2002 Tax Help Archives  
  Home > Tax Help Archives > 2002 > Instructions > Form 5500

Instructions for Form 5500 (Revised 2002) 2002 Tax Year

Annual Return/Report of Employee Benefit Plan (Info Copy Only)

HTML Page 12 of 14

This is archived information that pertains only to the 2002 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.

2002 Instructions for Schedule I

(Form 5500) Financial Information - Small Plan

General Instructions

Who Must File

Schedule I (Form 5500) must be attached to a Form 5500 filed for pension benefit plans and welfare benefit plans that covered fewer than 100 participants as of the beginning of the plan year.

Exception.   If a Schedule I was filed for the plan for the 2001 plan year and the plan covered fewer than 121 participants as of the beginning of the 2002 plan year, the Schedule I may be completed instead of a Schedule H.

Note.   Certain insured, unfunded or combination unfunded/insured welfare plans are exempt from filing the Form 5500 and the Schedule I. In addition, certain fully insured pension plans are exempt from completing the Schedule I. See the Form 5500 instructions for Who Must File on page 3 and Limited Pension Plan Reporting on page 8 for more information.

Check the Schedule I box on the Form 5500 (Part II, line 10b(2)) if a Schedule I is attached to the Form 5500. Do not attach both a Schedule I and a Schedule H to the same Form 5500.

Specific Instructions

Lines A, B, C, and D.   This information should be the same as reported in Part II of the Form 5500 to which this Schedule I is attached. You may abbreviate the plan name (if necessary) to fit in the space provided.

Note.   Do not mark through the printed line descriptions on the Schedule I and insert your own description as this may cause additional correspondence due to a computerized review of the Schedule I.

Use either the cash, modified cash, or accrual basis for recognition of transactions, as long as you use one method consistently. Round off all amounts reported on the Schedule I to the nearest dollar. Any other amounts are subject to rejection. Check all subtotals and totals carefully.

If the assets of two or more plans are maintained in one fund, such as when an employer has two plans funded through a single trust (except a DFE), complete Parts I and II by entering the plan's allocable part of each line item.

If assets of one plan are maintained in two or more trust funds, report the combined financial information in Part I.

Current value means fair market value where available. Otherwise, it means the fair value as determined in good faith under the terms of the plan by a trustee or a named fiduciary, assuming an orderly liquidation at time of the determination. See ERISA section 3(26).

Part I - Small Plan Financial Information

Amounts reported on line 1a, 1b, and 1c for the beginning of the plan year must be the same as reported for the end of the plan year for corresponding lines on the return/report for the preceding plan year.

Do not include contributions designated for the 2002 plan year in column (a).

Line 1a.   A plan with assets held in common/collective trusts, pooled separate accounts, master trust investment accounts, and/or 103-12 IEs must also attach Schedule D (Form 5500).

Use the same method for determining the value of the plan's interest in an insurance company general account (unallocated contracts) which you used for line 3 of Schedule A (Form 5500), or, if line 3 is not required, line 6 of Schedule A (Form 5500).

Note.   Do not include in column (b) a participant loan that has been deemed distributed during the plan year under the provisions of Code section 72(p) and Treasury Regulation section 1.72(p)-1, if both of the following circumstances apply:

  1. Under the plan, the participant loan is treated as a direct investment solely of the participant's individual account; and
  2. As of the end of the plan year, the participant is not continuing repayment under the loan.

If the deemed distributed participant loan is included in column (a) and both of these circumstances apply, report the loan as a deemed distribution on line 2g. However, if either of these circumstances does not apply, the current value of the participant loan (including interest accruing thereon after the deemed distribution) should be included in column (b) without regard to the occurrence of a deemed distribution.

After a participant loan that has been deemed distributed is reported on line 2g, it is no longer to be reported as an asset on Schedule H or Schedule I unless, in a later year, the participant resumes repayment under the loan. However, such a loan (including interest accruing thereon after the deemed distribution) that has not been repaid is still considered outstanding for purposes of applying Code section 72(p)(2)(A) to determine the maximum amount of subsequent loans. Also, the deemed distribution is not treated as an actual distribution for other purposes, such as the qualification requirements of Code section 401, including, for example, the determination of top-heavy status under Code section 416 and the vesting requirements of Treasury Regulation section 1.411(a)-7(d)(5). See Q&As 12 and 19 of Treasury Regulation section 1.72(p)-1.

