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  • Administration

Form 5500

  • Posted on May 7, 2021 by Legacy Retirement Solutions

Each year qualified retirement plans must successfully navigate through a myriad of deadlines and due dates.  One of the most important deadlines for most plan types relates to the Department of Labor’s annual filing of the Form 5500.  Each Form 5500 must accurately reflect the characteristics and operations of the plan or arrangement being reported. The requirements for completing the Form 5500 will vary according to the type of plan or arrangement. This filing is due by the end of the 7th month following the end of the plan year; for calendar plan years this is July 31st.  A plan may obtain a one-time extension of time to file a Form 5500 annual return/report (up to 2½ months) by filing IRS Form 5558, Application for Extension of Time To File Certain Employee Plan Returns, on or before the normal due date, thereby making the extended due date October 15th for calendar year plans.

As a plan sponsor or financial advisor, it is paramount that you maintain an open line of communication with your TPA or recordkeeper responsible for preparing this filing in order to avoid potential penalties and fines from both the Internal Revenue Service (IRS) and the Department of Labor (DOL).  In order to avoid delays in the preparation and filing of the form, here are some things you can do as the plan sponsor to assist your service provider.

  • Return your census and annual questionnaire to your TPA in a timely manner.
  • Evaluate and amend your plan’s Fidelity bond requirements with your insurance provider and share any changes in coverage with your TPA.
  • If you are a large plan requiring an audit, engage an independent auditing firm early in the year and schedule the audit to occur at least two months prior to the deadline or extended deadline to file the 5500.
  • Make sure that you know your DOL assigned UserID and PIN number when the filing is ready to be signed and electronically submitted.

  Administrative Penalties:

  1. A penalty of up to $2,194 a day (or higher amount if adjusted pursuant to the Federal Civil Penalties Inflation Adjustment Act of 1990, as amended) for each day a plan administrator fails or refuses to file a complete report. See ERISA section 502(c)(2) and 29 CFR 2560.502c-2.
  2. A penalty of $25 a day (up to $15,000) for not filing returns for certain plans of deferred compensation, trusts and annuities, and bond purchase plans by the due date(s). See Code section 6652(e).
  3. A penalty of $1,000 for not filing an actuarial statement (Schedule MB (Form 5500) or Schedule SB (Form 5500)) required by the applicable instructions. See Code section 6692.

Other Penalties:

  1. Any individual who willfully violates any provision of Part 1 of Title I of ERISA shall on conviction be fined not more than $100,000 or imprisoned not more than 10 years, or both. See ERISA section 501.
  2. A penalty up to $10,000, five (5) years imprisonment, or both, may be imposed for making any false statement or representation of fact, knowing it to be false, or for knowingly concealing or not disclosing any fact required by ERISA. See section 1027, Title 18, U.S. Code, as amended by section 111 of ERISA.

 

Failure to file your Form 5500 in a timely manner can be costly if not handled properly.  The fines and penalties can be mitigated through the Delinquent Filers Voluntary Correction (DFVC) program at a reduced rate in most circumstances.  Legacy Retirement Solutions specializes in assisting plans who have failed to timely file their Form 5500, call us for assistance today.

  • Administration

Plan Year Compliance Package

  • Posted on April 6, 2021 by Legacy Retirement Solutions

With the ever increasing need for complete disclosure; managing and maintaining all of the documents, forms, testing results, tax filings, etc. has become a daunting and exhaustive task.  In addition, the regulatory agencies charged with auditing and investigating retirement plans continue to raise their expectations with respect to the formal policies and procedures implemented and maintained by retirement Plan Sponsors in order to facilitate the compliant operation of their plan.

Legacy is here to help your Company satisfy these requirements and expectations by offering 3 different levels of Plan Year Compliance reporting for the Defined Contribution plans from our Standard and our Plus, right up to our Premium.  Each Plan Year report is designed to help your Company maintain a “single source” organized and streamlined record of a prior Plan Year’s operation.  We also have a compliance package for our Defined Benefit/Cash Balance Plans. Below is a listing of each Plan Year Compliance package offered along with a list of included reports and pricing.  Please contact us for more information.

