Mandatory Electronic Filing Applies to Form 5500 Soon!

December 2009 Newsletter

When Congress passed the Pension Protection Act of 2006 (PPA), it enacted several provisions that affect your Form 5500 filing. The first provision requires that you file Form 5500 electronically, thereby eliminating the expensive paper processing system currently in use by the government.

The second important provision of the PPA relating to reporting and disclosure is the creation of an electronic public disclosure "room" on the Department of Labor's (DOL) web site. Both of these provisions apply to just about every Form 5500 filing made after December 31, 2009.


The new fully electronic processing system is known as EFAST2 and is scheduled to go live on January 1, 2010. Electronic filing applies to all Form 5500 reports filed for plan years beginning on or after January 1, 2009, except Form 5500-EZ which will be filed directly with the IRS on paper. In addition, any amended or late filings submitted after December 31, 2009 must be filed electronically using the new system.

Three Components

EFAST2 has three components:

Internet Registration System (I-REG)

I-REG is the first stop for anyone wanting to interact with the new EFAST2 system. Each person will need an Internet connection and an email address to sign up for credentials via the I-REG program. There's more about establishing your electronic credentials below.

Internet Filing System (I-FILE)

I-FILE is a free, limited-function, web-based application that provides the ability to create, edit and submit filings for a valid form and plan year. The I-FILE application includes validation, authentication and specific edit tests/checks to make sure the filing is complete before it is submitted. While most third-party preparers will opt to use software created by an EFAST2-approved vendor, a plan sponsor may find the application useful for preparing filings for welfare plans or small retirement plans.

Internet Filing Acceptance System (I-FAS)

I-FAS, as previously noted, actually processes the filings as they are electronically submitted. The most important feature of I-FAS is that it establishes the "filing status" of the transmitted filing. The possible filing status messages are:

Who Needs Credentials?

The person(s) who signs the face of the Form 5500 on behalf of either the plan sponsor or the plan administrator (or both) must apply for "signer" credentials using the I-REG system. Plan sponsors will receive a postcard from the DOL, probably in January 2010, inviting them to apply for their credentials. There are several important rules about these electronic credentials:

The majority of I-REG applicants will be seeking signer credentials only. The individual applying for credentials will log in to I-REG at  to register for his or her credentials. There will be a series of input screens for the person to act upon, culminating in the assignment of specific electronic credentials, comprised of a User ID and PIN.

Form 5500 preparers may apply for author and/or transmitter credentials in a similar fashion, although the need for such credentials will be driven by which EFAST2-approved third-party software vendor is selected.

Where Do I Sign?

While the new system is referred to as a paperless system, that is only on the part of the government. Plan sponsors must maintain a fully executed (wet signature) copy of the Form 5500 with all schedules and attachments. If the filing is for a defined benefit plan, the wet signature copy of the actuarial schedule, Schedule SB or MB, must be part of the plan's permanent records as well.

The instructions for the 2009 Form 5500 indicate that the filer may store the plan's copy electronically, so long as the electronic copy captures the handwritten signatures.

The electronic "signing ceremony," as it is dubbed, will be a new process for plan sponsors next year. Depending on the software used by your service provider, you will receive a notification (most likely by email) inviting you to link to the provider's software. There, you will be presented with a series of screens to act upon, thereby executing the signing ceremony. By inserting your User ID and PIN, you will have effectively signed the filing electronically.

The plan sponsor will no longer ship a paper filing off to Lawrence, Kansas. Instead, in many cases, the service provider will transmit the electronically signed filing and provide the plan sponsor a copy of the filing status report for its records. The filing status, as described earlier, is proof that the filing was processable and verifies the date and time of receipt by the EFAST2 system of the electronic filing.

Electronic Public Disclosure Room

The DOL has long maintained a Public Disclosure Room that holds all of the Form 5500 filings ever filed by any plan; however, access to data is available only by phone or by making a written request. Beginning with the 2009 Form 5500, the DOL will be building an electronic public disclosure function on its web site.

Only the filings processed by the EFAST2 system will appear on this database and information also will continue to be accessible through the old Public Disclosure Room. The DOL expects to post filings to the new site within 24 hours of receipt by the EFAST2 system.

What Do I Need To Do?

Fortunately, your service provider will be able to manage much of the transition to the electronic filing system for you. Software providers are still working out the details of their solutions so that everyone is ready for the January 1, 2010 go-live date. Watch for specific instructions from DOL and your service provider so that you are ready to make the jump to electronic filing.

2010 IRS and Social Security Annual Limitations

Each year the U.S. government adjusts the limits for qualified plans and social security to reflect cost of living adjustments and changes in the law. However, the 2009 limits will remain unchanged for 2010 because the applicable cost of living index has not been increased. Many of these limits are based on the "plan year." The elective deferral and catch-up limits are always based on the calendar year. Here are the 2010 limits as well as the three prior years for comparative purposes:

Limit 2010 2009 2008 2007
Maximum compensation limit $245,000 $245,000 $230,000 $225,000
Defined contribution plan maximum contribution $49,000 $49,000 $46,000 $45,000
Defined benefit plan maximum benefit $195,000 $195,000 $185,000 $180,000
401(k), 403(b) and 457 plan maximum elective deferrals $16,500 $16,500 $15,500 $15,500
     Catch-up contributions* $5,500 $5,500 $5,000 $5,000
SIMPLE plan maximum elective deferrals $11,500 $11,500 $10,500 $10,500
     Catch-up contributions* $2,500 $2,500 $2,500 $2,500
IRA maximum contributions $5,000 $5,000 $5,000 $4,000
     Catch-up contributions* $1,000 $1,000 $1,000 $1,000
Highly compensated employee threshold $110,000 $110,000 $105,000 $100,000
Key employee (officer) threshold $160,000 $160,000 $150,000 $145,000
Social security taxable wage base $106,800 $106,800 $102,000 $97,500
*Available to participants who are or will be age 50 or older by the end of the calendar year.

This newsletter is intended to provide general information on matters of interest in the area of qualified retirement plans and is distributed with the understanding that the publisher and distributor are not rendering legal, tax or other professional advice. Readers should not act or rely on any information in this newsletter without first seeking the advice of an independent tax advisor such as an attorney or CPA.

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