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The Internal Revenue Service (IRS) recently added new questions to the 2015 Form 5500 and 5500-SF (short form) annual retirement plan returns. The
Form 5500 series of returns are used by retirement plans to report the financial condition, investments and operations of the plans to the Department of Labor (DOL) and IRS.
When the new IRS compliance questions were originally introduced, the IRS described the questions as optional for plan year 2015. However, in its most recent instructions, the IRS has specifically advised plan sponsors not to complete these questions for the 2015 plan year.
The IRS decision to delay completion is due to privacy and misreporting concerns raised by retirement plan administrators and advisors.
The new compliance questions are intended to aid the IRS in determining whether a retirement plan, such as a 401(k) plan, is in compliance with applicable law—in particular, how the plan is satisfying discrimination testing and making timely plan amendments. The new questions also ask whether the plan trust incurred unrelated business taxable income and if the plan made in-service distributions, such as hardships. Specifically, the following new lines were added:
Form 5500 Annual Return (Report of Employee Benefit Plan)
Schedules H (Financial Informaiton) and Schedule I (Small Plan Financial Information)
Schedule R (Retirement Plan Information) – New Part VII: IRS Compliance Questions
Form 5500-SF Annual Return (Report of Small Employee Benefit Plan)
When plan sponsors and plan administrators are eventually required to respond to these new questions, their responses could highlight plan compliance issues of which the plan sponsor or the IRS may not have been aware, and could lead to follow-up investigations from the IRS. The new questions are helpful guidance for plan sponsors to make certain that their 401(k) and 403(b) plans are in compliance.
Melissa B. Kurtzman is co-chair, employee benefits practice group, in Littler’s Philadelphia office.
Sara Richland is an associate in the firm’s Los Angeles (Century City) office. © 2016 Littler Mendelson P.C. All rights reserved. Republished with permission.
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