The ERISA consultants at the Learning Center Resource Desk, which is available through Columbia Threadneedle Investments, regularly receive calls from financial advisors on a broad array of technical topics related to IRAs and qualified retirement plans. A recent call with an advisor in Florida is representative of a common inquiry involving the DOL’s and IRS’s guidance on Form 5500. The advisor asked:
“What are the new compliance questions on Form 5500 and when do they apply?”
The DOL and IRS added new, probing compliance questions first to Form 5500-SUP, and then to the 2015 Forms 5500/5500-SF and Schedules H, I and R.
- The IRS recently declared plan sponsors should not complete these questions for the 2015 filing. (See the IRS posting.)
- At first, the IRS said the new inquires would be “optional” for 2015, but in February 2016, the IRS backed down on that for this year. It is likely that the questions will be required for 2016 Form 5500 filings, however. Plan sponsors and service providers should be prepared.
The new compliance questions cover the following:
- Is the plan an Internal Revenue Code Section (IRC §) 401(k) plan?
- How did the plan satisfy the actual deferral percentage and actual contribution percentage nondiscrimination tests?
- How did the plan satisfy the minimum coverage requirements of IRC §410(b)?
- Has the plan been amended for all required tax law changes?
- What type of document is the plan based on (master and prototype, volume submitter or individually designed)?
- What is the date of the plan’s most recent favorable approval letter?
- Did the employer maintain an employee stock ownership plan and how were dividends managed?
- Is the plan maintained in a U.S. territory (Puerto Rico, American Samoa, Guam, the Commonwealth of the Northern Mariana Islands or the U.S. Virgin Islands)?
- What contribution amount was deducted? By how much did the contribution exceed the deduction limit?
- Did the plan trust incur unrelated business taxable income?
- Were in-service distributions made during the plan year?
Conclusion
The DOL and IRS plan to zero in on key plan compliance requirements for plans through the addition of revealing questions on Form 5500 filings. Plan sponsors and service providers get a “pass” for 2015, but should anticipate that the questions will apply to 2016 filings.
The Learning Center Resource Desk is staffed by the Retirement Learning Center, LLC (RLC), a third-party industry consultant that is not affiliated with Columbia Threadneedle. Any information provided is for informational purposes only. It cannot be used for the purposes of avoiding penalties and taxes. Columbia Threadneedle does not provide tax or legal advice. Consumers consult with their tax advisor or attorney regarding their specific situation.
Information and opinions provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by Columbia Threadneedle.
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©2016, Columbia Management Investment Advisers, LLC. Used with permission.
