Posted by Maria T. Hurd, CPA
*Updated 6/29/16 – 3:30pm
In the retirement plan industry, 2 + 2 can be 4, or many other amounts depending on the actuarial assumptions used. Similarly, one-participant plans can actually cover hundreds of participants. In fact, a one-participant plan is:
- A plan that covers only an individual or an individual and his/her spouse who wholly owns a trade or business (incorporated or unincorporated); or
- A plan for a partnership (or an entity taxed as a partnership) that covers only the partners or the partners and the partners’ spouses.
One-participant plans are eligible to file a Form 5500-EZ on paper directly with the IRS, since the form may not be filed electronically. However, sponsors of one-participant plans may elect to file Form 5500-SF electronically with the Department of Labor (DOL) in lieu of the paper Form 5500-EZ. Plan sponsors do not have to file Form 5500-EZ for the 2015 plan year for a one-participant plan if the total of the plan’s assets and the assets of all other one-participant plans maintained by the employer at the end of the 2015 plan year does not exceed $250,000, unless 2015 is the final plan year of the plan. If a one-participant plan’s total assets (either alone or in combination with one or more one-participant plans maintained by the employer) exceed $250,000 at the end of the 2015 plan year, Form 5500-EZ must be filed for each of the employer’s one-participant plans, including those with less than $250,000 in assets for the 2015 plan year.
The Internal Revenue Service (IRS) will generally waive late filing penalties for Form 5500 series filers who satisfy the DOL’s Delinquent Filer Voluntary Compliance Program (DFVC) requirements. However, plans that cover only owners and their spouses and partnerships with no employees are not subject to ERISA, and as such, are not eligible for the DOL’s DFVC Program. To help 5500-EZ non-filers, the IRS has a separate Form 5500-EZ Late Filer Program that offers relief from late filing penalties for non-ERISA plans that must file Forms 5500-EZ or 5500-SF because they cover only the owner, partner and spouses.
If a plan sponsor has not received the delinquency notice CP 283 – Penalty Charged on Your Form 5500 Return, the employer may:
- Prepare a paper Form 5500-EZ for each delinquent year, including any required schedules and attachments.
- Write in red at the top of each paper return: “Delinquent Return Filed under Rev. Proc. 2015-32, Eligible for Penalty Relief.”
- Attach the Form 14704 Transmittal Schedule to the top of the submission (including all delinquent returns).
- Include $500 per delinquent return, up to $1,500 per plan payable to “United States Treasury.”
Without the program, potential late filing penalties include $25 per day up to $15,000 for each late Form 5500 or 5500-EZ, plus interest (IRC Section 6652(e)) and $1,000 for each actuarial report, if applicable.
As an alternative to submitting late returns under this delinquent filer program, plan sponsors may instead request relief by attaching a statement to the delinquent return, signed by a person in authority, stating your reasonable cause for the untimely return. However, if the request is denied, the plan sponsor will receive the CP 283 penalty notice and the return will no longer be eligible for the delinquent filer program.
For step-by-step instructions on how to file under the Penalty Relief Program, as well as the full text of Revenue Procedure 2015-32, please refer to the following link in the IRS website:
Whether a plan sponsor has a one-person, or a one-hundred-partner plan that missed one or more Form 5500-EZ filings, penalties owed can be limited to a maximum of $1,500 by filing under this program. It’s as easy as 2+2.