The ERISA consultants at the Columbia Management Retirement Learning Center Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs and qualified retirement plans. A recent call with an advisor in California is representative of a common inquiry related to 403(b) plans and Form 5500 reporting. The advisor asked:
“One of my 403(b) plan sponsor clients has a pre-2009 frozen 403(b) plan and an active ERISA Title I 403(b) plan. Are there any special Form 5500 reporting rules that apply in this case?”
Highlights of Discussion
• Therefore, based on this relief in FABs 2009-02 and 2010-01, a 403(b) plan sponsor would be able to exclude any pre-2009 403(b) annuity contracts and/or accounts from the current 403(b) plan’s Form 5500 report.
• Yes, the DOL, in Field Assistance Bulletin (FAB) 2009-02 and FAB 2010-01, has provided specific Form 5500 reporting guidance for 403(b) contracts or accounts issued to current or former employees before January 1, 2009 — so-called “grandfathered” 403(b)s.
• Specifically, the administrator of a 403(b) plan need not treat 403(b) annuity contracts and custodial accounts as part of the employer’s Title I plan or as plan assets for purposes of ERISA’s Form 5500 annual reporting and related independent audit requirements provided the following apply:
— the contract or account was issued to a current or former employee before Jan. 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 Jan. 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.
• Therefore, based on this relief in FABs 2009-02 and 2010-01, a 403(b) plan sponsor would be able to exclude any pre-2009 403(b) annuity contracts and/or accounts from the current 403(b) plan’s Form 5500 report.
Conclusion
Form 5500 reporting is an important compliance issue for plan sponsors. In recognition of the unique characteristics of 403(b) accounts and contracts issued prior to 2009, the DOL provided relief from the annual reporting and related auditing requirements, provided these grandfathered accounts and/or contracts meet certain criteria.
The Columbia Management Retirement Learning Center Resource Desk is staffed by the Retirement Learning Center, LLC, a third-party industry consultant that is not affiliated with Columbia Management. For informational purposes only. Please consult a tax advisor or attorney for specific tax or legal needs. © 2014 Columbia Management Investment Advisers, LLC. Used with permission.
