Pw c web 06.21.2018 final

www.pwc.com
Form 5500 update
Presented by Debbie Packer
& Cindy Herendeen
June 21, 2018

PwC | Form 5500 Update
When are audited financial statements required?
2
• Large pension plans (100 or more participants)
• 80-to-120 rule
• Small pension plans that do not meet the conditions for the audit waiver
• Large funded welfare plans (100 or more participants)
- VEBAs or taxable trusts
• 80-to-120 rule different for welfare plans because small fully insured or
unfunded welfare plans are not required to file
- Only small funded welfare plans required to file may take advantage of
this rule

Small pension plan audit waiver summary
3
Is the plan a pension plan?
Is the Schedule I required as part of the plan’s
annual report?
Do at least 95% of the assets of the plan constitute
'qualifying plan assets'?
Small pension plan
audit waiver
conditions do not
apply.
The conditions for the waiver have
not been satisfied.
Is each person who handles
non-qualifying plan assets properly
bonded in an amount that is at
least equal to the value of the
non-qualifying plan assets?
The conditions for the waiver of IQPA audit
and report have been satisfied.
No
Does the administrator disclose the required information
in the SAR and on request?
Yes
No
No
No
No
Yes
Yes
Yes
Yes

Reviewer’s notes – Small plan audit waiver
4
• Schedule I, Part II, Line 4k - Check 'Yes' if claiming waiver of the
audit requirement
Plans eligible:
• Welfare plans
• Small pension plans that satisfy the conditions of the Small Pension Plan
Security Regulation
If the plan is required to be audited:
• Check 'No' and attach audit report and financial statements
• Schedule I filers are not required to attach supplemental schedules

File with or without an audit report attached?
5
A frequently asked question is whether Form 5500 should be filed by the due
date if the audit report is not yet completed or should the Form 5500 be filed
late through the Delinquent Filer Voluntary Compliance Program (DFVCP).
http://www.dol.go
v/ebsa/enforceme
nt/OCAManual/ch
a8.html

File with or without an audit report
attached? (continued)
6
Q25: Will the EFAST2 system still receive my filing if I do not attach
the IQPA report with my Form 5500 annual return/report
when it is required?
• EFAST2 will receive the filing which may be subject to further review,
rejection and civil penalties
• Schedule H, Line 3 must be correctly answered
• Still complete line 3c if the IQPA for the plan can be identified
• Correct the error as soon as possible

Check the filing status after filing is submitted
7
• Important to check the status of your submission attempt and make sure they are accepted
• DOL requires at least one electronic signature be valid
• Various ways to check the status:
- Through the software you used to send your filing
- Through the EFAST2 Filing Search webpage
- Through EFAST2 Submissions webpage
◦ If you submitted through IFILE
◦ If you signed the filing
• Also, monitor your email later for correspondence from the EFAST2/DRC email address
• Note that the signed auditor’s report with financial statements must be attached as a pdf file
• The pdf file cannot be encrypted or password protected
- “Unprocessable error”
- Remember to pdf in portrait not landscape format
- Print heavy letterheads may result in rejection

When is my filing considered filed?
FAQ38
8
Not filed….
Unprocessable Submission*
Processable Submission++
Processing++
Filing Unprocessable*
* This submission must be corrected
and re-submitted.
++ This submission is still processing
Filed….
Processing Stopped**
Filing Error**
Filing Received
** Filings with a status of ‘Filing
Error’ or ‘Processing Stopped’ must be
corrected through an amended filing

EFAST2
9
The IRS has all responsibility for the Form 5500-EZ and Form 5558 and their
processing. Please call the IRS for questions regarding these Forms.
EFAST2 Help Line
• Can’t answer questions regarding Third Party Software
• Can’t view your filing prior to submission to EFAST2
• Can’t see your password or challenge question
• Can reset or revoke Accounts
• Can answer questions about IFILE or Filing Status
• Staffed help line at 1-866-GO-EFAST
(between 8:00 AM and 8:00 PM Eastern Standard) – will be staffed on
Columbus Day.

Electronic Filing/EFAST 2
10
Check EFAST2 Website for:
• Form 5500 Search
• FAQs
• Disaster Relief Information
• User Guides
• Tutorials
• Information about Delinquent Filer Voluntary Compliance Program
(DFVCP)
• EFAST2 Page https://www.efast.dol.gov

Other delinquent filings
11
• IRS provides late filing relief for plans not covered by DFVCP – see Rev.
Prov. 2015-32
- Penalty payment required - $500 per return up to a maximum of $1500
- “one participant” plans - covering only a 100% business owner
(or owner and spouse) or one or more partners in a partnership
(or partners and their spouses), and foreign plans
◦ Must file complete Form 5500-EZ return, paper version and a
transmittal schedule for each return (Form 14704 found on
IRS website)

