Department of Labor Eases Form 5500 Reporting Requirements for 403(b) Plans

Department of Labor Eases Form 5500 Reporting Requirements for 403(b) Plans

In Field Assistance Bulletin (FAB) 2009-02 issued on July 20, 2009, the Department of Labor (DOL) provided transition relief for administrators of 403(b) plans that are subject to annual reporting under ERISA (i.e. Form 5500). The Form 5500 filing requirements generally apply to all 403(b) plans other than governmental and church plans.

Historically, ERISA 403(b) plans have been subject to very limited annual reporting requirements. However, when the DOL published revisions to the Form 5500 and related final regulations in 2007, the special limited reporting for 403(b) plans was eliminated. Under the new annual reporting rules, generally effective for the 2009 Form 5500 filing due in 2010, 403(b) plans must file the full Form 5500 and applicable schedules that have long applied to qualified plans. Moreover, like qualified plans, 403(b) plans with 100 or more participants (large plans) must now include audited financial statements with their Form 5500s. All plans, qualified and 403(b) plans, will also have to comply with new reporting requirements for plan fees and expenses on the 2009 Form 5500.

Many employers expressed concern with the expanded Form 5500 requirements, and in particular the audit requirement, arguing that due to the historic nature of 403(b) plans as a collection of individual contracts, it would be difficult and costly to secure financial information about annuity contracts and custodial accounts issued and discontinued before January 1, 2009. The final 403(b) regulations issued by the IRS, which became effective January 1, 2009, require employers to be responsible for their 403(b) plan and all contracts issued under that plan. While the Internal Revenue Service issued transitional relief in Revenue Procedure 2007-71 that imposed only minimal responsibilities on 403(b) plan administrators with respect to contracts and accounts issued before 2009 to which contributions were no longer being made after 2008, the DOL had not issued similar relief. The DOL issued FAB 2009-02 in response to these concerns.

Under FAB 2009-02, pre-2009 annuity contracts and custodial accounts are not treated as part of the employer's ERISA plan or as plan assets for purposes of the Form 5500 filing requirements. In addition, former or current employees holding only these contracts or accounts are not counted as participants covered under the plan for annual reporting purposes. This transition relief only applies if certain conditions are satisfied, namely:

the contract or account was issued to a current or former employee before January 1, 2009;
the employer stopped making contributions to the contract or account before January 1, 2009, and had no obligation to make contributions after such date (including employee salary reduction contributions);
all of the rights and benefits under the contract or account are legally enforceable against the insurer or custodian by the individual owner of the contract or account without any involvement by the employer; and
the individual owner of the contract is fully vested in the contract or account.

The transition relief further states that the DOL will not reject a qualified, adverse or disclaimed opinion in the audited financial statements so long as the sole reason for the opinion was because the pre-2009 contracts or accounts were not covered in the audit.

For more information about FAB 2009-02 and how the transition relief impacts your 403(b) plan, please contact Tara Sciscoe, Mary Beth Braitman, Jim Kemper or your Ice Miller LLP employee benefits attorney.