SunGard Relius

In our continuing series of FAQs on EFAST2, we are addressing the issues and procedures with which the 5500 preparers and plan sponsors will need to familiarize themselves to make the transition to electronic filing. 5500 preparers and plan sponsors need to understand that an important consequence of electronic filing is that the DOL and IRS will have immediate information as to whether a Form 5500 filing is timely. The following FAQs address the issues relating to deadlines, extensions and the Delinquent Filing Voluntary Compliance Program.

Will the DOL apply the same deadline for filing a Form 5500 under EFAST2 as under EFAST?

Yes. The DOL and IRS will apply the same deadline for filing a Form 5500 under EFAST2 as applies under EFAST – the last day of the 7th month after the close of the plan year. Note: We expect the transition to EFAST2 to be difficult, so we would not be surprised if the DOL grants a general extension for 2009 filings. Unfortunately, the DOL may not announce such an extension until late in the filing season.

Will a plan sponsor continue to use a Form 5558 to obtain a 2½ month extension to file a Form 5500?

Yes. A plan sponsor will use a Form 5558 to obtain an extension to file a Form 5500 under EFAST2. The plan sponsor also will continue filing the form with the IRS rather than the DOL.

May an employer continue to take advantage of the automatic extension under EFAST2?

Yes. If the plan sponsor’s taxable year and the plan year are the same, and the sponsor extends the due date of its income tax return, the plan sponsor will qualify for an extension for filing its Form 5500 until the extended due date of the plan sponsor’s tax return.

Under EFAST2, must the plan sponsor attach the Form 5558 or the plan sponsor’s extension request to the Form 5500 filing?

No. Unlike EFAST, where the plan sponsor must attach to the Form 5500 filing either the Form 5558 or the plan sponsor’s extension request, under EFAST2, the plan sponsor attaches neither the Form 5558 nor the plan sponsor’s extension request to the filing. The preparer simply checks the appropriate box under line D on the Form 5500 indicating the type of extension obtained (i.e., Form 5558, automatic extension or special extension).

Will the Delinquent Filer Voluntary Compliance (DFVC) Program continue to be available under EFAST2?

Yes. The 5500 preparer will check the box under line D of the Form 5500 indicating that it is filing under the DFVC program. Recent comments by DOL officials indicate that they intend for plan sponsors to use the DFVC Program to correct late filings. Whether such comments mean that DFVC will be the exclusive method for correcting late filings is unclear. A preparer that relies on a written request to abate the penalty for reasonable cause is taking a risk of substantially higher penalties than will apply if the preparer simply files under DFVC. A preparer that decides to request an abatement of the penalties will need to attach the request as an attachment to the late-filed Form 5500.

Preparers also should be aware that under EFAST2, the DOL and IRS will know immediately of a late Form 5500 filing. Currently, it may take the DOL up to a year to process the return. The delay provides a preparer time to deal with a late filing. Under EFAST2, the preparer will not have the same luxury of time. We recommend that preparers deal with late filings quickly and through the DFVC Program. However, plan sponsors filing a Form 5500-EZ are not eligible for DFVC. 5500-EZ filers should attach a letter requesting an abatement of the penalty when filing late. Generally, the IRS has been reasonable in abating penalties if the request is included with the filing.

5500 Workshop/401(k) Workshop. In our upcoming 5500 workshop, not only will we address all of the important questions and issues in the 5500, 5500-EZ, and schedules, we also will explain how to use and prepare effectively for EFAST2. We also have scheduled our 401(k) Plan Workshop to follow the 5500 Workshop. The topics for the 401(k) Workshop include the Suspension of the Required Minimum Distribution;, PPA ’06 Technical Corrections; New Guidance of Permissive Disaggregation; Safe Harbor 401(k) Plan Design; Participants in Financial Difficulties: loan defaults, hardship distribution and QDROs; and Complex Testing of Ordinary Allocations; and Penalties and Additional Income Taxes. For more information on the seminars, click here.

The 5500 Filing Guide is a comprehensive guide to completing the 5500 (and schedules) effectively and efficiently. The recently updated book not only includes practical explanations of each line on all the forms and schedules, but it also provides hundreds of examples and FAQs. For information on how to order the book, click here.

Relius Government Forms. SunGard’s Relius Government Forms 5500 Web Client is a secure, interactive, online solution that can help you and your clients meet the challenges posed by EFAST2. For more information, see our Web site.

Question and Answer Pamphlet on EFAST2. To help 5500 preparers explain the changes made by EFAST2, SunGard has prepared a Q&A pamphlet to answer the employers’ questions. Find out more here.