The entry on line 1a, column (b), of Schedule I (plan assets - end of year) or on line 1c(8), column (b), of Schedule H (participant loans - end of year) must include the current value of any participant loan reported as a deemed distribution on line 2g for any earlier year if, during the plan year, the participant resumes repayment under the loan. In addition, the amount to be entered on line 2g must be reduced by the amount of the participant loan reported as a deemed distribution on line 2g for the earlier year.

Line 1b.   Enter the total liabilities at the beginning and end of the plan year. Liabilities to be entered here do not include the value of future pension payments to plan participants; however, the amount to be entered in line 1b for accrual basis filers includes, among other things:

  1. Benefit claims that have been processed and approved for payment by the plan but have not been paid (including all incurred but not reported welfare benefit claims);
  2. Accounts payable obligations owed by the plan that were incurred in the normal operations of the plan but have not been paid; and
  3. Other liabilities such as acquisition indebtedness and any other amount owed by the plan.

Line 1c.   Enter the net assets as of the beginning and end of the plan year. (Subtract line 1b from 1a.) Line 1c, column (b) must equal the sum of line 1c, column (a) plus lines 2j and 2k.

Line 2a.   Include the total cash contributions received and/or (for accrual basis plans) due to be received.

Line 2a(1).   Plans using the accrual basis of accounting should not include contributions designated for years before the 2002 plan year on line 2a(1).

Line 2a(2).   For welfare plans, report all employee contributions, including all elective contributions under a cafeteria plan (Code section 125). For pension plans, participant contributions, for purposes of this item, also include elective contributions under a qualified cash or deferred arrangement (Code section 401(k)).

Line 2b.   Use the current value, at date contributed, of securities or other noncash property.

Line 2d.   Enter the total of all cash contributions (line 2a(1) through (3)), noncash contributions (line 2b), and other plan income during the plan year. If entering a negative number, enter a minus sign - to the left of the number. Plan income received and/or receivable may include, among other things:

  1. Interest on investments (including money market accounts, sweep accounts, STIF accounts, etc.).
  2. Dividends. (Accrual basis plans should include dividends declared for all stock held by the plan even if the dividends have not been received as of the end of the plan year.)
  3. Rents from income-producing property owned by the plan.
  4. Royalties.
  5. Net gain or loss from the sale of assets.
  6. Other income such as unrealized appreciation (depreciation) in plan assets. To compute this amount subtract the current value of all assets at the beginning of the year plus the cost of any assets acquired during the plan year from the current value of all assets at the end of the year minus assets disposed of during the plan year.

Line 2e.   Include:

  1. payments made (and for accrual basis filers payments due) to or on behalf of participants or beneficiaries in cash, securities, or other property (including rollovers of an individual's accrued benefit or account balance). Include all eligible rollover distributions as defined in Code section 401(a)(31)(D) paid at the participant's election to an eligible retirement plan (including an IRA within the meaning of section 401(a)(31)(E));
  2. payments to insurance companies and similar organizations such as Blue Cross, Blue Shield, and health maintenance organizations for the provision of plan benefits (e.g., paid-up annuities, accident insurance, health insurance, vision care, dental coverage, etc.); and
  3. payments made to other organizations or individuals providing benefits.

Generally, these payments discussed in (3) are made to individual providers of welfare benefits such as legal services, day care services, and training and apprenticeship services. If securities or other property are distributed to plan participants or beneficiaries, include the current value on the date of distribution.

Line 2f.   Include all distributions paid during the plan year of excess deferrals under Code section 402(g)(2)(A)(ii), excess contributions under section 401(k)(8), and excess aggregate contributions under section 401(m)(6), allocable income distributed, and any elective deferrals and employee contributions distributed or returned to employees during the plan year in accordance with Treasury Regulation section 1.415-6(b)(6)(iv), as well as any attributable gains that were also distributed.

