Tax

Penalty Relief for Failure to File Certain Retirement Plan Documents Made Permanent

June 2015

The IRS established permanent penalty relief for certain retirement plans failing to file the required IRS Form 5500 series return.

Rev. Proc. 2015-32, effective June 3, 2015, establishes permanent penalty relief for failure to file certain retirement plan documents and replaces the recently expired temporary relief program under Rev. Proc. 2014-32. While the permanent program is similar to the temporary relief, a few key provisions changed.

Just as before, only plans covering a 100 percent business owner and his or her spouse or plans covering only one or more partners and their spouses qualify for relief. These plans may not cover any employees of the business unless the employee is a spouse of an owner. Foreign plans maintained outside the U.S. primarily for nonresident aliens also qualify for relief.

Rather than the $25 per-day penalty allowed by law—which can accumulate to a maximum of $15,000 per late return—and the $1,000 penalty for a late-filed actuarial report, the relief charges a payment of $500 for each late-filed return, capped at a maximum of $1,500 per plan. When filing a late return under the relief program, the IRS requires a $500 payment for a single return, $1,000 for two returns for the same plan and $1,500 for three or more late returns for the same plan.

To obtain relief under the permanent program, plan sponsors or administrators must follow these steps:

  1. File the late return, including any required schedules and attachments, using Form 5500-EZ for the delinquent year. This is a change from the temporary relief, which required plan sponsors and administrators to file the longer Form 5500 if originally required. Annual actuarial reports for defined benefit plans need to be prepared even if they’re not required with the filed return.
  2. Write “Delinquent return submitted under Rev. Proc. 2015-32, Eligible for Penalty Relief” in red letters on the first page above the title of the form on each late return you submit. Failure to do so may cause your late return to be ineligible for penalty relief.
  3. Attach a completed one-page transmittal schedule to the front of the earliest late-filed return.
  4. Mail the return with payment attached to the transmittal letter to the address provided in Rev. Proc. 2015-32.

Plans ineligible for late-filing relief under this program may instead pursue penalty relief through the U.S. Department of Labor’s Delinquent Filer Voluntary Compliance Program.

If you have questions or need assistance bringing your organization into compliance, contact your BKD advisor.

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