IRS Announces Higher 2020 Retirement Plan Contribution Limits
Topics: IRS, contribution limits, irs bulletin, 2020
If your firm has a profit sharing plan, a 401(k) plan or some other tax-qualified retirement plan, then you have been given a Form 5500 to sign and file every year since your business adopted the plan. While the form looks like most other IRS forms, the information reported on the filing is automatically provided to the Department of Labor (DOL), the IRS and the Pension Benefit Guaranty Corporation (PBGC) by the electronic system that captures the data. This system is known as the ERISA Filing Acceptance System (EFAST2) and is funded and managed by the DOL.
What this tells you is that three governmental agencies have their fingers in the mix and that each has its own agenda in determining what data is collected. Ultimately, though, all of the agencies want to make sure that your plan is being operated correctly and for the sole benefit of your employees.
How is the Form 5500 Data Utilized?
You may wonder how the government uses the data it collects about your plan on the Form 5500 you submit. Since each agency has its own mandate, we need to look at each one separately.
The IRS is all about tax compliance. It is responsible for the rules that allow tax benefits for both employees and employers, related to retirement plans, including vesting and distribution requirements.
The DOL, through its Employee Benefits Security Administration (EBSA), focuses on protecting the rights and benefits of participants and monitors the decisions and actions of fiduciaries associated with the operation of the plan.
The PBGC was created to protect pension benefits in private-sector defined benefit plans. It guarantees payment of certain pension benefits under plans that are terminated with insufficient money to pay all benefits.
The Form 5500 is an informational return and government agencies use it not only for enforcement but also for statistical analysis, e.g., how many workers are covered by workplace plans, how many small plans are there, how many large plans are there, what does that mean in terms of policy making, etc.