Form 8955-SSA
12
• Annual registration statement identifying terminated vested participants
• Report information on separated participants only on Page 2
- Do not use additional pages 1
- No attachments or other nonstandard format
• Instructions to lines 6a and 6b clarified – do not include any participants
who were previously reported (only report “A’s”)
• Reminder – file with IRS, not EFAST2
• IRS regs issued in September 2014 make e-filing mandatory for 2014
and forward
- Paper still an option for filers with under 250 filings (e.g., W-2s),
otherwise file electronically through FIRE system
- Penalty relief available for delinquent filers

Delinquent Form 8955-SSA filings
13
• IRS Notice 2014-35 provides relief for delinquent Forms 8955-SSA
• IRS penalties waived if DOL DFVCP requirements met for related Form
5500 series filing
• File a paper Form 8955-SSA with IRS (electronic forms are not eligible)
• Check Line C – “special extension” and enter “DFVCP” in description
• Must file delinquent Form s8955-SSA no later than 30 days after
DFVCP filing

DOL Enforcement
14
The Office of the Chief Accountant (OCA) queries the ERISA database and targets Form
5500 processing errors that have gone uncorrected as well as filings improperly prepared.
1. Notice of Rejection – gives the plan administrator 45 days to make
any corrections.
2. Notice of Intent to Assess a Penalty (NOI) – the plan administrator has 35 days
to submit to the DOL a statement of reasonable cause.
3. Notice of Penalty Assessment – (failure to respond to the NOI) Now the matter
becomes a debt due to the government. There is no appeal at this point and cannot be
over turned or reduced.
4. Notice of Determination – after the DOL reviews the statement of reasonable
cause the agency issues a notice of determination that contains the final penalty
amount.
i. The plan administrators may choose to pay the penalty or within 35 days file an
answer with the administrative law judge, appealing the penalty.

Schedule C – Service provider information –
The basics
15
• There are payments made directly from the plan
Direct Fees = Reportable
• There are payments not made directly from the plan
Indirect fees = Reportable
Eligible indirect fees = Disclosable

Schedule C – Part I, Line 1 – Persons receiving
only eligible indirect compensation
16

Part 1, Line 1 – Alternative reporting option
17
Eligible Indirect Compensation a.k.a. Alternative Reporting option
• Disclosable - If meets certain conditions, then fees/codes are not required to
be reported (only report who provided the disclosures)
• Make sure plan sponsor/administrator received all required disclosures for
'eligible indirect compensation‘
• FAQ 31: Do the disclosures regarding “eligible indirect compensation” need
to be provided at least annually…..
- No specific requirement however the plan admin must review in
preparation of the Form 5500 at least annually and confirm the
information is still correct

Required written disclosures
18
• Existence of compensation
• Who paid the compensation
• Who received the compensation
• Services provided or purpose for payment of the indirect compensation
• Amount (or estimate) or description of a formula used to
determine compensation

Examples of eligible indirect compensation
19
• Rule of thumb - Fees or expense reimbursements charged to investment fund
and reflected in fund’s value or return on investment
- Examples:
◦ Fund management fees
◦ 12b-1 fees
◦ Finder’s fees
◦ Brokerage commissions (not part of the operation of the fund)
◦ Float Revenue

Quick look at Part I, Line 2
20

$5,000 reporting threshold
21
• $5,000 threshold remains unchanged
• Applies for total of direct and indirect compensation
• If administrator is only provided a formula for Schedule C compensation
reporting purposes, generally amount is presumed to meet the
$5,000 threshold

Direct compensation
22
• Payments made directly by the plan (or plan sponsor if reimbursed by the
plan) for services rendered to a plan or because of a person’s position
with a plan
Exceptions
• Plan employee compensation <$25,000
• Employees of sponsor or service provider as long as:
- Sponsor/service provider is reported on Schedule C
- No other compensation from plan is paid to employee
• Person whose only compensation was reported on Schedule A
• Sponsor who was not reimbursed by Plan for expenses

Persons receiving direct compensation
23
Part I, Line 2(a)
• Except for those persons and eligible indirect compensation for which
you answered “Yes” to line 1, complete as many entries as needed to list
each person receiving $5,000 or more in total direct and indirect
(including EIC) compensation.
Part I, Line 2(b)
• Enter service code describing service provided
Part 1, Line 2(c)
• Enter relationship with Plan or Plan sponsor, if any
Part 1, Line 2(d)
• Enter amount of direct compensation paid by Plan

Reporting indirect compensation – Example
24
Part 1, Line 2
1. Capital One charged the plan $141,000 for recordkeeping services in 2017.
2. Massachusetts Mutual pays Capital One 10 basis points for other
administrative services. (These remained unchanged through the
end of the year.)

