Revised Form 5500 and information reporting.
A change that may prove particularly thorny is the enhanced reporting by direct filing entities (DFEs) and by the plans that invest in them "Direct filing entity" describes those investment arrangements that hold plan assets or provide benefits for several, possibly unrelated, plans. DFEs include bank common/collective trusts (CCTs), insurance company pooled separate accounts (PSAs), master trust investment accounts (MTIAs), group insurance arrangements (GIAs) and 103-12 Investment Entities (103-12 IEs).
Direct filing is optional for CCTs, PSAs, GIAs and 103-12 IEs However, such direct filing can substantially reduce a plan's filing requirements or costs associated with such entities; see Employee Retirement Income Security Act of 1974 (ERISA) Regs. Sections 2520.103-3-5,-8 and -9, 2520 104-43 and 2520 103-12. Direct filing is mandatory for MTIAs.
Given the many changes, a DFE'S sponsor needs to consider the benefits of filing Form 5500 for each DFE that it sponsors. For example, a bank may offer four different CCTs to its retirement plan customers; many local businesses may invest their retirementplan assets in these CCTs When the bank files four Forms 5500 (one for each CCT), any plans subject to a financial audit will have significantly fewer disclosures required on filing. The Form 5500 is due within nine-and-a-half months after the end of the trust year.
The new Form 5500 instructions provide specific guidance about DFE filing requirements. Pages 8-10 include a table illustrating which schedules must be attached to the form. In general, a Form 5500 filed for a DFE will include Schedules D and H. Schedule D lists the name, plan number, sponsor's name and employee identification number (EIN) for each retirement or welfare plan that invests in the DFE. Schedule H shows the DFE's assets and liabilities.
DFE sponsors should take action now to compile the information they will need to file their Forms 5500.
Plan sponsors whose plans invest in DFEs also have enhanced reporting requirements. They now are required to list the DFE's name, sponsor and EIN, and the plan's number and value on Form 5500. Sponsors will also need to determine whether any eligible entity complied with the voluntary direct filing; if not, the PSA, CCT or 103-12 IE would not be considered a DFE.
To improve tracking of plan assets, the IRS intends to cross-check the information it receives from a DFE with the information reported by participating plans. Therefore, plan sponsors should take steps now to obtain required information from the banks and insurance companies that hold their retirement and welfare plan assets.
FROM BECKY MILLER, ROCHESTER, MN
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|Publication:||The Tax Adviser|
|Date:||Apr 1, 2000|
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