Form 5500 changes are coming. The IRS published the proposed Form 5500 for 2015, and new questions are embedded in the return:
- Trust information, including name of trust and its federal identification number, name of trustee and trustee phone number
- Plan document questions relating to whether the plan has been timely amended ,and a request for the date of the most recent determination letter (or opinion letter for plans using a volume submitter or prototype document)
- Question regarding any tax deductible dividends paid by a C corporation ESOP
- Question on whether the plan has incurred unrelated business taxable income
- 401(k) nondiscrimination testing questions
- Coverage testing questions
The draft 5500 also changes identification of the return’s paid preparer from optional to mandatory. A number of comment letters have been sent to the Service, requesting that preparer information continue to be optional or not be subject to public disclosure on the Department of Labor’s EFAST site. The Service has also received requests to postpone all 2015 changes so that there is adequate time for preparers to plan for these changes, though it is unlikely that the changes will be postponed.
Blue Ridge will revise its electronic yearend planning letter to include the new data disclosures for Form 5500.
Form 5500 extension changes are coming. The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (also known as the Highway Funding Bill) included provisions that modify the extended due dates for various tax and informational returns. The changes in extended due dates are effective for taxable years beginning on or after January 1, 2016. Much of the publicity surrounding the bill has focused on changes to corporate and partnership return due dates. However, the legislation also changes the Form 5500 extension period from 2 ½ months to 3 ½ months. That means a calendar year 2016 Form 5500 would be due on November 15, 2017.
Hardship withdrawals are drawing IRS scrutiny. The IRS Employee Plans News issue 2015-4 focused on the need for plan sponsors to obtain, and retain in their records, documentation supporting the participant needs on which a hardship withdrawal is based. An employee’s self-certification that he has a financial need that justifies a hardship withdrawal is not considered sufficient documentation. The IRS appears to be concerned that hardship distributions without documentation are just a means of circumventing a plan’s provisions that limit distributions to post- termination of employment. The plan sponsor needs to retain:
- Documentation of the request and its review and approval
- Financial information that substantiates the employee’s immediate and heavy financial need
- Documentation that the distribution is made in accordance with plan provisions
DOL revised fiduciary rules are still being finalized. The Department of Labor issued its new proposed fiduciary rules earlier this year. The rules are frequently referred to as the Conflict of Interest Rules or Conflicted Advice Rules. The proposed regulation redefines who is a plan fiduciary as the result of giving investment advice or recommendations to an employee benefit plan, plan fiduciary, participant or beneficiary, IRA or IRA owner.
During a 90-day comment period, the Department of Labor received over 330,000 public comments. It also held a public hearing on the proposed rules in August. The DOL continued to take comments until September 24. The DOL will prepare a final rule that, unless delayed, should go into effect at some point in 2016. There are some in Congress who would like to see the new DOL regulation delayed until the Securities and Exchange Commission reviews the proposed regulations.
Expect to see more details on the conflicted advice rules once they are published in the Federal Register and become final.
New 2016 Pension Plan Limitations are announced. The IRS announced cost-of-living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2016. Highlights of the limitations that changed from 2015 to 2016 are as follows:
- For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $184,000 and $194,000, up from $183,000 and $193,000.
- The AGI phase-out range for taxpayers making contributions to a Roth IRA is $184,000 to $194,000 for married couples filing jointly, up from $183,000 to $193,000. For singles and heads of household, the income phase-out range is $117,000 to $132,000, up from $116,000 to
$131,000. - The AGI limit for the saver’s credit (also known as the retirement savings contribution credit) for low- and moderate-income workers is $61,500 for married couples filing jointly, up from $61,000; $46,125 for heads of household, up from $45,750; and $30,750 for married individuals filing separately and for singles, up from $30,500.
Click here to read the full announcement.