Line 2g.   Report on line 2g a participant loan included in line 1a, column (a) (participant loans - beginning of year) and that has been deemed distributed during the plan year under the provisions of Code section 72(p) and Treasury Regulation section 1.72(p)-1 only if both of the following circumstances apply:

  1. Under the plan, the participant loan is treated as a directed investment solely of the participant's individual account; and
  2. As of the end of the plan year, the participant is not continuing repayment under the loan.

If either of these circumstances does not apply, a deemed distribution of a participant loan should not be reported on line 2g. Instead, the current value of the participant loan (including interest accruing thereon after the deemed distribution) should be included on line 1a, column (b) (plan assets - end of year), without regard to the occurrence of a deemed distribution.

Note.   The amount to be reported on line 2g of Schedule H or Schedule I must be reduced if, during the plan year, a participant resumes repayment under a participant loan reported as a deemed distribution on line 2g for any earlier year. The amount of the required reduction is the amount of the participant loan that was reported as a deemed distribution on line 2g for the earlier year. If entering a negative number, enter a minus sign - to the left of the number. The current value of the participant loan must then be included in line 1c(8), column (b), of Schedule H (participant loans - end of year) or in line 1a, column (b), of Schedule I (plan assets - end of year).

Although certain participant loans deemed distributed are to be reported on line 2g of the Schedule H or Schedule I, and are not to be reported on the Schedule H or Schedule I as an asset thereafter (unless the participant resumes repayment under the loan in a later year), they are still considered outstanding loans and are not treated as actual distributions for certain purposes. See Q&As 12 and 19 of Treasury Regulation section 1.72(p)-1.

Line 2h.   Other expenses (paid and/or payable) may include, among others:

  1. Salaries to employees of the plan;
  2. Expenses for accounting, actuarial, legal, and investment services;
  3. Fees and expenses for trustees including reimbursement for travel, seminars, and meeting expenses;
  4. Fees paid for valuations and appraisals; and
  5. Other administrative and miscellaneous expenses paid by or charged to the plan, including those that were not subtracted from the gross income of master trust investment accounts and 103-12 IEs in determining their net investment gain(s) or loss(es).

Line 2i.   Enter the total of all benefits paid or due as reported on lines 2e, 2f, and 2g and all other plan expenses (line 2h) during the year.

Line 2k.   Enter the net value of all assets transferred to and from the plan during the plan year including those resulting from mergers and spin-offs. A transfer of assets or liabilities occurs when there is a reduction of assets or liabilities with respect to one plan and the receipt of these assets or the assumption of these liabilities by another plan. Transfers out at the end of the year should be reported as occurring during the plan year.

Note.   A distribution of all or part of an individual participant's account balance that is reportable on Form 1099-R should not be included on line 2k but must be included in benefit payments reported on line 2e. Do not submit Form 1099-R with Form 5500.

Lines 3a through 3g.   Check "Yes" and enter the amount or "No" as specified below. Do not include the plan's interest in CCTs, PSAs, MTIAs, and 103-12 IEs. (See instructions for Direct Filing Entity (DFE) on page 4 of the instructions for the Form 5500.)

Line 3a.   Enter the value of the plan's participation in a partnership or joint venture, unless the partnership or joint venture is a 103-12 IE.

Line 3b.   The term "employer real property" means real property (and related personal property) that is leased to an employer of employees covered by the plan, or to an affiliate of such employer. For purposes of determining the time at which a plan acquires employer real property for purposes of this line, such property shall be deemed to be acquired by the plan on the date on which the plan acquires the property or on the date on which the lease to the employer (or affiliate) is entered into, whichever is later.

Line 3d.   An employer security is any security issued by an employer (including affiliates) of employees covered by the plan. These may include common stocks, preferred stocks, bonds, zero coupon bonds, debentures, convertible debentures, notes and commercial paper.

