IRS, Labor teamwork pays

As agencies work under greater scrutiny to justify spending and information

technology investments, the Labor Department and the Internal Revenue Service

have discovered one way to facilitate funding for new IT projects: working


The agencies are collaborating on a new forms processing system that

will help expedite Form 5500 filings, which all private companies submit

annually if they offer employee benefits. Although the collaboration involved

several challenges (see sidebar), the $9 million system is expected to decrease

combined operating costs at Labor and the IRS by at least 50 percent annually.

The IRS and Labor are sharing the development and operating costs of

the new system. A third agency, the Social Security Administration, is not

contributing funds for the system's development but will be able to retrieve

information from the system.

The Employee Retirement Income Security Act (ERISA) Filing Acceptance

System (EFAST) is scheduled to go live in July. Cost savings will come primarily

from reduced paper handling and elimination of data entry. "In the old system,

much of our costs came from paying staff to manually key-punch the information

into the system," Labor spokesman John Helms said.

The new system also will benefit employers. The electronic forms will

have automatic error-checking features that will warn employers about mistakes,

saving them time they might spend later to make corrections. The system

also will enable agencies to improve service by shortening customer response


Components of the system, which is being built by National Computer

Systems Inc. and Logicon Inc., will give employers several options in filing

Form 5500:

n Employers whose computer resources or abilities are limited can still

write or type information on paper and send the forms via regular mail.

Agency staff members will then scan the paper forms using one of three Eastman

Kodak Co. 9500 scanners. OCR software from Captiva Software Corp. will flag

inconsistencies or characters that cannot be read to alert a staff person

to intervene.

"Everything will be double-checked by an individual to prevent the filer

from getting burned," said Carl Walston, IT programmer for NCS.

n For employers that have adequate computer resources, there will be

several options for filing Form 5500 electronically. All the electronic

options include a common front end — an electronic forms software program

that walks the employer through the form-filling process. The agencies will

encourage employers to use the electronic form.

"Because of the interactive quality [of the electronic form], inconsistencies

will be flagged and fixed," said Alan Lebowitz, deputy assistant secretary

for Labor's Pension and Welfare Benefits Administration. "When the document

is finally filed, it won't need additional attention by our staff, and the

filer can avoid fines and penalties."

Once they've filled out the electronic form, employers have several options

for sending it to the agency processing center.

The form can be printed out and delivered via regular mail. In this

case, the forms software will place five bar codes on the bottom of each

page. The bar codes will contain all the information listed on the form.

The same scanners used to read the hand-filled forms will read the bar code

and capture the information.

Alternatively, employers can send the electronic forms to the agencies

on portable electronic media, such as CDs, floppy disks or magnetic tape.

Or, in an option still being developed, employers can apply to the agencies

for encryption codes and electronic signatures that will let them send forms

using secure e-mail.

The EFAST software is being developed by more than 10 software companies.

The agencies expect the developers to have finished products by March or

April. The cost and hardware requirements to run the programs will depend

on the specifications included in the final design.

Information collected from the more than 1 million forms filed each

year will be stored on an Oracle Corp. database housed near Minneapolis.

The information, which will be categorized and sent to individual agencies,

will be used to enforce ERISA regulations.

The database can hold up to 4 terabytes of information, or three years

worth of expected filings. An additional 4 terabytes can be stored offline

on magnetic tape. "Because the system is scalable, if we find we need more

[storage] space, we can simply add more," Walston said.


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