Circuit advised that the requested enrollment form, a returned envelope showing that plan-related information had been sent to an obsolete address, and an e-mail from a representative of the employer were not instruments under which the plan was established or operated and, therefore, not subject to the statutory penalty. (2)

(1.) Baucom v. Pilot Life Ins. Co., 674 F.Supp 1175 (M.D. NC 1987).

(2.) ERISA Sec. 4(b).

(3.) ERISA Sec. 101(b)(4).

(1.) Annual Reporting and Disclosure, Revision of Annual Information Return/Reports, Final Rule, 29 CFR Part 2520, 72 Fed. Reg. 64709 (Nov. 16, 2007); Notice of Adoption of Revisions to Annual Return/Report Forms, 72 Fed. Reg. 64731 (Nov. 16, 2007).

(2.) IRC Sec. 6057(b).

(1) Annual Reporting and Disclosure, Revision of Annual Information Return/Reports, Final RUle, 29 CFR Part 2520, 72 Fed. Reg. 64709 (Nov. 16, 2007); Notice of Adoption of Revision to Annual Return/Report Forms, 72 Fed, 64731 (Nov. 16, 2007).

(1.) 71 Fed. Reg. 41615 (7/21/06).

(2.) They can be viewed and printed from the DOL's website at http://www.dol.gov/ebsa/5500main.html.

(3.) Annual Reporting and Disclosure, Revision of Annual Information Return/Reports, Final Rule, 29 CFR Part 2520, 72 Fed. Reg. 64709 (Nov. 16, 2007); Notice of Adoption of Revisions to Annual Return/Report Forms, 72 Fed. Reg. 64731 (Nov. 16, 2007).

(4) Annual Reporting and Disclosure, Revision of Annual Information Return/Reports, Final Rule, 29 CFR Part 2520, 72 Fed. Reg. 64709 (Nov. 16, 2007); Notice of Adoption of Revisions to Annual Return/Report Forms, 72 Fed. Reg. 64731 (Nov. 16, 2007).

(1) Annual Reporting and Disclosure, Revision of Annual Information Return/Reports, Final Rule, 29 CFR Part 2520, 72 Fed. Reg. 64709 (Nov. 16, 2007), Notice of Adoption of Revisions to Annual Report/Report Forms, 72 Fed. Reg. 64731 (Nov. 16, 2007).

(1)Annual Reporting and Disclosure, Revision of Annual Information Return, Final RUle, 29 CFR Part 2520, 72 Fed. Reg. 64709 (Nov. 16, 2007); Notice of Adoption of Revision to Annual Return/Report Forms Fed. 64731 (Nov. 16, 2007).

(2) www.dol.gov/ebsa/faqs/faq_scheduleC.html.

(1.) Announcement 2007-63, 2007-30 IRB 65.

(1.) IRC Sec. 6057(a).

(2.) 1993-2 C.B. 540.

(3.) Labor Reg. [section] 2510.3-102.

(4.) As defined in Labor Reg. [section] 2510.3-102, above.

(1.) See AICPA Audit and Accounting Guide of Audits of Employee Benefit Plains at paragraph 13.09 through 13.19.

(2.) Source: http://www.dol.gov/ebsa/faqs/fsq_compliance_5500.html.

(1.) ERISA Sec. 103(b)(1).

(2.) ERISA Sec. 103(b)(2).

(1.) ERISA Sec. 103(b)(3).

(2.) Labor Reg. [section] 2520.103-6(c)

(3.) Labor Reg. [section] 2520.103-6(c)

(1.) Labor Reg. [section] 2520.103-6(c)(3).

(2.) Labor Reg. [section] 2520.103-6(d)(1).

(3.) ERISA Sec. 3(26).

(4.) Labor Regs. [subsection]2520.103-3, 2520.103-4.

(1.) PWBA v. USAirway, Inc, 24 EBC 2604 (Office of Admin Law Judges 2000)

(1.) 60 Fed. Reg. 20874.

(1.) 67 Fed. Reg. 15051 (3/28/02).

(2.) DOL Procedure: PWBA's Delinquent Filer Voluntary Compliance Program; Office of Chief Accountant Frequently Asked Questions; Delinquent Filer Voluntary Compliance Program; www.dol.gov/ebsa/faqs/faq_dfvc.html.

(3.) See 29 CFR Part 2520. Labor Reg. [section] 2570.502c-2, redesignated as Labor Reg. [section] 2575.502c-2. 64 Fed. Reg. 2246 (8-3-99).

(4.) See Labor Regs. [section] [section] 2560.502c-2, 2570.60, et seq.

