IRS establishes permanent program to provide relief to plan administrators who fail to timely file Form 5500-EZ

The IRS has issued a revenue procedure establishing a permanent program to provide relief to plan administrators who fail to timely file Form 5500-EZ. The permanent program replaces the pilot program that was open from June 2, 2014 to June 2, 2015. The relief provided under the permanent program is effective June 3, 2015. Returns submitted before June 3, 2015 will be processed in accordance with Rev. Proc. 2014-32.

Temporary pilot program

The temporary one-year pilot program was only available to the plan administrator or plan sponsor of (1) certain small business (owner-spouse) plans and plans of business partnerships (together, “one-participant plans”) and (2) certain foreign plans. No penalty or other payment was required to be paid under this pilot program. The IRS stated that, after the temporary pilot program ended, the IRS would consider whether the pilot program should be replaced with a permanent program. The IRS had determined that any permanent program that was offered would include a fee or other payment. The IRS invited the public to submit comments on whether such a permanent program should be established and, if so, how fees should be determined.

The IRS notes that all of the comments received were in favor of replacing the pilot program with a permanent program and two commenters suggested potential fee structures.

Procedural requirements

As in the pilot program, the relief under the permanent program is only available to filers that are the plan administrator or plan sponsor of (1) certain small business (owner-spouse) plans and plans of business partnerships (together, “one-participant plans”) and (2) certain foreign plans, and that satisfy procedural requirements. A plan is not eligible for relief under the permanent program for any year that the plan was subject to Title I of ERISA.

In the pilot program, the applicant was required to submit the following information to the IRS in order to receive penalty relief:


A complete Form 5500 Series return

    . The submission was required to include a complete Form 5500 Series Annual Return/Report, including all required schedules and attachments, for each plan year for which the applicant was seeking penalty relief.

Delinquent returns must be marked

    . For each delinquent Form 5500 Series return submitted to the IRS, the applicant had to mark in red letters in the top margin of the first page (above the title of the form): “Delinquent return submitted under Rev. Proc. 2014-32, Eligible for Penalty Relief.” Failure to properly mark the submitted delinquent return might cause the IRS to treat the return as ineligible for the relief and assess all applicable penalties (unless the plan administrator or plan sponsor could establish that the failure to timely file was attributable to reasonable cause).

Required Transmittal Schedule

      . For each delinquent return being submitted, the applicant was required to complete a paper copy of the Transmittal Schedule provided in the Appendix of the revenue procedure (also was available at

    ). A completed Transmittal Schedule was to be attached to the front of each delinquent return.

The IRS explains that the permanent program generally follows the requirements of the pilot program, but some changes have been made to reflect the comments received as well as to reflect the addition of a payment requirement.

Payment requirement. The payment for each submission is $500 for each delinquent return for each plan, up to a maximum of $1,500 per plan. Because applicants under this program will typically be smaller than filers under the Department of Labor’s Delinquent Filer Voluntary Compliance (DFVC) program, a smaller payment is required under this program for two or fewer delinquent returns than is required under the DFVC program, but the maximum amount per plan (which applies under this program to three or more delinquent returns) is the same.

Form 5500-EZ. As under the pilot program, the permanent program requires that a Form 5500-EZ return be filed even though the applicant could have filed a Form 5500-SF return electronically if the return had been timely filed. The IRS was concerned that it would be difficult to match delinquent forms filed under the EFAST filing system to a payment. The IRS states that it will consider future changes in the program to allow electronic filing of delinquent returns as administrative and technological capacities improve.

In general, an applicant must submit the delinquent return on the Form 5500-EZ that applied for the plan year for which the return was delinquent. There are exceptions to this requirement, including for plans not subject to Title I of ERISA that were required to file returns on Form 5500, rather than Form 5500-EZ, prior to 2009. The pilot program required these filers to file a Form 5500 for the applicable year instead of a Form 5500-EZ. The IRS has simplified this issue in the permanent program by requiring these filers to file a current-year Form 5500-EZ return, filled out with the beginning and ending dates for the plan year for which the return was delinquent.

Multiple returns. The pilot program allowed for the filing of multiple returns in a single submission. Because the permanent program requires a payment based on the number of delinquent returns for each plan, however, the IRS now requires that delinquent returns for each plan be submitted separately. Thus, multiple delinquent returns for a single plan should be submitted in a single package, but delinquent returns for different plans must be submitted in different packages.

Transmittal schedule. In the pilot program, a transmittal schedule in Appendix A of Rev. Proc. 2014-32 was required to be submitted with each delinquent return. Under the permanent program, applicants must include a Form 14704, Transmittal Schedule – Form 5500-EZ Delinquent Filer Penalty Relief Program (Rev. Proc. 2015-32), with each submission. Unlike the pilot program, the IRS will contact the applicant if the Form 14704 is not included, the documents submitted are inconsistent with the Form 14704, a required signature on a delinquent return is not provided, or the amount of payment is incorrect. As under the pilot program, however, the IRS generally does not expect to contact the applicant in other cases.

Note: The IRS states that, as an alternative to making a submission under the permanent program, filers may instead file for the relief currently available for a failure to timely file that is due to reasonable cause. However, a filer who is denied relief for reasonable cause for a particular delinquent return will not be eligible for relief as to that return under this permanent program. Also, filers may not seek relief for reasonable cause as part of their submission under this program.

Source: IRS Rev. Proc. 2015-32.

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