New IRS Program For Delinquent 5500 Filers For Plans Without Employees

Posted on October 7, 2014

The Department of Labor (DOL) has for years sponsored a program to permit retirement plans subject to Title I of the Employee Retirement Income Security Act of 1974 (ERISA) to file delinquent annual reports (Form 5500) and pay a reduced, fixed penalty amount.  The Internal Revenue Service (IRS) has agreed not to impose its own penalties ($25 for each day the report is delinquent, up to $15,000) for delinquent Form 5500 reports filed through the DOL’s delinquent filer program.

However, plans sponsored by employers with no employees are not covered under ERISA and therefore are not within the DOL’s jurisdiction. Primarily, these are plans that only cover the owner of a sole proprietorship (and his/her spouse) or the partners of a partnership (and their spouses). This type of plan is referred to by the IRS as a “One-Participant” plan.  One-Participant plans are generally required to file a Form 5500-EZ if their assets at the end of the year are more than $250,000, or for the last plan year if the plan is terminating. (The rules for years prior to 2009 were different.) One-Participant plans cannot take advantage of the DOL delinquent filer program, but can request relief from IRS penalties if they can prove “reasonable cause for not filing timely.” Such relief is subject to the discretion of the IRS.

The IRS recently announced a temporary program to provide delinquent-filer relief for One-Participant plans.[i] The program will run through June 2, 2015, but may be made permanent after that date. No penalty or other fee must be paid for a report filed under the program. The IRS did indicate that if the program is made permanent a filing fee may be required.

To qualify for relief under the program, a complete Form 5500 with all required schedules must be filed for the delinquent year.  (For years prior to 2009 a form other than Form 5500 EZ may be required.) A paper copy of the report must be filed with the IRS and must include a legend at the top that it is being filed under the program and is eligible for penalty relief.  More than one delinquent return may be filed at one time, but each report must include a “Transmittal Schedule” in the format provided by IRS in their announcement.

Reports for which a delinquent filing penalty have already been assessed are not eligible for the program.

This program is a welcome relief for Form 5500 EZ and other filers of One-Participant plans. If you think you may have been required to file a Form 5500 for a prior year and did not do so, please contact BCG to determine if you qualify for filing under this relief program.

[i] The program is also open to retirement plans maintained outside the United States primarily for nonresident aliens, if the plan sponsor is a U.S. employer or a foreign employer with U.S. source income that deducts contribution to the foreign plan on its U.S. income tax return.

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