The Department of Labor recently released the 2015 version of the Form 5500, the annual report which must be filed by certain employee benefit plans subject to ERISA.  As previously announced by the IRS, three of the Schedules to the 2015 version include new IRS compliance questions for retirement plans.  In this client alert, we discuss why employers who sponsor retirement plans will want to review these questions now even though answering them is optional 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.

Each of the new questions is also found on the 2015 version of Form 5500-SF which is filed by certain small plans.  Form 5500 SF contains an additional IRS compliance question regarding whether required minimum distributions were properly made to 5% owners who attained age 70-1/2 regardless of whether such owners had retired.

  1. Steps Employers Can Take Now

As noted above, answering the new questions is optional 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. 

Regardless, for the 2016 plan year, employers will need to be prepared to answer these questions that can involve detailed documentary and/or operational review.