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IRS says certain compliance questions on 2015 Forms 5500 shouldn’t be completed

IRS Compliance Questions on the 2015 Form 5500-Series Returns.

IRS has announced that, since proposed 2015 IRS compliance questions on the Forms 5500 (Annual Return/Report of Employee Benefit Plan) and 5500-SF (Short Form Annual Return/Report of Small Employee Benefit Plan), and Schedules H (Financial Information), I (Financial Information—Small Plan), and R (Retirement Plan Information) were not approved by the Office of Management and Budget (OMB) when the 2015 Form 5500 and Form 5500-SF were published on Dec. 7, 2015, plan sponsors should not complete these questions for the 2015 plan year.

Background. Under Code Sec. 6058(a), every employer maintaining a pension, annuity, stock bonus, profit-sharing, or other funded plan of deferred compensation, or the plan administrator, must file an annual return stating the information required by regs with regard to the plan’s qualification, financial condition, and operations. This reporting requirement is satisfied by filing a return in the Form 5500 series.

IRS, the Department of Labor (DOL) and the Pension Benefit Guaranty Corporation (PBGC) posted advance informational copies of the 2015 Form 5500, related schedules, and instructions, on the ERISA Filing Acceptance System (EFAST) webpage (see ). There were a number of new IRS compliance questions for purposes of satisfying the Code Sec. 6058(a) reporting requirements. These compliance questions were optional for the 2015 plan year.

The compliance questions in Schedules H and I (Lines 4o, 4p, 6a-6d) and Form 5500-SF (Lines 10j, 14a-d, and 19) ask:

…Did the plan trust incur unrelated business taxable income?
…Were in-service distributions made during the plan year?
…Name of trust.
…Trust’s EIN.
…Name of trustee or custodian.
…Trustee’s or custodian’s telephone number.

The compliance questions in Schedule R (Part VII; Lines 20a-c, 21a-b, 22a-d, and 23) and Form 5500-SF, Part IX, Lines 15a-c, 16a-b, 17a-d, and 18) ask:

…Is the plan a Code Sec. 401(k) plan?
…If “Yes,” how does the Code Sec. 401(k) plan satisfy the nondiscrimination requirements for employee deferrals and employer matching contributions (as applicable) under Code Sec. 401(k)(3) and Code Sec. 401(m)(2) (Design-based safe harbor method or actual deferral percentage (ADP)/actual contribution percentage (ACP))?
…If the ADP/ACP test is used, did the Code Sec. 401(k) plan perform ADP/ACP testing for the plan year using the “current year testing method” for non-highly compensated employees?
…Check the box to indicate the method used by the plan to satisfy the coverage requirements under Code Sec. 410(b)(ratio percentage test or average benefit test).
…Does the plan satisfy the coverage and nondiscrimination tests of Code Sec. 410(b) and Code Sec. 401(a)(4) by combining this plan with any other plans under the permissive aggregation rules?
…Has the plan been timely amended for all required tax law changes?
…Date the last plan amendment/restatement for the required tax law changes was adopted; enter the applicable code.
…If the plan sponsor is an adopter of a pre-approved master and prototype (M&P) or volume submitter plan that is subject to a favorable IRS opinion or advisory letter, enter the date of that favorable letter and the letter’s serial number.
…If the plan is an individually-designed plan and received a favorable determination letter from the IRS, enter the date of the plan’s last favorable determination letter.
…Is the Plan maintained in a U.S. territory (i.e., Puerto Rico (if no election under ERISA § 1022(i)(2)ERISA § 1022(i)(2) has been made), American Samoa, Guam, the Commonwealth of the Northern Mariana Islands or the U.S. Virgin Islands)?

In December of 2015, IRS issued a series of frequently asked questions (FAQs) clarifying some of the new compliance questions that have been added to the 2015 Form 5500 series. IRS strongly encouraged Form 5500 filers to answer the new compliance questions (see Weekly Alert ¶  9  12/31/2015).

IRS announcement. Because of the failure to secure OMB approval, IRS has decided that plan sponsors shouldn’t answer the new IRS compliance questions that had been added to Schedules H and I (Lines 4o-4p, 6a-6d) and Schedule R (Part VII; Lines 20a-c, 21a-b, 22a-d, and 23), and to Form 5500-SF (Lines 10j, 14a-d, and Part IX: Lines 15a-c, 16a-b, 17a-d, 18, 19, and 20) (which are optional for the 2015 plan year).

DOL has followed up on the IRS announcement and stated on its EFAST2 Filing site that, effective Feb. 17, 2016, plan sponsors should not complete the new IRS compliance questions (see ).

References: For information returns for pension and other employee benefit plans, see FTC 2d/FIN ¶  S-3350; United States Tax Reporter ¶  60,584; TaxDesk ¶  813,001; TG ¶  9100.

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