Employee Benefit Reporting Goes Electronic

7/22/2010

By Mark Corey, CPA

Beginning for plan years starting on January 1, 2009, all employee welfare or pension plans need to be filed electronically with the Department of Labor (DOL).  All 5500s filed after January 1, 2010, will be filed using the DOL’s electronic filing system called EFAST2.  Even delinquent or amended form 5500s will be filed using the new EFAST2 system.  The DOL has made it clear in news releases and on their website that they will not accept any 5500 on paper that is required to be filed electronically.

The process to file a 5500 return under the new electronic submission system begins as it always has, namely, to prepare the 5500 as usual. The next step depends on if you prepare your own 5500 or if you have a paid preparer.  

If you prepare your own 5500, and you have traditionally prepared it on paper, you can use the DOL’s system called IFILE to submit your 5500 to EFAST2.  If you use an approved third party software vendor they should be able to interface with the DOL’s EFAST2 system and allow you to transmit your 5500 to the DOL directly. In order to do that you need to register on the DOL’s EFAST2 website and receive “signing credentials,” which are essentially a pin used to electronically sign the 5500 since you cannot sign a paper copy anymore. There are several credential options depending on what your role is in preparing the 5500.  Basically, the plan administrator, plan sponsor, and transmitter need to get these electronic credentials. For small plans, one person may serve all three roles and one set of credentials will suffice for all three.

If you use a paid preparer the plan administrator and plan sponsor will most likely still need to get an electronic signature credential. Per the DOL website, plan administrators and plan sponsors are not allowed to give their pin to their paid preparer. Instead, they have to find an alternate means to manually enter their pin into the paid preparer’s software, such as visiting the paid preparer’s work site and entering their number directly in the paid preparer’s computer, or using software that allows a remote user to access another computer, such as GotoMeeting.  Another alternative is for the plan sponsor and plan administrator to sign page 1 of the 5500, mail or fax that page to their paid preparer and have them attach that signature page as a pdf to the electronic filing.  The only downside to this method is that the signature page becomes part of the public record of the 5500 filing to which the general public has access.

There are many quirks and details involved in this new system for filing 5500s, and with this being the first year of the EFAST2 system, there are bound to be many bugs.  If you have a 5500 filing coming up it would be wise to visit the DOL website or talk to your paid preparer to get more information on this new mandatory electronic filing for your 5500.