New IRS Program for Delinquent Form 5500 Filers of Non-ERISA Plans

by McDermott Will & Emery

The Internal Revenue Service recently established a one-year pilot program that provides plan administrators and plan sponsors of certain non-ERISA and foreign plans subject to the annual Form 5500 reporting requirements relief from penalties under the Internal Revenue Code.  The penalty relief is temporary and expires on June 2, 2015.

The Internal Revenue Service (IRS) recently established a temporary, one-year pilot program that provides plan administrators and plan sponsors of certain non-Employee Retirement Income Security Act of 1974 (ERISA) and foreign plans subject to the annual Form 5500 reporting requirements relief from penalties under Sections 6652(e) and 6692 of the Internal Revenue Code (Code).  The program is separate from, and is intended for, plans that are not eligible for the U.S. Department of Labor (DOL) Delinquent Filer Voluntary Compliance Program (DFVCP).


U.S. retirement plans are generally required to file the appropriate annual Form 5500 Series Annual Return/Report or be subject to civil penalties under the Code, as amended.  Code Section 6652(e) provides that if a plan sponsor or plan administrator fails to timely file the return or statement required under Code Sections 6058 or 6047(e) (relating to an employee benefit plan or employee stock ownership plan, respectively), the IRS may require the late filer to pay a penalty of $25 for each day that the filing is delinquent, up to a maximum of $15,000.  In addition, if a plan fails to timely file an actuarial report as required by Code Section 6059, under Code Section 6692, the IRS may assess a separate penalty of $1,000 for such failure.   

Years ago, the DOL established the DFVCP to permit late filers to reduce late-filing penalties associated with delinquent annual reports.  IRS Notice 2002-23, which provides the applicable DFVCP guidelines, limited relief under the program to those filers who are required to file reports under both the Code and Title I of ERISA.  Accordingly, any plan subject to reporting requirements under the Code, but not under Title I of ERISA, is not permitted to seek a reduced penalty under the DFVCP.

Eligible Plans

The new IRS pilot program offers relief to sponsors and administrators of plans not covered by the DFVCP, including certain small business plans, plans of business partnerships (so-called one-participant plans) and foreign plans.  For purposes of Revenue Procedure 2014-32 (the Rev. Proc.), a foreign plan is a retirement plan maintained outside the United States primarily for the benefit of nonresident aliens.  Thus, the plan administrator, plan sponsor or a foreign plan is eligible for penalty relief under the Rev. Proc. if the employer maintaining the plan is a domestic or foreign employer with income derived from sources within the United States that deducts contributions to the plan on its U.S. income tax return.


Provided a plan is otherwise eligible as described above, the Rev. Proc. requires the plan administrator or plan sponsor of such plan to submit to the IRS the following, with respect to the plan for each delinquent plan year:

  • A complete Form 5500 Series return, including all required schedules and attachments, for each plan year for which the applicant seeks relief.  A complete return consists of a signed, paper copy of the applicable Form 5500 series return for the plan year that is delinquent.  The applicant cannot file the delinquent return through the EFAST electronic filing system.  Applicants should note that separate mailing addresses are used depending on whether the applicant is submitting a Form 5500-EZ or Form 5500.
  • Each delinquent return must be marked “Delinquent return submitted under Rev. Proc. 2014-32, Eligible for Penalty Relief,” in red letters in the top margin of the applicable filing
  • Each delinquent return must be accompanied by a paper copy of the Transmittal Schedule, included as an appendix to the Rev. Proc.

Failure to comply with any of the above requirements may cause the IRS to treat the return as ineligible for the relief provided under the Rev. Proc. and assess all applicable penalties under Code Sections 6052(e) and 6692.  In such cases, or if a delinquent filer is not otherwise eligible for relief under DFVCP or the Rev. Proc. and decides to file delinquent returns, the filer may request relief on the basis that the failure to file was attributable to reasonable cause.

Plan administrators and plan sponsors of plans subject to the annual reporting requirements under Code Sections 6047(e), 6058 and 6059, but not subject to Title I of ERISA, should review such plans’ records to determine whether the proper filings were submitted.  If not, the proper Forms 5500 and/or 5500-EZ should be prepared and submitted within the one-year relief period.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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