DoL Provides Relief on Form 5500 Reporting for 403(b) Plans

The DoL said the relief is limited to the Form 5500 annual reporting requirements, including the requirement for large plans to include as part of their annual report the report of an independent qualified public accountant (see 403(b) Plans to File Full Form 5500 ).

Specifically, FAB 2009-02 provides that the administrator of a 403(b) plan does not need to treat annuity contracts and custodial accounts as part of the employer’s Title I plan or as plan assets for purposes of ERISA’s annual reporting requirements provided that:

• the contract or account was issued to a current or former employee before January 1, 2009;
• the employer ceased to have any obligation to make contributions (including employee salary reduction contributions), and in fact ceased making contributions to the contract or account before January 1, 2009;
• 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.

In addition, the DoL said current or former employees with only contracts or accounts that are excludable from the plan’s Form 5500 or Form 5500-SF under the above transition relief do not need to be counted as participants covered under the plan for Form 5500 annual reporting purposes. The DoL also will not reject a Form 5500 on the basis of a “qualified,” “adverse” or disclaimed opinion if the accountant expressly states that the sole reason for such an opinion was because such pre-2009 contracts were not covered by the audit or included in the plan’s financial statements.

The Labor Department said it generally finds unacceptable and rejects Form 5500 filings with adverse, qualified or disclaimer opinions, which the American Institute of Certified Public Accountants (AICPA) said its members may do in the case of 403(b) plan filings.

Following passage of new 403(b) regulations in July 2007, the DoL separately published Form 5500 revisions and related final regulations generally effective for plan years beginning on or after January 1, 2009. Some plan administrators expressed concern that the historical treatment of 403(b) plans as a collection of individual contracts with respect to which employees could engage in a range of actions without the consent or involvement of an employer or plan administrator could make it costly, and in some cases impossible, to identify and obtain financial information about certain pre-2009 contracts and custodial accounts to which the employer is no longer making employer contributions or forwarding employee salary reduction contributions.

The FAB said employers and investment providers have noted in particular that in many cases they would not be able to obtain the information necessary to include these contracts and accounts in the expanded Form 5500 required for 403(b) plans beginning with the 2009 plan year (see Providers Need More Time and Guidance for Form 5500 Rules ). Moreover, even in cases where some annual reporting with respect to the contracts would be possible, the compliance efforts involved would be substantial and expensive.

FAB 2009-02 is here .