Recent Developments – Sept./Oct. 2015

Form 5500-EZ

In June of 2014, the IRS launched a one-year pilot program providing penalty relief for delinquent Form 5500-EZ filers. On June 3, 2015, the IRS announced that the one-year free pilot program has been replaced by a permanent program (Revenue Procedure 2015-32). Form 5500-EZ may be filed by plan sponsors of "one-participant" plans (and certain foreign plans).

To qualify for this program, the plan sponsor must file all the delinquent Form 5500-EZ returns and pay a filing fee of $500 per return up to a maximum of $1,500 per plan, regardless of how many late forms are filed. The IRS has noted that late filers may request relief from late-filing penalties due to reasonable cause by attaching correspondence to the applicable delinquent return. The plan sponsor is not eligible for the program if the IRS has already assessed a late-filing penalty.

Preapproved document changes

In Revenue Procedure 2015-36, the IRS added cash balance plans and employee stock ownership plans (ESOPs) to its preapproved plan program for master, prototype, and volume submitter plans. It also extended the application deadline for submitting the current round of Pension Protection Act of 2006 (PPA) preapproved defined benefit (DB) plans from June 30, 2015, to October 30, 2015. The extension gives drafters an opportunity to incorporate cash balance plan language into the PPA round of preapproved DB plans. Historically, IRS review and approval takes about two years from the application submission date. Therefore, preapproved PPA DB documents may not be available until the latter part of 2017 or perhaps 2018.

Drafters of preapproved defined contribution (DC) plan documents will be able to include ESOP provisions in the next round, i.e., the round after the PPA documents. The next six-year DC plan cycle opens on February 1, 2017, which means the next preapproved DC plans will generally not be available until sometime in early 2020.

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