Reporting indirect compensation –
Example (continued)
25
Indirect compensation may be reported by providing an amount, estimated
amount, or formula.
If provided a formula:
• Enter ‘0' in Element (g)
• Check 'Yes' to Element (h)
• Attach description of formula or other method
• Amount or formula to calculate indirect compensation may be based on
service provider’s fiscal year that ends within the Plan’s reporting year.
Direct compensation should be based on Plan’s year.

Reporting indirect compensation –
Example (continued)
26
Part 1, Line 3

Reviewer’s notes – Schedule C
27
Part I
• Line 1- If you have mutual funds, CCT’s, PSA’s did you receive the disclosures
for eligible indirect compensation.
- Did you report who provided the disclosures? (not who received the
compensation)
• Line 2 – If Yes for element (e) service provider receiving indirect comp is (f)
thought (h) completed?
• Line 2 – If an amount on line (g) or (h) is checked Yes, do you need an entry
on line 3?
Part III – did you change auditors?

Special rules for
certain compensation
28

Reporting gifts and other
non-monetary compensation
29
• Non-monetary compensation must be reported
• Limited de minimis exception
• Instructions caution filers that gifts and gratuities of any amount paid to or
received by plan fiduciaries may violate ERISA and give rise to civil liabilities
and criminal penalties

Limited exceptions from reporting for gifts and
other non-monetary compensation
30
• Tax deductible for federal income tax purposes by person providing
non-monetary compensation
• Nontaxable to recipient
• Valued at less than $50
• Aggregate value of gifts from one source is less than $100 in a calendar year
• Gifts with a value of less than $10 do not have to be counted toward the
$100 limit
• If the $100 aggregate value limit is exceeded, the value of all gifts will
be reportable
• Reported only if the provider receives in total $5,000 or more

Fully insured group health and similarly fully
insured benefits
31
If fees and expenses have been reported on Schedule A, they do not also have to
be reported on Schedule C
• Insurance investment contracts are not eligible for this exception
Compensation paid by insurer from its general assets to affiliates or third
parties to satisfy its contractual obligations to provide benefits is not required to
be reported on Schedule C
• Would not include compensation provided by insurer incidental to the sale
or renewal of a policy

Part II, service providers who fail or refuse to
provide information
32
Before reporting a service provider in Part II:
• Contact the service provider to request necessary information
• Warn them you will list them on Schedule C, Part II

Schedule C
33
• For mutual fund investments or other investment funds with fees paid from
fund, complete Schedule C, line 1
• For direct expenses paid from the plan’s trust, enter on line 2
• For indirect compensation paid to service providers, complete line 2 and 3.
Line 1 Line 2 Line 3
EIC Only Direct Only Indirect
Direct and EIC Non-monetary
Direct and Indirect
Non-monetary

Expenses on Schedules H and C
34
Schedule H
• Reports expenses paid directly by plan/trust or where employer paid an
expense and is reimbursed by plan
• Includes taxes (UBIT or foreign taxes paid on investments)
• Includes PBGC premiums
• Usually prepared on accrual basis, consistent with financial statements
Schedule C
• Frequently prepared on cash basis
• Includes indirect fees
• Does not include taxes or PBGC premiums
• Note – DOL has sent letters to plan sponsors where no fees shown on
Form 5500

Who must file Schedule H?
35
• Large pension and welfare plans and
• All Direct Filing Entities
• Exceptions:
- Insured, unfunded or combination of insured/unfunded welfare plans
(29 CFR 2520.104-44)
- Fully insured & 403(b) pension plans
(29 CFR 2520.104-44)
- Plans utilizing the '80-120 Rule'

Sections of Schedule H
36
• Parts I & II
- Asset & Liability Statement
- Income & Expense Statement
• Part III
- Accountant’s opinion information
• Part IV
- Compliance questions & transactions during plan year

Common attachments to Schedule H
37
• Accountant’s Opinion: includes report with the opinion, audited financial
statements, and footnotes
• Schedule of Delinquent Participant Contributions
• Schedule of Reportable Transactions
• Schedule of Assets Acquired and Disposed Within a Year
• Schedule of Assets Held at the End of the Year

Schedule H – Part I – Asset & Liability statement
38
• Cash, modified cash or accrual basis may be used as long as
there is consistency
• Differences between Schedule H and audited financial statements must be
reconciled in footnotes
• Beginning balances must equal prior year ending balances
• Generally the company EIN is used to file (vs. trust EIN)

Schedule H – Part IV – Compliance questions
39
• Limited reporting for DFEs
• Line 4a: Failure to transmit employee contributions within the time
prescribed. Includes employee deferral deposits and loans
- Department of Labor’s Voluntary Fiduciary Correction Program
• Schedule G items: defaulted loans, uncollectible leases, nonexempt
transactions with parties in interest.
• Questions regarding fraud activity
• Certain investment disclosures
• Failure to pay benefits when due
• 401(k) compliance questions
• Plan terminations and asset transfers