Line 3e.   Enter the current value of all loans to participants including residential mortgage loans that are subject to Code section 72(p). Include the sum of the value of the unpaid principal balances, plus accrued but unpaid interest, if any, for participant loans made under an individual account plan with investment experience segregated for each account, that are made in accordance with 29 CFR 2550.408b-1 and secured solely by a portion of the participant's vested accrued benefit. When applicable, combine this amount with the current value of any other participant loans. Do not include any amount of a participant loan deemed distributed during the plan year under the provisions of Code section 72(p) and Treasury Regulation section 1.72(p)-1, if both of the following circumstances apply:

  1. Under the plan, the participant loan is treated as a directed investment solely of the participant's individual account; and
  2. As of the end of the plan year, the participant is not continuing repayment under the loan.

If both of these circumstances apply, report the loan as a deemed distribution on line 2g. However, if either of these circumstances does not apply, the current value of the participant loan (including interest accruing thereon after the deemed distribution) should be included on line 3e without regard to the occurrence of a deemed distribution.

Note.   After participant loans have been deemed distributed and reported on line 2g of the Schedule I or H, they are no longer required to be reported as assets on the Schedule I or H. However, such loans (including interest accruing thereon after the deemed distribution) that have not been repaid are still considered outstanding for purposes of applying Code section 72(p)(2)(A) to determine the maximum amount of subsequent loans. Also, the deemed distribution is not treated as an actual distribution for other purposes, such as the qualification requirements of Code section 401, including, for example, the determination of top-heavy status under Code section 416 and the vesting requirements of Treasury Regulation section 1.411(a)-7(d)(5). See Q&As 12 and 19 of Treasury Regulation section 1.72(p)-1.

Line 3f.   Enter the current value of all loans made by the plan, except participant loans reportable on line 3e. Include the sum of the value of loans for construction, securities loans, commercial and/or residential mortgage loans that are not subject to Code section 72(p) (either by making or participating in the loans directly or by purchasing loans originated by a third party), and other miscellaneous loans.

Line 3g.   Include all property that has concrete existence and is capable of being processed, such as goods, wares, merchandise, furniture, machines, equipment, animals, automobiles, etc. This includes collectibles, such as works of art, rugs, antiques, metals, gems, stamps, coins, alcoholic beverages, musical instruments, and historical objects (documents, clothes, etc.). Do not include the value of a plan's interest in property reported on lines 3a through 3f, or intangible property, such as patents, copyrights, goodwill, franchises, notes, mortgages, stocks, claims, interests, or other property that embodies intellectual or legal rights.

Part II - Transactions During Plan Year

Answer all lines either "Yes" or "No," and if lines 4a through 4i are "Yes," an amount must be entered. If you check "No" on line 4k you must attach the report of an independent qualified public accountant or a statement that the plan is eligible and elects to defer attaching the IQPA's opinion pursuant to 29 CFR 2520.104-50 in connection with a short plan year of seven months or less. Plans with all of their funds held in a master trust should check No on Schedule I, lines 4b, c, and i.

Line 4a.   Amounts paid by a participant or beneficiary to an employer and/or withheld by an employer for contribution to the plan are participant contributions that become plan assets as of the earliest date on which such contributions can reasonably be segregated from the employer's general assets (see 29 CFR 2510.3-102). Plans that check Yes must enter the aggregate amount of all late contributions for the year. An employer holding these assets after that date commingled with its general assets will have engaged in a prohibited use of plan assets (see ERISA section 406). If such a nonexempt prohibited transaction occurred with respect to a disqualified person (see Code section 4975(e)(2)), file Form 5330 with the IRS to pay any applicable excise tax on the transaction. If no participant contributions were received or withheld by the employer during the plan year, answer "No."

TAXTIP: The DOL Voluntary Fiduciary Correction Program (VFCP) describes how to apply, the specific transactions covered (which transactions include delinquent participant contributions to pension and welfare plans), and acceptable methods for correcting violations. In addition, applicants that satisfy both the VFCP requirements and the conditions of Prohibited Transaction Exemption (PTE) 2002-51 are eligible for immediate relief from payment of certain prohibited transaction excise taxes for certain corrected transactions. For more information, see 67 Fed. Reg. 15062 and 67 Fed. Reg. 70623 (November 25, 2002). All late contributions must be reported on line 4a even if violations have been corrected. However, if the conditions of PTE 2002-51 are satisfied, corrected transactions should be treated as exempt under Code section 4975(c) for the purposes of answering line 4d. Information about the VFCP is also available on the Internet at www.dol.gov/pwba.

