FreeERISA's Form 5310 Database

One of the most valuable FreeERISA resources is our Form 5310 database, which contains timely information unavailable anywhere else on the Internet. To use the data effectively, you need some knowledge – beginning with why companies file Form 5310.

Form 5310 – Application for Determination for Terminating Plan – is submitted by defined contribution and defined benefit plans that want to terminate, many months before the plan distributes assets to participants. Filing this document often is among the "first steps" in a long chain of events leading to termination. Since the act of filing 5310 is a matter of public record, it effectively announces to everyone, including participants, the intent to terminate. (Note: The full 5310 filing is public record only for companies with more than 25 participants. However, every participant has a right to inspect his/her plan's full filing and supporting documents.)

This filing is not always required by the IRS to terminate a plan. It seeks a favorable determination from the IRS that a plan is tax-qualified at the time of termination. Without this ruling, the plan's trustees and administrators face enormous liability-since actions taken during termination or before could disqualify the plan. Once a plan is closed, there may be few effective remedies for correcting deficiencies.

Also, several IRS districts have targeted for increased audit surveillance terminated plans that have not filed 5310. Therefore, 5310 is filed by virtually all responsible plans with intent to terminate, unless administrators or trustees have strong reason to believe the plan is tax-qualified for other reasons.

In today's era of turnkey prototypes, retirement plans can be like a "roach motel"-easier for companies to get in them than out. The 5310 is among the complex document to file, requiring many hours to understand, prepare and assemble (including necessary recordkeeping.

Once the 5310 is filed and a processing fee is paid, the plan's trustees and administrators can only cross their fingers and hope for a favorable IRS determination. If the response is favorable, they then can proceed to notify employees, arrange for the distribution of accounts, and terminate the plan. If the IRS returns an unfavorable determination, the plan may spend many more months remedying deficiencies, or else challenging finding in court.

Using the Database

The FreeERISA Form 5310 Database is very current, often including filings made as recently as about 30 days ago, and they are of two types: 1) Companies listed in our "Open" 5310 data have filed for a determination but not yet received an IRS response; 2) Companies in our "Closed" data have had their cases closed by the IRS.

Whether or not the determination was favorable, the IRS is no longer evaluating their application. In most cases, "Closed" cases indicate a plan that is proceeding toward (or has already completed) termination.

Technically, however, a plan does not "close" until the last dollar has been distributed to participants.

How should you use the 5310 database in prospecting rollover candidates?

Here are a few ideas:

• Develop a regular routine for checking the "Open" data for your state. New filings are added regularly. Since these filings are public, time is of the essence in contacting the company and its participants. The sooner you identify a termination candidate, the better.

• Don't assume that all distributions must await a "Closed" status or favorable termination. Some employees may have the option of taking distributions before the plan terminates, and a public announcement of "intent to terminate" can motivate them to move money. An intent to terminate often signals an event such as a downsizing, merger or bankruptcy that may cause workers to leave the company before the plan terminates.

• You can access 5310 "Open" data by state and sort each list by sponsor, Zip code, EIN plan number, number of participants, and control date.

• Once attractive rollover candidates have been identified, you can further research facts about their plan by looking up their most recent Form 5500 filing on FreeERISA. When 5500s are available for companies filing 5310s, you will see a link in the 5310 database. Click it to access the 5500 and any attached forms filed by the same plan. Our 5310 database reveals the number of participants in each plan, for example, but not total plan assets. For that and other detailed data, check the 5500.

• You will need to cross-reference the 5500 to obtain the name of the plan's trustee and/or administrator. As soon as you identify an attractive company in the "Open" 5310 database, make an introductory phone call to this person. Say that you have detected the 5310 filing in publicly available data, introduce yourself, and indicate that you would like to help the company and its participants make this transition successfully and smoothly. Ask for an appointment to present your qualifications and services.

• Ask the company if plan participants have been made aware of the filing. If so, ask how. If not, urge the company to make a proactive positive announcement. Explain that otherwise participants will find out, and rumors will spread. The announcement should indicate clearly the reason for the termination. It also should emphasize that participants will be given education, information and choices-when the termination is approved.

• Don't delay even one day in making this call. Your goal is to be the first financial advisor to call a decision-maker at the plan, right after the 5310 is filed. You won't be the last!

• Make a commitment to check the 5310 "Open" data for your state at least once each week. Build it into your routine. Teach your assistant or secretary how.