Form 5500 Resources

In preparation of the upcoming Form 5500 (extended) filing deadline here are some links that may be useful:

United States Department of Labor (DOL): current and past Form 5500 and Schedules (1995 through current)

United States Department of Labor (DOL): 2010 Form 5500 Instructions

Internal Revenue Service (IRS): Form 5500 Corner

Internal Revenue Service (IRS): Form 5500 Filing Tips

Internal Revenue Service (IRS): Form 5500EZ


United States Department of Labor (DOL): EFAST 2 Form 5500 and Form 5500-SF Filing Tips

United States Department of Labor (DOL): Form 5500 Data Sets -- Data from Form 5500 Filings

ASU 2010-25 -- Reclassifies Participant Loans

Prior to 12/15/10, participant loans were classified as investments in an Employee Benefit Plan. Effective for periods ending after December 15, 2010, ASU 2010-25 Plan Accounting – Defined Contribution Pension Plans (Topic 962) amends the ASC to reclassify participant loans from investments to notes receivable from participants. Participant loans are no longer subject to ASC 820 disclosure requirements. The provisions of ASU 2010-25 are to be applied retrospectively to all prior periods presented.

Under ASU 2010-25, current year and prior year participant loans should be classified as Notes Receivable from Participants under the Receivables section of the balance sheet. Appropriate disclosure of the Notes Receivable from Participants will need to be made in the Significant Accounting Policies note disclosure. The Participant loans will no longer be included in the ASC 820 disclosures.

The change in accounting principle will require disclosure in the year the Plan adopts ASU 2010-25. See ASC 250-10-50-1 through 250-10-50-3 for the required disclosures.

Participant loans should still be reported on Form 5500 Schedule H, Line 4i - Schedule of Assets (Held At End of Year).

Timely Use of Forfeitures in an Employee Benefit Plan

Recently the Internal Revenue Service (IRS) and Department of Labor (DOL) have been focusing some much needed attention on the timely use of forfeitures in employee benefit plans. Forfeitures are typically generated when participants who have non-vested employer contributions distribute their balances; the result is an amount of employer contributions left in the plan which are no longer allocated to a specific individual. 

The use of forfeitures should be authorized in the Plan Document. Typically, forfeitures are used to pay plan expenses, reduce employer contributions, or are allocated to remaining participants accounts.

The IRS has taken the position that forfeitures must be used or allocated to participants in the year incurred. Per the Spring 2010 IRS publication Retirement News for Employers: Revenue Ruling 80-155 states that a defined contribution plan will not be qualified unless all funds are allocated to participant’s accounts in accordance with a definite formula  defined in the plan.

This means that a Plan cannot carry forfeiture balances over from one year to the next. So what happens if forfeitures are maintained in the plan at year-end? For example, some plans make an employer contribution annually which is not determined until after year-end; would the plan be required to allocate forfeitures to participant accounts in lieu of reducing the post year-end employer contribution? Not necessarily.

The IRS makes it clear in the 2010 IRS publication Retirement News for Employers that the Plan will remain qualified if there are forfeitures maintained in the plan at year-end so long as:

1.    The plan document authorizes forfeitures to be used to pay plan expenses or to reduce employer contributions.

2.    There is an administrative plan/procedures in place to ensure that forfeitures will be used up promptly in the year in which they occurred or in some instances no later than the immediately succeeding plan year.

IT appears that IRS is more concerned with the plan using forfeitures within a reasonable time frame after the forfeitures occur in consideration of the overall design and operation of the plan. For example, forfeitures in a plan that makes weekly employer contributions should be $0 (or close to $0) as of year-end unless there were some forfeited accounts generated near year-end; in this case the forfeitures would need to be used promptly after year-end. However, for a plan with annual employer contributions which are determined subsequent to year-end, it would be appropriate to use the forfeitures as of year-end to reduce the subsequent employer contribution.

So, make sure that your plan is designed properly and that there are administrative procedures in place to ensure that forfeitures are used timely depending on the design and overall operation of the plan.