(1.) DOL Procedures PWBA's Delinquent Filer Voluntary Compliance Program; Office of Chief Accountant Asked Question, Delinquent Filer Voluntary Compliance Program; www.dol.gov/ebsa/faqs_dfve.html.

(1.) DOL Procedure: PWBA's Delinquent Filer Voluntary Compliance Program; Office of Chief Accountant Frequently Asked Questions; Delinquent Filer Voluntary Compliance Program; www.dol.gov/ebsa/faqs/faq_dfvc.html.

(1.) DOL Procedure: PWBA's Delinquent Filer Voluntary Compliance Program; Office of Chief Accountant Frequently Asked Questions; Delinquent Filer Voluntary Compliance Program; www.dol.gov/ebsa/faqs/faq_dfvc.html.

(1.) DOL Procedure: PWBA's Delinquent Filer Voluntary Compliance Program; Office of Chief Accountant Frequently Asked Questions; Delinquent Filer Voluntary Compliance Program; www.dol.gov/ebsa/faqs/faq_dfvc.html.

(2.) DOL News Release 08-1345.

(1.) DOL Procedure: PWBA's Delinquent Filer Voluntary Compliance Program; Office of Chief Accountant Frequently Asked Questions; Delinquent Filer Voluntary Compliance Program; www.dol.gov/ebsa/faqs/faq_dfvc.html.

(2.) DOL Procedure: PWBA's Delinquent Filer Voluntary Compliance Program; Office of Chief Accountant Frequently Asked Questions; Delinquent Filer Voluntary Compliance Program: www.dol.gov/ebsa/faqs/faq_dfvc.html.

(3.) DOL Procedure: PWBA's Delinquent Filer Voluntary Compliance Program; Office of Chief Accountant Frequently Asked Questions; Delinquent Filer Voluntary Compliance Program; www.dol.gov/ebsa/faqs/faq_dfvc.html.

(1.) DOL Procedure: PWBA's Delinquent Filer Voluntary Compliance Program; Office of Chief Accountant Frequently Asked Questions; Delinquent Filer Voluntary Compliance Program; www.dol.gov/ebsa/faqs/faq_dfvc.html.

(2.) DOL Procedure: PWBA's Delinquent Filer Voluntary Compliance Program; Office of Chief Accountant Frequently Asked Questions; Delinquent Filer Voluntary Compliance Program; www.dol.gov/ebsa/faqs/faq_dfvc.html.

(3.) DOL Procedure: PWBA's Delinquent Filer Voluntary Compliance Program; Office of Chief Accountant Frequently Asked Questions; Delinquent Filer Voluntary Compliance Program; www.dol.gov/ebsa/faqs/faq_dfvc.html.

(4.) See DOL Procedure: PWBA's Delinquent Filer Voluntary Compliance Program; Office of Chief Accountant Frequently Asked Questions; Delinquent Filer Voluntary Compliance Program; www.dol.gov/ebsa/faqs/faq_dfvc.html.

(1.) DOL Procedure: PWBA's Delinquent Filer Voluntary Compliance Program; Office of Chief Accountant Frequently Asked Questions; Delinquent Filer Voluntary Compliance Program; www.dol.gov/ebsa/faqs/faq_dfvc.html.

(1.) See 29 CFR [section] 2520.104-23.

(2.) DOL Procedure: PWBA's Delinquent Filer Voluntary Compliance Program; Office of Chief Accountant Frequently Asked Questions; Delinquent Filer Voluntary Compliance Program; www.dol.gov/ebsa/faqs/faq_dfvc.html.

(1.) DOL Procedure: PWBA's Delinquent Filer Voluntary Compliance Program; Office of Chief Accountant Frequently Asked Questions; Delinquent Filer Voluntary Compliance Program; www.dol.gov/ebsa/faqs/faq_dfvc.html.

(2.) DOL Procedure: PWBA's Delinquent Filer Voluntary Compliance Program; Office of Chief Accountant Frequently Asked Questions; Delinquent Filer Voluntary Compliance Program; www.dol.gov/ebsa/faqs/faq_dfvc.html.

(3.) See sections 5.02 and 5.03 of the DFVC Program Federal Register Notice and IRS Notice 2002-23. See also, DOL Procedure: PWBA's Delinquent Filer Voluntary Compliance Program; Office of Chief Accountant Frequently Asked Questions; Delinquent Filer Voluntary Compliance Program; www.dol.gov/ebsa/faqs/faq_dfvc.html.

(1.) RIN 1210-AA67 and RIN 1210-AA68, 64 Fed. Reg. 42797 (8-5-99). ERISA Secs. 104(a)(6), 502(c)(6); Labor Reg. [section] 2560.502c-6.