Line 4b.   Plans that check "Yes" must enter the amount. The due date, payment amount and conditions for determining default of a note or loan are usually contained in the documents establishing the note or loan. A loan by the plan is in default when the borrower is unable to pay the obligation upon maturity. Obligations that require periodic repayment can default at any time. Generally, loans and fixed income obligations are considered uncollectible when payment has not been made and there is little probability that payment will be made. A fixed income obligation has a fixed maturity date at a specified interest rate. Do not include participant loans made under an individual account plan with investment experience segregated for each account that were made in accordance with 29 CFR 2550.408b-1 and secured solely by a portion of the participant's vested accrued benefit.

Line 4c.   Plans that check "Yes" must enter the amount. A lease is an agreement conveying the right to use property, plant or equipment for a stated period. A lease is in default when the required payment(s) has not been made. An uncollectible lease is one where the required payments have not been made and for which there is little probability that payment will be made.

Line 4d.   Plans that check "Yes" must enter the amount. Check "Yes" if any nonexempt transaction with a party-in-interest occurred regardless of whether the transaction is disclosed in the accountant's report, unless the transaction is:

  1. statutorily exempt under Part 4 of Title I of ERISA;
  2. administratively exempt under ERISA section 408(a);
  3. exempt under Code sections 4975(c) or 4975(d);
  4. the holding of participant contributions in the employer's general assets for a welfare plan that meets the conditions of ERISA Technical Release 92-01; or
  5. a transaction of a 103-12 IE with parties other than the plan.

You may indicate that an application for an administrative exemption is pending. If you are unsure whether a transaction is exempt or not, you should consult with either a qualified public accountant, legal counsel or both. If the plan is a qualified pension plan and a nonexempt prohibited transaction occurred with respect to a disqualified person, a Form 5330 should be filed with the IRS to pay the excise tax on the transaction.

TAXTIP: Applicants that satisfy the VFCP requirements and the conditions of PTE 2002-51 (see the instructions for line 4a) are eligible for immediate relief from payment of certain prohibited transaction excise taxes for certain corrected transactions. For more information, see 67 Fed. Reg. 15062 and 67 Fed. Reg. 70623 (November 25, 2002). When the conditions of PTE 2002-51 have been satisfied, the corrected transactions should be treated as exempt under Code section 4975(c) for the purposes of answering line 4d.

Party-in-Interest.   For purposes of this form, party-in-interest is deemed to include a disqualified person. See Code section 4975(e)(2). The term "party-in-interest" means, as to an employee benefit plan:

  1. Any fiduciary (including, but not limited to, any administrator, officer, trustee or custodian), counsel, or employee of the plan;
  2. A person providing services to the plan;
  3. An employer, any of whose employees are covered by the plan;
  4. An employee organization, any of whose members are covered by the plan;
  5. An owner, direct or indirect, of 50% or more of:
    1. the combined voting power of all classes of stock entitled to vote or the total value of shares of all classes of stock entitled to vote or the total value of shares of all classes of stock of a corporation,
    2. the capital interest or the profits interest of a partnership, or
    3. the beneficial interest of a trust or unincorporated enterprise that is an employer or an employee organization described in C or D;
  6. A relative of any individual described in A, B, C, or E;
  7. A corporation, partnership, or trust or estate of which (or in which) 50% or more of:
    1. the combined voting power of all classes of stock entitled to vote or the total value of shares of all classes of stock of such corporation,
    2. the capital interest or profits interest of such partnership, or
    3. the beneficial interest of such trust or estate is owned directly or indirectly, or held by, persons described in A, B, C, D, or E;
  8. An employee, officer, director (or an individual having powers or responsibilities similar to those of officers or directors), or a 10% or more shareholder, directly or indirectly, of a person described in B, C, D, E, or G, or of the employee benefit plan; or
  9. A 10% or more (directly or indirectly in capital or profits) partner or joint venturer of a person described in B, C, D, E, or G.

