By Pension and Benefits Editorial Staff
The Department of Labor has issued guidance and temporary penalty relief for multiple employer plans (MEPs) subject to ERISA Title I that have not provided certain information required on their Forms 5500/5500-SF. The Employee Benefits Security Administration (EBSA) has found that a substantial number of MEP filers have not been in full compliance with their reporting obligation under ERISA Sec. 103(g) to provide complete and accurate lists of participating employers with their Forms 5500. The DOL is giving transition relief for MEPs that have failed to file a complete and accurate list of participating employers with their Forms 5500 for the 2017 plan year and before, provided certain conditions are met. The DOL notes that this guidance and relief relates solely to civil penalties for Form 5500 reporting obligations under Title I of ERISA.
Background. In 2014, the Cooperative and Small Employer Charity Pension Flexibility Act (P.L.113-97, CSEC Act) added ERISA Sec. 103(g) as a specific Form 5500 annual report requirement for multiple employer plans. The new reporting requirement was effective for plan years beginning after December 31, 2013. As part of the interim final rule issued by EBSA, the new requirements were added to the first question on Form 5500 at Part I, Line A, Annual Report Identification Information. Next to the check box for MEPs was an instruction to “attach a list of participating employer information in accordance with the form instructions”. More specific requirements were added to the Form 5500 instructions. One exception was made for unfunded or insured welfare plans that are exempt under ERISA Reg. Sec. 2520.104-44 from filing financial information with their Form 5500. These plans have been required to file a list of participating employers, but have not had to include an estimated amount of contributions from each employer.
While reviewing Form 5500 data in 2018, the DOL found that some MEPs, including MEPs sponsored by professional employer organizations (PEOs), had failed to include a complete and accurate list of participating employers with their Forms 5500/5500-SF. The DOL identified 185 MEP filings for the 2016 plan year that were compliant and 101 MEP filings that were non-compliant. Examples of non-compliant filings included forms in which: (1) the filer replaced employer names with either abbreviated names or initials, client numbers, or other labels such as “Client 1;” (2) the filing reported only the last 4 digits of EINs; (3) the filing included an attachment with no information and a note “Details available upon request;” and (4) the filing incorrectly listed the PEO as the only participating employer.
The DOL noted that National Association of Professional Employer Organizations (NAPEO), in a letter dated March 26, 2019, told the Department that while “a few” PEOs listed the employers that participate in their MEPs, “most” filed their Form 5500 with the participating employer redacted, coded, or under a separate cover. The PEOs and their representatives objected to the ERISA Sec. 103(g) filing requirement. They contended that filing the participating employer list imposes material costs and burdens on PEO-sponsored plans, and that making the employer list public was not in the best interests of plan participants and beneficiaries. According to the DOL, it received and considered similar objections with the publication of the interim final rule, and continues to believe that the reporting requirements made effective for MEPs by the interim final rule implementing ERISA Sec. 103(g) are a reasonable and appropriate way to implement the CSEC Act.
Transition relief. Before the DOL proceeds with further civil penalty enforcement actions on this issue, the DOL is providing transition relief to plan administrators of MEPs who voluntarily comply with the annual reporting requirements in ERISA Sec. 103(g) and start filing complete and accurate participating employer information going forward. Specifically, the DOL will not reject a Form 5500 or Form 5500-SF filed on behalf of a MEP for the 2017 plan year, or any prior plan year, or seek to assess civil penalties against the plan administrator under ERISA Sec. 502(c)(2) with respect to these filings, solely on the basis that the plan administrator failed to include complete and accurate participating employer information in accordance with ERISA Sec. 103(g), provided that the annual reports filed for the plan for the 2018 and following plan years comply with the requirements in ERISA Sec. 103(g), the Form 5500 or Form 5500-SF, as applicable, and the accompanying instructions. Thus, as provided in the instructions for the Form 5500 and Form 5500-SF, the annual report must include in the required format: (1) a complete and accurate listing of each participating employer in the plan during the plan year, identified by name and employer identification number (EIN); and (2) a good faith estimate of each employer’s percentage of the total contributions (including employer and participant contributions) made by all participating employers during the year.
Noting the July 31, 2019 due date for calendar year plans to file their 2018 Form 5500 or Form 5500-SF, the Department is granting MEPs a special filing extension of up to 2Â½ months to file their 2018 annual report in compliance with ERISA Sec. 103(g). MEP plan administrators should check the “special extension” box under Part I, Line D on the 2018 Form 5500/5500-SF and enter “FAB 2019-01” as the description to use this extension. MEPs using this special extension do not need to file a Form 5558 with the IRS, according to the DOL.
As for MEPs for which 2018 Form 5500 or Form 5500-SF have already been filed, the relief given here will be available, provided that the MEP plan administrators file an amended annual report for the 2018 plan year that complies with the ERISA Sec. 103(g) reporting requirement by October 15, 2019.
The DOL, however, reserves the right in individual cases to request that MEPs furnish the employer information for previous years in which the plan administrator failed to include complete and accurate participating employer information. The DOL explains that the availability of this transitional relief is contingent on compliance with the Department’s request in these cases.
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