(1.) ERISA Sec. 104(a)(6).

(2.) ERISA Sec. 502(c)(6).

(3.) ERISA Sec. 101(c).

(4.) ERISA Sec. 302(c)(8)(C).

(5.) Notice of the Withdrawal of a Substantial Employer;

(6.) Annual Reports (Form 5500); and

(7.) Terminal Reports.

(1.) ERISA Sec. 4244A(b)(1)(A).

(2.) ERISA Sec. 4245(e)(1).

(1.) Prop. Regs. [subsection]2520.101-6(a), 2520.101-6 (d).

(2.) Prop. Regs. [subsection]2520.101-6(b)(1), 2520.101-6(2).

(1.) Prop. Reg. [section] 2520.101-6(c)(1).

(2.) Prop. Regs. [section] [section] 2520.101-6(c)(2)(A), 2520.101-6(B).

(3.) Prop. Regs. [section] [section] 2520.101-6(b)(3),2520.101-6 (4).

(4.) Prop. Reg. [section] 2520.104b-30. Prop. Labor Reg. [section] 2520.101-6; Prop Labor Reg. [section] 2520.104b-30. 72 Fed. Reg. 52527, Sept. 14, 2007.

(1.) Staib v. Vaughn Industries, 2001 U.S. Dist. LEXIS 17838 (N.D. Ohio).

(2.) Caputo v. Pfizer, Inc., 2001 US App LEXIS 21707 (2nd Cir. 2001).

(3.) Bins v. Exxon Co. USA, 24 EBC 2377 (9th Cir. 2000).

(4.) See Labor Reg. [section] 2575.502c-6, 68 Fed. Reg. 2875 (January 22, 2003).

(5.) Lowe v. McGraw-Hill Companies, Inc., 361 F.3d 335 (7th Cir. 2004).

(1.) Zirnhelt v. Michigan Consol. Gas Co. (2008, 6th Cir.) 526 F.3d 282.

(2.) Jordan v. Tyson Foods, Inc., 2008 WL 3876422 (6th Cir. 2008).

(3.) Preamble to Prop. Labor Reg. [section] [section] 2550.404a-5 and 2550.404c-1, 73 Fed. Reg. 43014, July 23, 2008.

(4.) Prop. Labor Reg. [section] 2550.404a-5(b).

(5.) Prop. Labor Reg. [section] 2550.404a-5(a).

(1.) Prop. Labor Reg. [section] 2550.404a-5(c)(1)(i)(A) through (E).

(2.) Prop. Labor Reg. [section] 2550.404a-5(c)(1)(ii).

(3.) Prop. Labor Reg. [section] 2550.404a-5(c)(2)(i).

(4.) Prop. Labor Reg. [section] 2550.404a-5(c)(2)(ii)(A) and (B).

(5.) Prop. Labor Reg. [section] 2550.404a-5(c)(3)(i) and (ii)(A) and (B).

(6.) Prop. Labor Reg. [section] 2550.404a-5(d)(1)(i)(A) through (D).

(1.) Prop. Labor Reg. [section] 2550.404a-5(d)(ii).

(2.) Prop. Labor Reg. [section] 2550.404a-5(d)(iii).

(3.) Prop. Labor Reg. [section] 2550.404a-5(d)(iv)(A), (B) and (C).

(4.) Prop. Labor Reg. [section] 2550.404a-5(d)(v)(4)(i) through (iv).

(5.) Prop. Labor Reg. [section] 2550.404a-5(e)(1), (2) and (3).

(6.) ERISA Sec. 104(a)(6).

(7.) Labor Reg. [section] 2520.102-3.

(1.) Labor Reg. [section] 2520.102-3.

(2.) Labor Reg. [section] [section] 2520.102-3(j)(2) and (3).

(3.) Labor Reg. [section] 2520.102-3(j)(3).

(1.) Labor Reg. [section] 2520.102-3(j)(1).

(2.) Labor Reg. [section] 2520.102-3(j)(2).

(3.) Labor Regs. [subsection]2520.102-3(t)(2) and (u)(1).

(4.) ERISA Sec. 102(a).

(5.) Labor Reg. [section] 2520.102-2(c)(1).

(6.) Labor Reg. [section] 2520.104-4.

(1.) ERISA Sec. 104(b)(1); Labor Reg. [section] 2520.104b-2(a).

(2.) Labor Reg. [section] 2520.104b-2(a)(3).

(3.) ERISA Sec. 104(b)(4) (emphasis added).

