JULY 2009 Pension Plan tip of the month...
Annual Administrative Reports/5500 Package
Every year, we provide each of our clients a packet of administrative reports, required filings, testing and summaries pertaining to their Plan. This package broadly represents the activity and compliance work for the Plan for the designated Plan Year.
The package comes in one of two formats based upon each client’s preference; either a hardcopy binder or CD. Typically accompanying the binder or CD are two important items: a cover letter and the 5500 filing along with the Summary Annual Report.
The cover letter provides a synopsis of Plan items and issues as well as items requiring action. It is imperative to review all items on this letter and respond accordingly.
The 5500 is a time sensitive document. Please review the cover instructions concerning when and where it should be filed. The 5500 is typically due 7 months after your Plan Year End (unless an extension is requested from the IRS/DOL, which allows you an additional 2 ½ months). Therefore, if your Plan Year end is 12/31, your filing due date is 7/31, if you are not on extension. It is imperative that your 5500 be filed by this deadline, as there are severe penalties for not filing timely. Paragon provides you with a signature ready Form 5500. Please execute the Form 5500 where indicated and forward the Form and attached Schedules to the address provided in the cover letter before the filing deadline. If your Plan requires an annual audit, an extension is typically necessary to provide your independent auditor sufficient time to review the plan’s financial information and prepare an Audit Report to attach to the Form 5500. In cases where an extension is needed, your Account Executive will file the extension on behalf of the plan. Feel free to contact your Account Executive with any questions regarding this.
The Summary Annual Report-Must be distributed to plan participants no later than 60 days following the filing of the Form 5500.
Contents of the Year end Binder or CD
Below is a brief summary of additional features and information that can, for most plans, be found in the administrative packet.
Introductory Reports-The cover page identifies the Plan name and reporting period followed by a summary of a few of the major Plan specifications including eligibility requirements and vesting schedule(s) as well as the Plan’s Asset Reconciliation which gives an overview of account financial activity.
Census – This gives a complete demographic listing of all participants and/or current employees of the Plan sponsor. This report is particularly important in identifying employee status, entry date and years of credited service.
Contribution – Applicable reports might include a Contribution Analysis report listing participants and their plan contributions, a Maximum Employer Deductibility report helping to determine appropriate deduction levels and an Allocation Report detailing any employer contributions and corresponding detail by participant. We've also added a report listing participants over age 50 who could take advantage of the "catch up" provision allowing them to defer up to $5,500 more of their pay on a non-tested basis.
Compliance Testing – The applicable compliance tests for the Plan are contained in this section. This section delves into the details of required plan discrimination tests. These may include ADP/ACP testing of 401(k) deferrals and corresponding matching contributions, 410(b) coverage analysis, 401(a)(4) testing measuring benefit levels, 416 testing determining the Plan’s Top-Heavy status and Section 415 testing the annual additions limitation for each participant. Each compliance test is important in its own way and each is required to be satisfied in order for the Plan to keep its tax qualified status.
Summary of Accounts – This reports applicable account activity by participant including contributions, distributions and earnings for the period. Beginning, ending and vested account balances are listed. Also included is a Plan summary account of all participants by money source.
Government Forms – A copy of the unsigned 5500 and all attachments for your files as well as a copy of the Summary Annual Report which is given to all participants is included here. If your plan requires an independent audit, a DRAFT copy will be enclosed for review by your auditor.
Miscellaneous – Additional pertinent reports would be contained here such as the Terminee Report detailing any distributions that may have been paid out during the period or terminated participants that still have an account balance.
The requirements for a qualified retirement Plan are vast and complex. This package is just one of the tools used by The Paragon Alliance Group, LLC to help keep your Plan in compliance and remain tax qualified. When you receive each package, please review all information and contact your Paragon Account Executive with any questions you may have. Your Paragon Account Executive will contact you shortly after the package has been sent. Please do not hesitate to call for immediate assistance.