On February, 17, 2010, the US Department of Labor’s (DOL) Employee Benefits Security Administration (EBSA) issued DOL Field Assistance Bulletin (FAB) No. 2010-01, Annual Reporting and ERISA Coverage for 403(b) Plans. The FAB supplements FAB 2009-2, Annual Reporting Requirements for 403(b) Plans and is a response to frequently asked questions received on the scope and conditions provided in FAB 2009-2 as well as questions received concerning the scope of safe harbor. The following summarizes the Q&A:
Annual Reporting and Auditing Responses
1. An annuity contract or custodial account would not need to be included in the Form 5500 if the employer provides information to the 403(b) provider concerning an employee’s or former employee’s employment status in connection with a contract or account that otherwise meets the conditions of FAB 2009-02.
2. Ongoing loan repayments forwarded by the employer should be treated like salary reduction employee contributions, and the contract or account should be included in the plan’s annual report.
3. Contracts or accounts which are known to plan administrators and can be identified are not required to be included in the plan annual reports if the contract or account meets the requirements of FAB 2009-02.
4. The plan administrator can decide to include contracts or accounts even if they meet the requirements of FAB 2009-02.
5. The relief provided by FAB 2009-02 applies to both large and small 403(b) plans in determining what contracts or accounts should be treated as assets of the plan for purposes of the plan audit and for determining what plan assets must be identified on the plan’s financial statements.
6. Annuity contracts and custodial accounts that are determined by the plan administrator to meet the conditions of FAB 2009-02 are not required to treat either the annuity contracts or custodial accounts as plan assets for purposes of ERISA’s annual reporting requirements.
7. It is the obligation of the plan administrator to determine that the conditions of FAB 2009-02 have been satisfied; however, if the Independent Qualified Public Accountant discovers during the course of their audit that contract(s) were incorrectly excluded under FAB 2009-02, the DOL expects the accountant to alert the plan administrator, and if there is not agreement on a resolution, for these issues to be noted in the audit report.
8. If a plan excluded contracts and accounts meeting the conditions of FAB 2009-02 from the Schedule of Assets Held for Investment and Schedule of Reportable Transactions, and assuming all other required information is included, these schedules will be deemed to be presented in compliance with the DOL’s Rule and Regulations for Reporting and Disclosure.
9. Contracts and accounts that are excludable from reporting in the 2009 plan-year financial statements may also be excluded from comparative financial statements included in the plan’s 2009 annual report.
10. FAB 2009-02 does not provide plan administrators relief with respect to contracts or accounts exchanged in accordance with Treasury regulations and IRS requirements for another contract or account with a new provider after January 1, 2009.
11. The DOL will not reject annual reports and audit reports required to be filed for years subsequent to 2009 solely because they exclude contract and accounts meeting the conditions of FAB 2009-09.
12. What constitutes a “good faith” effort to comply by plan administrators that have determined that they will not be able to comply fully with ERISA’s annual reporting requirements for contracts that do not meet the conditions of FAB 2009-02, depends on the facts and circumstances. Good faith generally requires plan administrators to document their efforts properly and to implement internal controls to keep and maintain sufficient records on a going-forward basis. ERISA requires plan administrators to maintain records to verify information in a Form 5500 for six years from the date that the report was filed, and to maintain records sufficient to determine benefits due for as long as necessary.
13. Final contributions to the contract or accounts that are attributable to 2008 but not deposited until 2009 will not be treated by the DOL as continuing contributions after January 1, 2009 that would make the contract or account ineligible for the relief provided in FAB 2009-02.
Safe Harbor Responses
14. A safe harbor arrangement under DOL regulation 29 CFR 2510.3-2(f) can make optional features, such as participant loans, available if the 403(b) provider is responsible for any discretionary determinations.
15. An employer who hires a third-party administrator to make discretionary decisions does exceed the ERISA coverage safe harbor limitations on employer involvement.
16. To meet the terms of safe harbor, the arrangement generally must offer a choice of more than one 403(b) contract and more than one investment product.
17. An arrangement that otherwise meets the terms of the safe harbor can stay within the safe harbor if the written plan document required by Treasury Regulations under Code Section 403(b) provides that salary deferrals will be discontinued to a provider that is not complying with Code requirements.
18. A safe harbor non-Title I arrangement cannot authorize the employer to change 403(b) providers and unilaterally move employee funds from one provider to contract or accounts of another provider.
For further information, the bulletin is available on the Department of Labor website.
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