IRS Forms 5500 Without Audit Reports Will Not Be Accepted, EFAST2 Filing Procedures, Schedule Changes, and IRS Form 5500-SF

In recent posts we have been discussing the 2009 IRS Forms 5500 Electronic Filing Requirements, the EFAST2 Filing System, and the EFAST2 Filing System Credentials. Three new informative articles on EFAST are now online.

Attachments and Plan Audits discusses how the electronic filing system will handle attachments, including audit reports, in FAQ format. The plan sponsor will have to attach all attachments, including the audit report, in .pdf or plain text format, and will require a "wet" signature:

Under EFAST2, the accountant's opinion must be on the accounting firm's letterhead with the firm's name, address and phone number. The opinion must also include a "wet" signature of the accountant. A wet signature is an actual signature which the accountant creates by hand using a pen on the opinion. Accordingly, the accountant will scan the opinion into PDF format. The accountant may not use text files for the opinion.

If an accountant's opinion is required, a Form 5500 will not be accepted without it:

Unless the plan is exempt from the accountant's opinion requirement, the preparer may NOT file the Form 5500 without the accountant's opinion. If a preparer attempts to file without the opinion, the DOL will not accept the filing. Note: in the past, if the opinion was not ready by the extended deadline for filing the Form 5500, preparers would file the Form 5500 without the opinion to avoid the late filing penalties and then later, when the accountant completed the opinion, amend the filing to include the opinion. Although the DOL never officially recognized this technique, it never objected to it. Generally, by the time the DOL scanned the filing, the opinion was included. Accordingly, the preparer needs to warn the accountant that this technique will not be available under EFAST2.

Electronic Filing Procedures provides the steps that a preparer will follow using the IFILE or a third-party web based system. The DOL will make the filing publicly available on its website within 90 days.

Modifications to Form 5500 and Schedules discusses the elimination of Schedule E and SSA. Some Schedule E questions will be moved to Schedule R and Schedule SSA will be filed separately with the IRS:

Since the Schedule SSA will no longer be part of the Form 5500 filing, it is not part of EFAST2. Instead, the preparer will complete a new "Form" SSA using paper copies (no bar codes) of the form. The preparer then will file the form directly with the IRS. The IRS intends to provide electronic filing for the Form SSA filing in 2011.

It also discusses the new two-page IRS Form 5500-SF which will also be publicly available on the DOL website:

A pension or welfare plan is eligible to file a Form 5500-SF if the plan: (1) covers fewer than 100 participants (the 80/120 rules applies); (2) is eligible for the audit waiver; (3) has no employer securities; and (4) has 100% of its assets invested in investments with a readily ascertainable market value.

Note that it appears that most ESOPs will not qualify to use the IRS Form 5500-SF.

It also shares a summary of the IRS Forms 5500 changes:

Some of the more important modifications are as follows:

1. Form 5500
   New options to designate the type of extension obtained and a box for DFVC filing
   Modifications to participant count question
   Removing the preparer information question
   New feature codes for default investment and automatic enrollment
   New multiple employer question
   
2. Schedule A
   Question to report insurance companies which do not provide information
   
3. Schedule C
   Reporting information on persons receiving only eligible indirect compensation
   Reporting information on other service providers receiving direct and indirect compensation
   Modification to service provider information
   Increasing the dollar threshold for non-fiduciary employees of the plan
   Question to report service providers which do not provide necessary information
   
4. Schedules H and I
   Blackout period question
   Compliance question regarding payment of benefits
   Supporting schedules for Schedule H do not need to list participant directed accounts
   Standard supplemental schedule for reporting late deposits of deferrals
   
5. Schedule R
   ESOP questions
   Multiemployer defined benefit plan questions
   Additional information for single employer and multiemployer defined benefit plan

Here is a complete list of the FAQ:

• Will a plan sponsor electronically file attachments and plan audits (attachments)?
• In what formats must the preparer provide the attachments?
• Under EFAST2, how many potential attachments are includible?
• Under EFAST2, what requirements apply to the accountant's opinion?
• May a plan sponsor file a Form 5500 without the accountant's opinion?
• How will the DOL prevent a preparer from filing a Form 5500 without the accountant's opinion?
  Will the Schedule SB or MB require a "wet" signature on the part of the actuary?
• What are the steps a 5500 preparer will follow in filing a Form 5500 electronically under IFILE (or using third-party software uploaded to IFILE)?
• What are the steps a 5500 preparer will follow in filing a Form 5500 electronically under a third-party web-based system?
• Does the DOL consider a Form 5500 filed on the date it is submitted or on the date the DOL accepts the filing?
• How quickly will the DOL make a Form 5500 filing publicly available on its website?
• What schedules will no longer be a part of a Form 5500 filing under EFAST2?
• How will a plan sponsor file a Schedule SSA under EFAST2?
• Will a plan sponsor be able to include attachments to the Form SSA to report additional participants beyond the four spaces provided in the schedule?
• Will there be any new forms under EFAST2?
• Which plans will qualify to file a Form 5500-SF?
• What schedules will a preparer include with a Form 5500-SF?
• Under EFAST2, must a plan sponsor file a Form 5500-EZ electronically?
  Under EFAST2, what modifications will be made to the Form 5500 or the schedules?