Nonexempt transactions   with a party-in-interest include any direct or indirect:

  1. Sale or exchange, or lease, of any property between the plan and a party-in-interest.
  2. Lending of money or other extension of credit between the plan and a party-in-interest.
  3. Furnishing of goods, services, or facilities between the plan and a party-in-interest.
  4. Transfer to, or use by or for the benefit of, a party-in-interest, of any income or assets of the plan.
  5. Acquisition, on behalf of the plan, of any employer security or employer real property in violation of Code section 407(a).
  6. Dealing with the assets of the plan for a fiduciary's own interest or own account.
  7. Acting in a fiduciary's individual or any other capacity in any transaction involving the plan on behalf of a party (or represent a party) whose interests are adverse to the interests of the plan or the interests of its participants or beneficiaries.
  8. Receipt of any consideration for his or her own personal account by a party-in-interest who is a fiduciary from any party dealing with the plan in connection with a transaction involving the income or assets of the plan.

Note.   Amounts paid by a participant or beneficiary to an employer and/or withheld by an employer for contribution to the plan are participant contributions that become plan assets as of the earliest date on which such contributions can reasonably be segregated from the employer's general assets (see 29 CFR 2510.3-102). An employer holding these assets after that date commingled with its general assets will have engaged in a prohibited use of plan assets for purposes of the nonexempt transactions described above (see ERISA section 406).

Line 4e.   Plans that check "Yes" must enter the aggregate amount of coverage for all claims. Check "Yes" only if the plan itself (as opposed to the plan sponsor or administrator) is a named insured under a fidelity bond covering plan officials and if the plan is protected as described in 29 CFR 2580.412-18. Generally, every plan official of an employee benefit plan who "handles" funds or other property of such plan must be bonded. Generally, a person shall be deemed to be "handling" funds or other property of a plan, so as to require bonding, whenever his or her other duties or activities with respect to given funds are such that there is a risk that such funds could be lost in the event of fraud or dishonesty on the part of such person, acting either alone or in collusion with others. Section 412 of ERISA and DOL regulations 29 CFR 2580 provide the bonding requirements, including the definition of "handling" (29 CFR 2580.412-6), the permissible forms of bonds (29 CFR 2580.412-10), the amount of the bond (29 CFR 2580, subpart C), and certain exemptions such as the exemption for unfunded plans, certain banks and insurance companies (ERISA section 412), and the exemption allowing plan officials to purchase bonds from surety companies authorized by the Secretary of the Treasury as acceptable reinsurers on Federal bonds (29 CFR 2580.412-23).

Note.   Plans are permitted under certain conditions to purchase fiduciary liability insurance. These policies do not protect the plan from dishonest acts and are not bonds that should be reported in line 4e.

Line 4f.   Check "Yes," if the plan had suffered or discovered any loss as a result of any dishonest or fraudulent act(s) even if the loss was reimbursed by the plan's fidelity bond or from any other source. If "Yes" is checked enter the full amount of the loss. If the full amount of the loss has not yet been determined, provide an estimate and disclose that the figure is an estimate, such as @1000.

Note.   Willful failure to report is a criminal offense. See ERISA section 501.

Lines 4g and 4h.   Current value means fair market value where available. Otherwise, it means the fair value as determined in good faith under the terms of the plan by a trustee or a named fiduciary, assuming an orderly liquidation at time of the determination. See ERISA section 3(26).

An accurate assessment of fair market value is essential to a pension plan's ability to comply with the requirements set forth in the Code (e.g., the exclusive benefit rule of Code section 401(a)(2), the limitations on benefits and contributions under Code section 415, and the minimum funding requirements under Code section 412) and must be determined annually.

Examples of assets that may not have a readily determinable value on an established market (e.g., NYSE, AMEX, over the counter, etc.) include real estate, nonpublicly traded securities, shares in a limited partnership, and collectibles. Do not check "Yes" on line 4g if the plan is a defined contribution plan and the only assets the plan holds, that do not have a readily determinable value on an established market, are:

  1. participant loans not in default, or
  2. assets over which the participant exercises control within the meaning of section 404(c) of ERISA.

