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

The IRS has issued a revenue procedure establishing a temporary one-year pilot program to provide relief to plan administrators who fail to timely file Form 5500-EZ. The pilot program will be open from June 2, 2014 to June 2, 2015.

No penalty or other payment is required to be paid under this pilot program. After this temporary pilot program ends, the IRS will consider whether the pilot program should be replaced with a permanent program. The IRS has determined that any permanent program that is offered will include a fee or other payment. The Service invites the public to submit comments on whether such a permanent program should be established and, if so, how fees should be determined.

Eligible plans

The relief under this revenue procedure is 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.

Procedural requirements

The applicant must submit the following information to the IRS in order to receive penalty relief:

(1) A complete Form 5500 Series return. The submission must include a complete Form 5500 Series Annual Return/Report, including all required schedules and attachments, for each plan year for which the applicant is seeking penalty relief.

(2) Delinquent returns must be marked. For each delinquent Form 5500 Series return submitted to the IRS, the applicant must 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 may cause the IRS to treat the return as ineligible for the relief and assess all applicable penalties (unless the plan administrator or plan sponsor can establish that the failure to timely file was attributable to reasonable cause).

(3) Required Transmittal Schedule. For each delinquent return being submitted, the applicant must complete a paper copy of the Transmittal Schedule provided in the Appendix of the revenue procedure (also available at http://www.irs.gov/pub/irs-tege/appendix_a_transmittal_schedule.pdf). A completed Transmittal Schedule must be attached to the front of each delinquent return.

Multiple returns may be included in a single submission. Thus, if a plan has delinquent returns for more than one plan year, the returns may be included in a single submission. Similarly, delinquent returns for more than one plan may be included in a single submission. For example, if an employer maintains a defined contribution plan and a defined benefit plan, and each plan is delinquent for three plan years, the employer may include the six delinquent returns (three for each plan) in a single submission.

Note: The IRS has made it clear that a plan is not eligible for relief under the pilot program for any year that the plan was subject to Title I of ERISA. Instead, the sponsor or plan administrator may pursue penalty relief for these years through the Labor Department’s Delinquent Filer Voluntary Compliance (DFVC) Program.

Source: Rev. Proc. 2014-32.

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