On May 9, the IRS announced a one-year amnesty program for one-participant (aka owner-only) plans which failed to timely file Form 5500. Owner-only plans are plans which cover only a business owner and his or her spouse, or only one or more partners or partners and their spouses in a business partnership.
As described in a recent Ask the Experts column, owner-only plans must file a 5500-series form once plan assets reach the $250,000 asset threshold. Since many of one-participant plans are self-reliant with respect to compliance requirements, delinquent returns are not uncommon. In certain situations, this failure may go on for many years.
Plans which are required to file Form 5500 or 5500-SF may rely on a Delinquent Filer Voluntary Compliance Program (DFVCP) to bring their filing status to date. This program sponsored by the Department of Labor. The IRS waives late filing penalties for plans which take part in DFVCP. However until now there was no similar mea culpa option for one-participant plans.
Program Dates: The new pilot program, announced in Notice 2014-35 and established under Revenue Procedure 2014-32, will be open from June 2, 2014 to June 2, 2015.
Who is Eligible: Plan sponsors and administrators who…
- were required to file the Form 5500 or Form 5500-EZ late, i.e. non-ERISA plans that cover only a business owner or one or more partners, and their spouses; or
- maintained a plan outside of the United States primarily for non-resident aliens but are subject to IRS annual reports requirements; and
- have not received a CP 283 Notice, “Penalty Charged on Your 5500 Return,’ for a delinquent return.
Costs: Unlike the DOL’s program which requires a compliance fee, there is no penalty or other fee required to be paid under this pilot program.
Benefit: This program offers a substantial advantage to plan sponsors to bring their plan(s) to compliance as penalties arising from failure to file a return may reach up to $15,000, plus interest, for each late return.
We are Here to Help
Failure to file Form 5500 is a common mistake, especially among small businesses. Unfortunately, the issue does not go away on its own. Regulators may easily uncover this issue when plans process distributions or begin their termination processes. This new program provides a significant opportunity to bring plans into compliance but the window of opportunity is short as the pilot program is set to close on June 2, 2015 and its future beyond that point is unknown. Call or email Retirement Services, (888) 926-0600 or firstname.lastname@example.org.