Although the current value of plan assets must be determined each year, there is no requirement that the assets (other than certain nonpublicly traded employer securities held in ESOPs) be valued every year by independent third-party appraisers.

Enter in the amount column the fair market value of the assets referred to on line 4g whose value was not readily determinable on an established market and which were not valued by an independent third-party appraiser in the plan year. Generally, as it relates to these questions, an appraisal by an independent third party is an evaluation of the value of an asset prepared by an individual or firm who knows how to judge the value of such assets and does not have an ongoing relationship with the plan or plan fiduciaries except for preparing the appraisals.

Line 4i.   Include as a single security all securities of the same issue. An example of a single issue is a certificate of deposit issued by the XYZ Bank on July 1, 2001, which matures on June 30, 2002, and yields 5.5%. For the purposes of line 4i, do not check "Yes" for securities issued by the U.S. Government or its agencies. Also, do not check Yes for securities held as a result of participant-directed transactions.

Line 4j.   Check "Yes" if all the plan assets (including insurance/annuity contracts) were distributed to the participants and beneficiaries, legally transferred to the control of another plan, or brought under the control of the PBGC.

Check "No" for a welfare benefit plan that is still liable to pay benefits for claims that were incurred before the termination date, but not yet paid. See 29 CFR 2520.104b-2(g)(2)(ii).

Note.   If "Yes" was checked on line 4j because all plan assets were distributed to participants and/or beneficiaries, you are encouraged to complete Schedule SSA (Form 5500), listing each participant reported on a previous Schedule SSA (Form 5500) who has received all of his/her plan benefits, and therefore, is no longer entitled to receive deferred vested benefits. This will ensure that SSA's records are correct, and help eliminate confusion for participants and plan administrators in the future. See the instructions to the Schedule SSA (Form 5500) for greater detail.

Line 4k.   Check "Yes" if you are claiming a waiver of the annual examination and report of an independent qualified public accountant (IQPA) under 29 CFR 2520.104-46. You are eligible to claim the waiver if the Schedule I is being filed for:

  1. A small welfare plan, or
  2. A small pension plan for a plan year that began on or after April 18, 2001 that complies with the conditions of 29 CFR 2520.104-46 summarized below.

Check "No" and attach the report of the IQPA meeting the requirements of 29 CFR 2520.103-1(b) if you are not claiming the waiver. Also check "No," and attach the required IQPA reports or the required explanatory statement if you are relying on 29 CFR 2520.104-50 in connection with a short plan year of seven months or less. At the top of any attached 2520.104-50 statement, enter 2520.104-50 Statement, Schedule I, Line 4k. For more information on the requirements for deferring an IQPA report pursuant to 29 CFR 2520.104-50 in connection with a short plan year of seven months or less and the contents of the required explanatory statement, see the instructions for Schedule H, line 3b(2) or call the EFAST Help Line at 1-866-463-3278.

The following summarizes the conditions of 29 CFR 2520.104-46 that must be met for a small pension plan with a plan year beginning on or after April 18, 2001, to be eligible for the waiver. If you need further information regarding these requirements, see the recent revision of 29 CFR 2520.104-46 which is available at www.dol.gov/pwba or call the EFAST Help Line at 1-866-463-3278.

Condition 1: At least 95 percent of plan assets are "qualifying plan assets" as of the end of the preceding plan year, or any person who handles assets of the plan that do not constitute qualifying plan assets is bonded in accordance with the requirements of ERISA section 412 (see the instructions for line 4e), except that the amount of the bond shall not be less than the value of such non-qualifying assets.

The determination of the "percent of plan assets" as of the end of the preceding plan year and the amount of any required bond must be made at the beginning of the plan's reporting year for which the waiver is being claimed. For purposes of this line, you will have satisfied the requirement to make these determinations at the beginning of the plan reporting year for which the waiver is being claimed if they are made as soon after the date when such year begins as the necessary information from the preceding reporting year can practically be ascertained. See 29 CFR 2580.412-11, 14 and 19 for additional guidance on these determinations, and 29 CFR 2580.412-15 for procedures to be used for estimating these amounts if there is no preceding plan year.