A word about delinquent
participant contributions
40
• All delinquent contributions, whether or not corrected, must be reported on
Line 4a of Schedule H until the year corrected
- Instructions seem to require reporting in year after full correction – but
DOL advises this is unnecessary to continue reporting after correction
- No immateriality
• Other prohibited transactions are reported on a separate schedule, see the
instructions for the required format
• Filers may also include delinquent loan repayments
• Failure to make deferrals are not the same as delinquent contributions
• FAQs from DOL website
- http://www.savingmatters.dol.gov/ebsa/pdf/faq-vfcp.pdf

Reviewer’s notes – Schedule H
41
Schedule H
Part I
• Beginning of the year values match the prior year values by
asset/liability classification
- IRS EPCU project – End of Year/Beginning of Year Assets Mismatch
• Line 1c(8) Participant Loans do not report for master trusts.
• Line 1c(9) Common/Collective trusts if have beginning or ending balance
do you have a Schedule D reporting CCTs?
- Do you have corresponding income or loss?

Reviewer’s notes – Schedule H (continued)
42
Schedule H
Part I
• Line 1c(10) pooled separate accounts if beginning or ending balance do you
have a schedule A and Schedule D?
- Do you have corresponding income or loss?
• 1c(14) insurance company general account – if beginning or ending balance
do you have a Schedule A?
• Is there a reconciling footnote needed in the financials, if so, does it agree
with the Schedule H balance?
• Compare assets by type in Part I have corresponding income in Part II.
Part II
• If transfers are reported from the plan has line 5b been completed?

Reviewer’s notes – Schedule H (continued)
43
Schedule H
Part III
• Accountant’s opinion
- If line 3b is checked limited scope is disclaimer check on line 3a?
- Should not have unqualified, qualified, adverse boxes checked with
limited scope audit
Part IV
• Lines 4a – 4d - is there a supplemental schedule that needs to be attached?
• Line 4e – enough covered under the fidelity bond?
• Line 4i Schedule of assets held at end of year – is schedule attached?
• 4k vs 5a – plan merger verses plan termination, are these lines answered
correctly?

More on schedule H & coordination with
other Schedules
44
• Codes used in Form 5500, Line 8a and 8b describe the benefits/features of
the plan
- FYI – if new employee rolling over account from prior employer, the plan
administrator can check the prior employer’s Form 5500 on EBSA see if
“not intended to be qualified” code “3C” is listed
• Schedule C – expense information
• Schedule D – existence of master trust, DFEs
• Schedule G – prohibited transactions, leases or loans in default
• Schedule SB and H for contributions & receivables

Master Trusts/Direct Filing Entities
45
• Expenses reported at master trust level should not also be reported at
plan level
• All expenses must be reported – either at trust level or at plan level
• Master trust footnote – review Schedule H for consistency
• Remember master trusts must always file Form 5500 DFEs
- Form 5500 filing is optional for 103-12 IE, CCTs and PSAs
- 103-12 IEs must attach audited financials

DFE Recap
46
Entity 5500 filing required? Audit required?
MTIA Yes No
PSA No No
CCT No No
103-12 IE Yes Yes
GIA Yes Yes

How are DFE investments reported on Schedule H
when DFEs don’t file?
47
Entity Effect of non/deficient filing on participating plans
MTIA Plan filings are deficient
PSA/CCT Plans must allocate investment among Schedule H, Part I categories
103-12 IE Same as PSA/CCT + Full scope audit is required
GIA Each plan must file as an individual plan

Emerging issues
48
• DOL focus on plan’s internal control environment
- Lost participants – National DOL enforcement priority
• In a recent IRS audit a large number of TVs and large number of large
benefit payments appeared to be a trigger
- Uncashed benefit payment checks – still IRS/DOL priority
- ERISA spending accounts
- Quality of audits
• New Compliance Questions – 2020 Changes on hold
• Increase in penalty amounts for late filings
• Puerto Rico – disaster area – attach statements
• Contact person – be sure to list current
• Benefit features codes – more scrutiny

Questions?
49
Debbie.Packer@pwc.com
646-471-7238
Cynthia.G.Herendeen@pwc.com
646-471-5243

This publication has been prepared for general guidance on matters of interest only, and does
not constitute professional advice. You should not act upon the information contained in this
publication without obtaining specific professional advice. No representation or warranty
(express or implied) is given as to the accuracy or completeness of the information contained
in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its
members, employees and agents do not accept or assume any liability, responsibility or duty of
care for any consequences of you or anyone else acting, or refraining to act, in reliance on the
information contained in this publication or for any decision based on it.
© 2018 PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries
or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate
legal entity. Please see www.pwc.com/structure for further details.

Pw c web 06.21.2018 final

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Pw c web 06.21.2018 final