1. Changes to the 2001 Form 5500, Annual Return/Report of Employee Benefit Plan, appear in the instructions, rather than on its face. Seasoned preparers will take the changes in stride as they are logical and, for the most part, definite improvements. The most noteworthy changes to this year’s instructions include:

• Permission to abbreviate the plan name reported on line A of all schedules that are part of the Form 5500 filing appears throughout the instructions. It is no longer necessary to precisely mirror the name reported on line 1a of Form 5500.
• The address sections of lines 2a, 3a, and 5a have been modified to present U.S. addresses in a more logical fashion. International address information is now grouped in lines at the end of these lines.
• Two business codes have been added for use on line 2d: Code 813930 for Labor Unions and Similar Labor Organizations, and Code 921000 for Governmental Instrumentality or Agency.
• Additional Pension Feature Codes have been included for line 8a: Code 2Q to report the employer maintaining an ESOP is an S Corporation, and Code 2R to report participant-directed brokerage account as investment options under the plan.
• Clarification that a plan filing Form 5500, rather than Form 5500-EZ, because it is aggregated with another plan of the employer to satisfy nondiscrimination requirements should insert Code 3G on line 8a.
• Expanded use of Box D at the top of Form 5500 to indicate the plan is filing under DFVC. The instructions for this section also address situations that qualify for filing extensions under federal disaster relief programs.
• Better instructions for filing amended returns. A completed and signed Form 5500 must be filed; however, only the schedules or attachments that were changed should be attached and identified on line 10 of the amended filing. Do not include schedules where only attachments are being amended. Do not include attachments if only the schedule is being amended.
• Confirmation that a securities brokerage firm is not a “similar financial institution” for purposes of the rules defining Master Trust Investment Accounts (MTIAs).

2. Tip: Some fringe plans required to file under IRC §6039D contain welfare features. Common example is a cafeteria plan with both a pre-tax premium feature as well as a medical reimbursement feature. The medical reimbursement functions as a welfare benefit within the fringe benefit plan. The Form 5500 filing must report as both a welfare and a fringe plan if the plan covers more than 100 participants as of the beginning of the plan year (refer to line 6 of Form 5500). Check both boxes 8b and 8c. Insert the proper code(s) at line 8b.

3. What is the filing requirement for a §403(b) plan?
Only the Form 5500, completed through line 8a, is filed for §403(b) plans. No independent accountant's report is required even when the plan covers more than 100 participants at the beginning of the plan year. See page 9 of the official instructions to 2001 Form 5500.

4. Who can prepare and file the Form 5500 for a Master Trust Investment Account?
Direct filing entities -- Master Trust Investment Accounts, Pooled Separate Accounts, Common/Collective Trusts, 103-12 Investment Entities, and Group Insurance Arrangements -- use Form 5500 to report information to the Department of Labor (DOL) beginning with the 1999 filing year. Previously, Master Trust Investment Accounts and Group Insurance Arrangements filed directly with the DOL without using the Form 5500.

Unfortunately, the instructions for preparing the report for Master Trust Investment Accounts are somewhat vague, particularly when identifying the "sponsor" to report in line 2a.

In response to a specific situation, the attorneys at DOL stated that "The employer is the controlling factor in a master trust, not the bank trustee or custodian. One employer maintains all of the plans in a particular Master Trust Investment Account. The administrator of each plan participating in the master trust is responsible for ensuring that the Master Trust Form 5500 is properly filed."

Thus, we can conclude that the Plan Sponsor's name can be identified in line 2a, with the Master Trust Investment Account reported at line 1a. By the way, this is a very practical result since frequently it is the plan sponsor who filed the report with DOL in the past.

The insurance company sponsoring a Pooled Separate Account, or the bank/financial institution sponsoring a Common/Collective Trust fund, is the "sponsor" to be identified in line 2a if those direct filing entities choose to file Form 5500.

5. Do you include participants who enter the plan on the first day of the plan year when completing line 6 of Form 5500?

Yes, the entry on line 6 must include all eligible participants as of the first day of the plan year. This figure is often different than the count as of the last day of the prior plan year. In discretionary plans such as profit sharing or §401(k), employees who have met eligibility but who do not have an account balance should be included here.

For retirement plans, this count is critical to identifying "large plan" status, which requires the attachment to the filing of an independent accountant's report.

6. Tip: The codes reported at line 8 of Form 5500 are feature codes. The DOL has made it clear that a code should be included even if that particular feature was not utilized during the year. For example, a §401(k) plan that has a discretionary match feature should report code 4K at line 8a of Form 5500, even if no matching contribution was made.

7. Can you explain why Example #3 on page 18 of the instructions reports life insurance in a retirement plan as a welfare benefit?

This concept certainly came out of left field for most seasoned preparers -- in fact, on Form 5500 reports filed for years before 1999, it seemed the IRS system rejected a filing that reported both "pension" and "welfare" benefits as components of the same report. The situation is further complicated by the portions of the Schedule A that are completed based upon whether the feature is a pension (Part II) or welfare benefit (Part III). Interestingly, there's absolutely no commentary on this issue anywhere in the official instructions.

In discussions with the DOL, however, they did not feel the example was a change to how plan sponsors should report life insurance features. Perhaps in our attempts to make the Form 5500 reports conform to the IRS's edit checks, we forgot some basic rules.

Let's consider the following:

• ERISA §3(1) defines a "welfare plan" to mean "any plan, fund, or program which was...established or is maintained for the purpose of providing...through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death..."
• ERISA §3(2) defines a "pension plan" as "any plan, fund, or program... established or maintained...to the extent that by its express terms or as a result of surrounding circumstances such plan, fund, or program (i) provides retirement income to employees, or (ii) results in a deferral of income..."

From these definitions, it might be possible to infer that any form of death benefit under a pension plan --whether or not it is an insured death benefit -- is a welfare benefit.