United States: REMINDER – IRS Questions On Form 5500 Not Required To Be Answered

Earlier this year, the IRS announced that it had failed to receive Office of Management and Budget approval and that, consequently, certain questions it had added to the Form 5500 series were not required to be answered by plan sponsors and administrators.  The instructions for Forms 5500 and 5500-SF, and for Schedules H, I and R were revised to provide that these questions should be skipped when completing the form.  These questions are lines 4o, 4p, 6c and 6d of Schedules H and I respectively, Part VII (IRS Compliance Questions) of Schedule R and Part IX (IRS Compliance Questions) of Form 5500-SF. 

Form 5500, Schedule H (Financial Information) and Schedule I (Small Plan Financial Information)

  • Line 4o - Did the plan trust incur unrelated business taxable income? Yes/No/N/A.  Amount ________.
  • Line 4p - Were in-service distributions made during the plan year? Yes/No.  Amount ________.
  • Line 6c - Name of trustee or custodian
  • Line 6d - Trustee's or custodian's telephone number


Form 5500, Schedule R (Retirement Plan Information) Part VII (IRS Compliance Questions) and
Form 5500-SF (Short Form Annual Return/Report) Part IX (IRS Compliance Questions)

  • Part VII Line 20a/Part IX Line 15a - Is the plan a 401(k) plan? Yes/No
  • Part VII Line 20b/ Part IX Line 15b - If "Yes", how does the 401(k) plan satisfy the nondiscrimination requirements for employee deferrals and employer matching contributions (as applicable) under section 401(k)(3) and 401(m)(2)?  ___ Design-based safe harbor method  ___ ADP/ACP Test
  • Part VII Line 20c/Part IX Line 15c - If the ADP/ACP test is used, did the 401(k) plan perform ADP/ACP testing for the plan year using the "current year testing method" for non-highly compensated employees (Tres.Reg sections 1.401(k)-2(a)(2)(ii) and 1.401(m)-2(a)(2)(ii)? Yes/No
  • Part VII Line 21a/Part IX Line 16a - Check the box to indicate the method used by the Plan to satisfy the coverage requirements under Section 410(b)?  ___ Ratio percentage test ___ Average benefit test
  • Part VII Line 21b/Part IX Line 16b - Does the plan satisfy the coverage and nondiscrimination tests of sections 410(b) and 401(a)(4) by combining this plan with any other plans under the permissive aggregation rules?  Yes/No
  • Part VII Line 22a/Part IX Line 17a - Has the plan been timely amended for all required tax law changes? Yes/No/N/A
  • Part VII Line 22b/Part IX Line 17b - Date the last plan amendment/restatement for the required tax law changes was adopted __/__/__.  Enter the applicable code ____ (See instructions for tax law changes and codes).
  • Part VII Line 22c/Part IX Line 17c - If the plan sponsor is an adopter of a pre-approved master and prototype (M&P) or volume submitter plan that is subject to a favorable IRS opinion or advisory letter, enter the date of that favorable letter __/__/__ and the letter's serial number ____________.
  • Part VII Line 22d/Part IX Line 17d - If the plan is an individually-designed plan and received a favorable determination letter from the IRS, enter the date of the plan's last favorable determination letter __/__/__.
  • Part VII Line 23/Part IX Line 18 - Is the plan maintained in a U.S. territory(i.e., Puerto Rico(if no election under ERISA section 1022(i)(2) has been made), American Samoa, Guam, the Commonwealth of Northern Marina Islands or the U.S. Virgin Islands)? Yes/No


Form 5500-SF (Short Form Annual Return/Report) Part IX (IRS Compliance Questions) {continued, as this Form does not include Schedules H or I}

  • Part IX Line 19 - Were in-service distributions made during the plan year? Yes/No.
  • If "Yes", enter amount ______.
  • Part IX Line 20 - Were required minimum distributions made to 5% owners who have attained age 70 1/2 (regardless of whether or not retired), as required under section 401(a)(9)? Yes/No/N/A

We are issuing this One Minute Memo as a reminder because plan sponsors and administrators may not have been focused on their Form 5500s when these announcements were issued, or may complete the forms (based on prior filings) without review of the updated instructions.  We also want to call attention to the questions themselves, because it is possible that some or all of these questions will be approved in the future.  By including the questions on the Form 5500s, the responses are executed under penalties of perjury.  Accordingly, plan sponsors and administrators may have to self-identity their plans as possibly being in violation of applicable IRS guidance.  In fact, the formal information collection request from IRS to the Office of Management and Budget specifically notes that the answers to some of these questions will be "fundamental to IRS's ability to monitor plans for compliance."  See 81 Fed. Reg. 18687--18691 (Mar. 31, 2016).  Further, should the IRS later disagree with the response to any of the questions (e.g., does the 401(k) plan pass the ADP and ACP tests?), the IRS will have the threat of perjury hanging over the filers.

It is possible that the Office of Management and Budget will not approve of the questions as currently posed because of, e.g., the risk that answers will be used by the IRS to target plans for examination.  On the other hand, Form 5500 currently asks whether late transmittal of participant contributions or another type of prohibited transaction occurred, for which an affirmative answer raises the likelihood of audit, and some of the questions appeared in prior years.  Accordingly, we suggest plan sponsors and administrators take the time to review these questions, and prepare themselves to be able to answer these questions on 2016 Form 5500 should such answers be required.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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