Penalty Relief Pilot Program for Certain Form 5500 Late Filers
The Internal Revenue Service (“IRS”) issued a temporary one-year pilot program under Revenue Procedure 2014-32, Pilot Penalty Relief Program – Late Annual Reporting for Non-Title I retirement Plans (“One-Participant Plans” and Certain Foreign Plans) which grants sponsors and administrators of retirement plans, not covered by Title I of the Employee Retirement Income Security Act (“ERISA”), automatic relief from penalties associated with late filings of Form 5500. In these instances, the IRS will waive the late filing penalties imposed under Internal Revenue Code (“IRC”) §§6652(e) and 6692 for failure to file timely with the reporting requirements of IRC §§6047(e) 6058 and 6059.
BACKGROUND
Relief is available from June 2, 2014 until June 2, 2015 for the following plans:
- Form 5500-EZ, Annual Return of One-Participant (Owners and Their Spouses) Retirement Plan, or
- Form 5500, Annual Return/Report of Employee Benefit Plan, if you must file this return because your non-ERISA plan doesn’t meet the filing requirements for Form 5500-EZ for plan years before 2009.
Plans that are eligible for relief include 1) Non-ERISA plans that cover only a 100% business owner or one or more partners, and their spouses (no common law employee participants), and 2) Plans maintained outside the U.S. primarily for non-resident aliens (foreign plans) subject to IRS annual reporting.
Plans that are not eligible for the program can still be granted relief by filing under the Department of Labor’s (“DOL”) Delinquent Filer Voluntary Compliance Program (“DFVCP”). Filing under DFVC can also substantially reduce the penalties.
PROCEDURES AND REQUIREMENTS
Plans will not qualify for penalty relief if a CP 283 Notice, Penalty Charged on Your 5500 Return, for the delinquent return has already been received. Returns must be paper filed with the IRS and may not be submitted electronically through the DOL EFAST2 filing system.
The late return plus any required schedules and attachments are to be filed using the original IRS form for that year. Form 5500-EZ for 2009 and later years must be filed even if the plan could have originally submitted a Form 5500-SF. Annual actuarial reports for defined benefit plans need to be attached, even if they are not required to be included with the filed return. Each return must be marked in red letters in the top margin of the first page above the title of the form “Delinquent return submitted under Rev. Proc. 2014-32, Eligible for Penalty Relief” on each late return submitted. Late returns submitted without this may be considered ineligible for penalty relief.
A required completed one page transmittal schedule must be attached to the front of each return. A copy of the transmittal schedule is provided at Appendix A of Revenue Procedure 2014-32. Multiple returns may be submitted in a single submission. This includes multiple years for one plan or multiple plans maintained by one employer.
CONCLUSION
Plan sponsors or administrators can be assessed substantial late filing penalties for delinquent Form 5500 returns, which can be as high as $15,000 per return, plus interest. Under this pilot program, these penalties will not apply. No payment is required at this time with this program; however, if this pilot program becomes permanent, user fees will be required. Plan sponsors or administrators should perform a review of their Form 5500 filings to determine if there is a need for them to take advantage of this pilot program.
NEED MORE INFORMATION
Please contact a member of WS+B’s Healthcare Services Group at [email protected] for further questions or assistance.
RESOURCE
A copy of IRS Revenue Procedure 2014-32 can be accessed below:
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The information contained herein is not necessarily all inclusive, does not constitute legal or any other advice, and should not be relied upon without first consulting with appropriate qualified professionals for your individual facts and circumstances.