In December 2015, the Department of Labor released the 2015 version of the Form 5500, the annual report which must be filed by certain employee benefit plans subject to ERISA.  Three of the Schedules to the 2015 version include new IRS compliance questions for retirement plans.  The IRS has recently announced that because these questions were not approved by the Office of Management and Budget when the Forms 5500 were published, the questions should not be completed for the 2015 plan year.  In this updated client alert, we discuss why employers who sponsor retirement plans will want to review these questions now even though they should not complete them for the 2015 plan year.

  1. The New Questions

The new questions are found on Schedule H (Financial Information), Schedule I (Financial Information – Small Plans) and Schedule R (Retirement Plan Information). 

Schedules H and I now address additional issues related to the plan’s financial transactions:

  • Whether the plan incurred unrelated business taxable income.
  • Whether in-service distributions were made during the plan year. 
  • The name and phone number of the plan’s trustee or custodian.

Schedule R further addresses the plan’s satisfaction of certain qualification requirements under the Internal Revenue Code:

  • How the plan satisfies the applicable coverage and nondiscrimination tests.
  • Whether and when the plan has been amended for required tax law changes.
  • The date of the plan’s last favorable determination, opinion, or advisory letter.
  • Whether the plan is maintained in a U.S. territory.
  1. Steps Employers Can Take Now

As noted above, the IRS has recently stated that the new questions should not be completed for the 2015 plan year.  Nonetheless, reviewing and answering them now, even if only internally and informally, can serve at least two purposes for employers who sponsor retirement plans. 

  • The new questions can serve as a “mini-audit” which may identify issues that can be addressed either through self-correction or through a formal submission to the IRS Employee Plans Compliance Resolution System prior to any IRS-initiated enforcement action.            
  • Although the scope of any IRS audit need not be limited to the new questions, they can nonetheless provide a guide to the types of issues that might arise on audit. 

  This client alert has discussed how employers can make use of the new questions in advance of any requirement that they be formally answered on Form 5500.