(4.) ERISA Sec. 502(c)(1); Labor Reg. [section] 2570.502c-1.

(5.) ERISA Section 104(b)(4).

(6.) Crotty v. Cook, 121 F.3d 541 (9th Cir. 1997).

(1.) See Hunter v. Lockheed Martin Corp., 202 U.S. Dist. LEXIS 13797 (N.D. Ca. 2002).

(2.) Brenner v. Johns Hopkins Univ., 2004 U.S. App. LEXIS 2339 (4th Cir. 2004).

(3.) Bailey v CIGNA Insurance, et al, 32 EBC 1720 (5th Cir. 2004).

(4.) Technical Release 84-1, 5A Pension Plan Guide (CCH) 22,475.

(1.) ERISA Sec. 104(b)(1).

(2.) Labor Reg. [section] 2520.104b-2(b).

(3.) ERISA Secs. 102(a)(1), 104(b)(1); Labor Reg. [section] 2520.104b-3(a).

(4.) Labor Reg. [section] 2520.104b-3(a).

(5.) Labor Reg. [section] 2520.104b-3(a).

(6.) Labor Reg. [section] 2520.104b-3(b).

(7.) DOL Adv. Op. 80-32A.

(1.) Labor Reg. [section] 2520.102-3(v)(1).

(2.) ERISA Sec. 711(d); Labor Reg. [section] 2520.1023(v)(2).

(3.) ERISA Sec. 104(b)(3); Labor Reg. [section] 2520.104b-10.

(4.) Labor Regs. [section] [section] 2520.104b-10(d)(3), 2520.104b-10(d)(4).

(5.) Labor Reg. [section] 2520.104b-10(c).

(6.) Labor Reg. [section] 2520.104b-10(e).

(1.) Labor Reg. [section] 2520.104b-10(g).

(2.) DOL Adv. Op. 79-64A.

(3.) ERISA Sec. 103(d)(11).

(4.) ERISA Sec. 104(b)(3).

(5.) ERISA Sec. 205(c)(3); IRC Sec. 417(a)(3)(A).

(6.) ERISA Sec. 205(c)(5)(A); IRC Sec. 417(a)(5)(A).

(1.) ERISA Sec. 205(c)(3)(B); IRC Sec. 417(a)(3)(B)(i).

(2.) ERISA Sec. 205(c)(3)(B); IRC Sec. 417(a)(3)(B)(ii).

(3.) ERISA Sec. 205(c)(5)(A); IRC Sec. 417(a)(5)(A).

(1.) IRC Sec. 402(f).

(2.) See also, Labor Reg. [section] 2550.404a-2.

(3.) ERISA Sec. 104(c).

(4.) See Labor Reg. [section] 2520.102-3(t)(2).

(1.) Labor Reg. [section] 2520.102-3(t)(2).

(2.) Labor Reg. [section] 2520.102-3(t)(1).

(3.) Labor Reg. [section] 2520.102-3(t)(2).

(1.) Labor Reg. [section] 2520.104-46.

(2.) Labor Reg. [section] 2520.104-46(b)(1)(i)(A)(1) and (2).

(3.) Labor Reg. [section] 2520.104-46(b)(1)(i)(C)(ii).

(1.) Labor Reg. [section] 2520.104-46(b)(1)(i)(B).

(2.) Labor Reg. [section] 2520.104-46(b)(1)(i)(C).

(3.) ERISA Sec. 105(a).

(4.) ERISA Sec. 209(a).

(1.) See Field Assistance Bulletin 2006-3.

(2.) ERISA Sec. 502(a)(1).

(1.) A copy of the DOL pamphlet on 401(k) plan fee disclosure is available on the internet at www.dol.gov/ebsa/.

(2.) ERISA Sec. 4011.

(3.) PBGC Reg. [section] 4011.8.

(4.) PBGC Reg. [section] 4011.10.

(1.) PBGC Reg. [section] 4011, App. A. See Appendix A.

(2.) ERISA Sec. 101(d).

(3.) DOL Field Assistance Bulletin 2007-03 (Oct. 12, 2007), www.dol.gov/ebsa/regs/fab2007-3.html.

(4.) ERISA Sec. 502(c)(1).

(5.) DOL Adv. Op. 11-86.

(6.) Rev. Proc. 94-22, 1994-1 CB 608.

(1.) Rev. Proc. 94-22, 1994-1 CB 608.

(2.) PBGC Adv. Op. 91-8.
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Title Annotation:CHAPTER 1: ESTABLISHMENT AND ADMINISTRATION
Publication:ERISA Facts
Date:Jan 1, 2010
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