 

Standard Package 

1. Summary of Test
     Results
2. Eligibility Status
3. 410(b) Test
4. Deductibility Test
5. Annual Additions
    Report
6. ADP/ACP Test
7. ADP/ACP Corrections
8. HCE & Key
    Determination
9. Top Heavy Report
$250 – Flash Drive
$350 – Hardcopy Binder

 

Plus Package

1. Standard Package
2. Basic Plan Document
3. Adoption Agreement
4. Summary Plan
     Description
5. SAS-70 Recordkeeper
6. Form 5500
7. Summary Annual
    Report
8. 5500 Reconciliation
9. Safe Harbor Notice
$400 – Flash Drive
$500 – Hardcopy Binder

 

Premium Package

1. Plus Package
2. Auditor Report
3. Administrative Report
4. Trust Report
5. Loan Summary Report
6. Investment Policy
    Statement*
7. 404(a)(5) Notice*
8. Auto Enrollment Notice*
9. QDIA Notice*
$500 – Flash Drive
$600 – Hardcopy Binder

 

Defined Benefit Package

1.    Valuations
2.    Summary of Plan Provisions
3.    Form 5500 with all applicable schedules
4.    SAR
5.    Plan Document
6.    Adoption Agreement
7.    SPD
8.    Amendments
9.    Participant Statements
10.  Trust Rpt/Brokerage Account statements
11.  AFTAP – Adjusted Funding Target Attainment Percentage
12.  AFN – Annual Funding Notice
13.  PBGC Filing, if applicable
$500 – Flash Drive
$600 – Hardcopy Binder

 

 

 *If applicable and subject to third-party provision of such documents, if necessary

  • Administration

Tax Credit For Small Employer Start-Up Plans

  • Posted on March 5, 2021 by Legacy Retirement Solutions

Many employers are unaware that, in certain circumstances, they may be eligible for a valuable tax credit in connection with their establishment of a retirement plan.   Although this particular tax credit has been available for almost two decades, it is still surprising to see the general lack of awareness that most plan sponsors have regarding this tax saving opportunity.  As a result, this article is intended to familiarize readers with this tax credit so that they can attempt to evaluate its application to their (or their client’s) tax situation.

Effective for tax years beginning on or after January 1, 2002, the Economic Growth and Tax Relief Reconciliation Act of 2001 (“EGTRRA”)[1] created a tax credit for “small employers” who establish a new “eligible employer plan”.  The credit is equal to up to 50 percent of the “qualified plan start-up costs” incurred for a period of up to three years.  In addition, a $500 maximum limit applies in relation to the credit for each of the three years that the credit may be claimed.

Recently, the Setting Up Every Community for Retirement Enhancement (“SECURE”) Act increased the original limits discussed above for tax years beginning after December 31, 2019. The revised value of the credit is now equal to up to 50 percent of qualified plan start-up cost for each of the first three years of the plan’s existence up to the greater of: 1) $500; or 2) the lesser of a) $250 per eligible non highly compensated employee; or b) $5,000. As a result of this change, the potential tax credit has substantially increased from a potential maximum of $500 per tax year to a potential maximum credit of $5,000 per year.

An employer may elect to initially apply the credit to the year the permissible plan is established or to the year before establishment.  Also, the employer may not deduct any start-up costs if it claims the credit.

As you can see, there are several very important “defined terms” included within the authorizing language for the credit that are critical to determining its availability to any particular plan sponsor.  First of all, only a “small employer” is eligible to claim this tax credit.  In this context, a small employer is defined in the same manner as it is used in conjunction with SIMPLE plans.  Thus, in general, a small employer for purposes of this tax credit is an employer with 100 or fewer employees who received at least $5,000 of compensation from such employer for the preceding year.

Another important consideration is that the start-up credit is only available with respect to the establishment of an “eligible employer plan”.  In general, an eligible employer plan is a tax-qualified plan under section 401(a) of the Code (such as a profit sharing plan, 401(k) plan and/or defined benefit plan, among others), Simplified Employee Pension Plan (“SEP”) or Savings Incentive Match Plan for Employees (“SIMPLE”).  In addition, in order to qualify for the credit, the newly established plan must have at least one participating non-highly compensated employee.  This final “eligible plan” qualification is of great importance because it effectively eliminates the credit with regard to “solo(k)” plans.

Finally, the credit may only be applied in connection with “qualified plan start-up costs”.  For this purpose, qualified plan start-up costs are any ordinary or necessary expenses incurred with regard to the establishment of such plan, its administration or certain costs incurred related to employee investment education expenses.

Although beyond the scope of this article, it is noteworthy that the SECURE Act also established a tax credit for plans that implement an “eligible automatic enrollment arrangement” (“EACA”) of $500 for each of the first 3 years that the plan has such an auto enrollment feature.  This “auto enroll” tax credit is separate and distinct from the start-up tax credit that is the subject of this article and both the start-up and auto enroll credits can be claimed concurrently.  Also noteworthy is that the EACA need not be in place at the time the plan is established in order to qualify for the credit.  As with the previously discussed small plan establishment tax credit, this credit is effective for tax years beginning after December 31,2019

Obviously, everyone’s tax situation is different so, as much as we hope this article helped you to better understand this topic, it is not to be construed as financial, tax or legal advice.  Therefore, if you believe that it may apply to your (or your client’s) company, be sure to further discuss it with a qualified accountant or tax professional.  For more information about this topic, please contact our marketing department at 484-483-1044 or your administrator at Legacy.

