Update: DOL Issues Transition Relief for 403(b) Plan Reporting and Audits

Update posted on September 10 2009 Back to Blog

In response to concerns raised by the AICPA 403(b) Plan Task Force and administrators and service providers with the new Form 5500 reporting and audit requirements for section 403(b) plans, the U. S. Department of Labor’s Employee Benefits Security Administration (EBSA) has provided transition relief for 403(b) plans administrators that make good faith efforts to transition for the 2009 plan year to ERISA’s generally applicable annual reporting requirements. The relief is limited to the Form 5500 annual reporting requirements, including the independent audit requirement for large plans.

DOL Field Assistance Bulletin (FAB) No. 2009-02, Annual Reporting Requirements for 403(b) Plans, is available on the DOL website at http://www.dol.gov/ebsa/regs/fab2009-2.html. (See previous EBPAQC EAlerts #’s 121, 134 and 160)

Exclusion of certain pre-January 1, 2009 annuity contracts and custodial accounts as plan assets for ERISA reporting purposes- The administrator of a 403(b) plan does not need to treat annuity contracts and custodial accounts as part of the employer’s Title I plan or as plan assets for purposes of ERISA’s annual reporting requirements provided that:

1. The contract or account was issued to a current or former employee before January 1, 2009;

2. 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 January 1, 2009;

3. 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

4. The individual owner of the contract is fully vested in the contract or account.

Participant counts- Current or former employees with only contracts or accounts that are excludable from the plan’s Form 5500 or Form 5500-SF under the transition relief do not need to be counted as participants covered under the plan for Form 5500 annual reporting purposes.

Auditor reports- The Department will not reject a 403(b) plan Form 5500 on the basis of a qualified, adverse or disclaimed opinion if the accountant expressly states that the sole reason for such an opinion was because such pre-2009 contracts were not covered by the audit or included in the plan’s financial statements. (Note that the auditor must still perform the audit in accordance with generally accepted auditing standards.) Questions concerning the information may be directed to the DOL’s Division of Coverage, Reporting and Disclosure at 202-693-8523. Questions concerning individual plans facing specific transition issues should be directed to EBSA’s Office of the Chief Accountant at 202-693-8360.

The AICPA 403(b) Plan Task Force will be meeting soon to discuss the impact of the transition relief. Look for future EAlerts for additional information on implementation of the 403(b) plan reporting and audit requirements.

IRS Circular 230 Disclosure - As required by IRS rules, although this written communication may address certain tax issues, the issuer of this document did not intend nor write the advice to be used to avoid any penalty imposed by a taxing authority, nor may the user/recipient of this document use this document’s written tax advice for that purpose. Nor may it be used to promote, market or recommend to another party any transaction or matter addressed herein.