Blue Ridge ESOP Associates Industry News

Form 5500

Posted by Dolores P. Lawrence, CPA, QKA

Jul 20, 2016 11:23:38 AM

The IRS, Department of Labor (DOL) and Pension Benefit Guaranty Corporation (PBGC) have decided that Form 5500 requires a major update.   The proposed revisions will be published July 21, followed by a 75-day comment period.  The revised Form 5500 is targeted for rollout with the 2019 filing year.  According to a DOL press release, proposed revisions are intended to:

  • Modernize the financial statement and investment information in the return
  • Update fee and expense information
  • Enhance the return’s usability
  • Require reporting by ALL group health plans under Title I of ERISA
  • Add new compliance questions regarding plan operations and its financial management

Hopefully, the revisions will streamline the financial information in the return.  More details will be provided once the comment period has closed.  We are hopeful that this means no changes to Form 5500 at all before 2019.

DOL Adjusts Penalties for Inflation

The 2015 Inflation Adjustment Act requires federal agencies to adjust their civil monetary penalties.  DOL has announced adjustments that go into effect for penalties it assesses after August 1, 2016 for violations occurring after November 2, 2015.   Beginning in 2017, the penalties will be adjusted annually for inflation.  Violations include, among other things, failure to provide blackout notices and automatic enrollment notices, failure to provide benefit statements to certain former participants and beneficiaries and failure to file Form 5500.  Some of the adjustments are significant.  The penalty for failing to file Form 5500, for example, increases from $1,100 per day to $2,063 per day.

IRS Modifies Its Determination Letter Program

New Revenue Procedure 2016-37 clarifies changes to its Determination Letter Program.  For individually-designed plans, the key takeaways are:

  • The current 5-year remedial amendment cycle is eliminated January 1, 2017. A “Cycle A” plans (employer identification number ending in 1 or 6) can still submit a determination letter request by January 31, 2017.
  • Thereafter, plan sponsors may submit determination letter requests only for a plan’s initial qualification and plan termination qualification. IRS may in the future announce other special exceptions for considering interim determination letter applications.
  • IRS will annually publish a Required Amendments List which will include potential amendments a plan might need to adopt to remain qualified
  • IRS will annually publish an Operational Compliance List that identifies changes in qualification requirements that are effective for a calendar year.

Note that the Revenue Procedure does NOT substantially change the 6-year remedial amendment cycle for the pre-approved plans (prototypes, volume submitter) that are frequently used for 401(k) and other plans.  The most recent restatement cycle ended April 30, 2016 and the next cycle is still anticipated to end in 2022.  During this cycle, ESOPs will be permitted in the pre-approved plan program after the IRS approves plan documents for ESOP use.

Topics: IRS, Form 5500, DOL