IRS Instructs Employers to Disregard Compliance Questions Included on Form 5500

By Joshua A. Diveley

The IRS has instructed employers to disregard various compliance questions included on the “final” version of the 5500 forms and instructions released in late 2015 by the DOL. Among others, the questions no longer requiring answers address topics including:

– Recent plan amendments
– Coverage testing
– ADP/ACP testing
– In-service distributions
– Unrelated business taxable income
– Paid preparer information

The updated guidance was required due to the questions not being approved for use with 2015 filings by the Office of Management and Budget. Employers and practitioners are encouraged not to complete the questions for 2015 filings, however, doing so will not cause the filings to be rejected. Corrective instructions from the DOL and IRS have been issued, but the forms continue to contain the questions to be disregarded.

For the IRS press release, see: https://www.irs.gov/Retirement-Plans/IRS-Compliance-Questions-on-the-2015-Form-5500-Series-Returns.

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IRS Offers Penalty Relief for Retirement Plan Administrators

The IRS has issued Revenue Procedure 2014-32 and Notice 2014-35 providing temporary penalty relief to retirement plan administrators that have failed to file all required Forms 5500 and 5500-EZ.

 Notice 2014-35 provides relief from late filing penalties for plans of larger businesses who satisfy the requirements of the notice and the Delinquent Filer Voluntary Compliance Program (DFVCP) offered by the Department of Labor (DOL). Under the DFVCP, in order to avoid incursion of the significant penalties that may be imposed by both the IRS and DOL, a reduced penalty may be paid with the filing of all delinquent returns. A DFVCP calculator is available at: https://www.askebsa.dol.gov/dfvcepay/calculator.

Revenue Procedure 2014-32 establishes a one-year pilot program providing relief from late filing penalties for plans not subject to the reporting requirements of Title I, including “one-participant plans” covering only the business owner and the owner’s spouse, that are required to file Form 5500-EZ but have failed to do so. No penalties or other payments are required under the pilot program, however, a fee or other payment may be required if and when a permanent program is established. If your plan is a “one participant plan” that has failed to file all necessary Forms 5500-EZ, it is highly recommended that you take advantage of the penalty-free relief offered under the pilot program.

The full text of Revenue Procedure 2014-32 is available at: http://www.irs.gov/pub/irs-drop/rp-14-32.pdf.

The full text of IRS Notice 2014-35 is available at: http://www.irs.gov/pub/irs-drop/n-14-35.pdf.

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Attachment Required for 2013 Form 5500

The Department of Labor (DOL) published final rules in 2013 under the Affordable Care Act to protect workers and employers whose health benefits are provided through Multiple Employer Welfare Arrangements (MEWAs). The DOL has also published a new version of Form 5500 which includes a new section “Form M-1 Compliance Information” added as an attachment to the Form 5500 for the 2013 plan year.

All welfare plans required to file the Form M-1, “Report for Multiple Employer Welfare Arrangements (MEWAs) and Certain Entities Claiming Exception (ECEs)” must now file the Form 5500 regardless of plan size or type of funding (including small unfunded or insured welfare plans). In addition, the new attachment must be filed by all welfare plans required to file a Form 5500 even if the plan is not subject to the Form M-1 filing requirement, including plans that are not MEWAs as well as plans that are MEWAs but are not required to file an M-1 because of a filing exemption.

If the Form M-1 attachment is not provided with the Form 5500, the filing may be rejected as incomplete, which could subject the plan to possible failure to file penalties. Form M-1 will be incorporated into the 2014 Form 5500 which will eliminate the attachment for subsequent years.

© 2014 Parsonage Vandenack Williams LLC

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