The term "qualifying plan assets," for purposes of this line, means:

  1. Any assets held by any of the following regulated financial institutions:
    1. A bank or similar financial institution as defined in 29 CFR 2550.408b-4(c);
    2. An insurance company qualified to do business under the laws of a state;
    3. An organization registered as a broker-dealer under the Securities Exchange Act of 1934; or
    4. Any other organization authorized to act as a trustee for individual retirement accounts under Code section 408.
  2. Shares issued by an investment company registered under the Investment Company Act of 1940 (e.g., mutual funds);
  3. Investment and annuity contracts issued by any insurance company qualified to do business under the laws of a state;
  4. In the case of an individual account plan, any assets in the individual account of a participant or beneficiary over which the participant or beneficiary has the opportunity to exercise control and with respect to which the participant or beneficiary is furnished, at least annually, a statement from a regulated financial institution referred to above describing the assets held or issued by the institution and the amount of such assets;
  5. Qualifying employer securities, as defined in ERISA section 407(d)(5); and
  6. Participant loans meeting the requirements of ERISA section 408(b)(1).

Condition 2: The administrator must include in the summary annual report (SAR) furnished to participants and beneficiaries in accordance with 29 CFR 2520.104b-10:

  1. The name of each regulated financial institution holding or issuing qualifying plan assets and the amount of such assets reported by the institution as of the end of the plan year (this SAR disclosure requirement does not apply to qualifying employer securities, participant loans and individual account assets described in paragraphs 4, 5 and 6 above);
  2. The name of the surety company issuing the fidelity bond, if the plan has more than 5% of its assets in non-qualifying plan assets;
  3. A notice that participants and beneficiaries may, upon request and without charge, examine or receive from the plan evidence of the required bond and copies of statements from the regulated financial institutions describing the qualifying plan assets; and
  4. A notice that participants and beneficiaries should contact the PWBA Regional Office if they are unable to examine or obtain copies of the regulated financial institution statements or evidence of the required bond, if applicable.

Condition 3: In addition, in response to a request from any participant or beneficiary, the administrator, without charge to the participant or beneficiary, must make available for examination, or upon request furnish copies of, each regulated financial institution statement and evidence of any required bond.

Examples.   Plan A, which has a plan year that began on or after April 18, 2001, had total assets of $600,000 as of the end of the 2000 plan year that included: investments in various bank, insurance company and mutual fund products of $520,000; investments in qualifying employer securities of $40,000; participant loans (meeting the requirements of ERISA section 408(b)(1)), totaling $20,000; and a $20,000 investment in a real estate limited partnership. Because the only asset of the plan that did not constitute a "qualifying plan asset" is the $20,000 real estate limited partnership investment and that investment represents less than 5% of the plan's total assets, no fidelity bond is required as a condition for the plan to be eligible for the waiver for the 2001 plan year.

Plan B is identical to Plan A except that of Plan B's total assets of $600,000 as of the end of the 2000 plan year, $558,000 constitutes "qualifying plan assets" and $42,000 constitutes non-qualifying plan assets. Because 7% - more than 5% - of Plan B's assets do not constitute "qualifying plan assets," Plan B, as a condition to be eligible for the waiver for the 2001 plan year, must ensure that it has a fidelity bond in an amount equal to at least $42,000 covering persons handling its non-qualifying plan assets. Inasmuch as compliance with ERISA section 412 generally requires the amount of the bond be not less than 10% of the amount of all the plan's funds or other property handled, the bond acquired for section 412 purposes may be adequate to cover the non-qualifying plan assets without an increase (i.e., if the amount of the bond determined to be needed for the relevant persons for section 412 purposes is at least $42,000). As demonstrated by the foregoing example, where a plan has more than 5% of its assets in non-qualifying plan assets, the required bond is for the total amount of the non-qualifying plan assets, not just the amount in excess of 5%.

If you need further information regarding these requirements, see the recent revision of 29 CFR 2520.104-46 which is available at www.dol.gov/pwba or call the EFAST Help Line at 1-866-463-3278.

Previous| First | Next

Instructions Index | 2002 Tax Help Archives | Tax Help Archives | Home