[1] Although the authorization for this tax credit under EGTRRA was scheduled to expire at the end of 2010, it was instead extended and made permanent by the Pension Protection Act of 2006 (“PPA”).

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Recent Administrative Posts

  • Form 5500
  • Plan Year Compliance Package
  • Tax Credit For Small Employer Start-Up Plans

Recent Plan Design Posts

  • Safe Harbor 401(k) Establishment Deadline
  • Safe Harbor 401(k) Establishment Deadlines
  • The Power of Combining Plans

Recent Statutory / Regulatory Posts

  • ERISA Bond: What Is It and Do I Need ONe?
  • Form 5500
  • Plan Year Compliance Package

Archived Articles A-Z

  • A-E
  • F-J
  • K-O
  • P-T
  • U-Y
  • Z-Z

A-E

  • Defined Benefit Plan Year Compliance Package
  • Delay to Deadline for Plan Sponsors to Make Retirement Plan Contributions
  • Department of Labor Releases New Guidance on Missing Participants
  • CARES Act – Retirement Plan Impact
  • Cashing-Out Terminated Employees From Your Company’s Retirement Plan
  • ADP Test Basics
  • ADP Test Basics
  • ADP Test Basics
  • ADP Test Corrections
  • Changes to DOL Late Deferral Remittance Enforcement Procedure
  • Changes to 404a-5 Participan Fee Disclosure Requires Additional Notifications
  • Congress Enacts Changes to Hardship Withdrawal Rules
  • Consequences of Failing to Timely Adopt a PPA Restatement
  • Employing the Proper Definition of Compensation
  • Correcting Average Deferral Percentage Test Failures
  • Correcting Average Deferral Percentage Test Failures
  • Are Your SEP Plans Safe From Other Financial Advisors?
  • Are You Ready For Your Next Plan year end?
  • ERISA Bond: What Is It and Do I Need One?
  • ERISA Bond: What Is It and Do I Need ONe?
  • A Plan Administrator’s “Due Diligence” Obligations
  • A Plan for Retirement Plan Compliance 2014
Back to top

F-J

  • Important CARES Act 2020 RMD Rollover Deadline Fast Approaching
  • Form 5500
  • Form 5500 Update
  • Form 5500 Update
  • IRS Creates Permanent Form 5500 Penalty Relief Program for Non-ERISA Plans
  • IRS Expands Retirement Plan Sponsors’ Self-Correction Options
  • IRS Expands Use of Pre-Approved Plan Documents To Cash Balance Plans
  • IRS Grants Form 5500 Penalty Relief for Non-ERISA Plans
  • IRS Grants 401(k) Safe Harbor Suspension Relief
  • IRS Issues Final Regulations on Mid-Year Reduction or Suspension of Safe Harbor Contributions
  • IRS Issues Guidance on Same Sex Marriage
  • IRS Issues Guidance Regarding Uncashed Check
  • IRS Revisits Mid-Plan Year Changes to Safe Harbor 401(k) Plans
  • IRS Provides Guidance on Expansion of In-Plan Roth Rollovers
Back to top

K-O

  • Legacy Solo(k) Plans 2016
  • NAPA Conference
  • New Opportunity In-Plan Roth Conversions
  • Limitations On Mid-Plan Year Amendments To Safe Harbor 401(k) Plans
Back to top

P-T

  • Safe Harbor 401(k) Establishment Deadline
  • Safe Harbor 401(k) Establishment Deadlines
  • Required Minimum Distributions
  • Required Minimum Distributions
  • Required Minimum Distributions
  • Tax Credit for Small Employer Start-Up Plans
  • Tax Credit For Small Employer Start-Up Plans
  • Tax Credit for Small Employer Start-Up Plans
  • The SECURE Act – Plan Sponsor Impact – Part 1
  • The SECURE Act – Plan Sponsor Impact – Part 2
  • The SECURE Act – Plan Sponsor Impact – Part 3
  • The Power of Combining Plans
  • The Problem with Using Forfeitures to Satisfy Employer Contributions
  • Plan Sponsors Must Retain Hardship and Loan Documentation
  • Plan Year Compliance Package
  • Plan Year Compliance Packages
  • Solo 401(k) Brochure
  • Treasury Issues Proposed Hardship Withdrawal Regulations
Back to top

U-Y

  • What are “Cash Balance Plans”?
  • What is “New Comparability”?
Back to top

 

 

 

 

Phone: 484-483-1044     E-mail: marketing@legacyrsllc.com     Address: 700 Turner Industrial Way, Suite 110, Aston, PA 19014     Follow Us: LinkedIn

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