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5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.
After analyzing Form 5500 data, the IRS's Employee Plans Multiemployer Compliance Planning Group has determined that there are three common errors being made when multiemployer plan sponsors complete Form 5500. All three errors involve completion of Part 1—Annual Report Identification Information.
The most common error, the IRS says, occurs when employers believe that they have a multiemployer plan when in fact they do not. According to the IRS, this mistake is due to a misunderstanding of the term "multiemployer." Some employers who have more than one employer in their plan sponsorship, such as controlled groups or affiliated service groups, think the term "multiemployer" applies to them.
However, the definition of a multiemployer plan in the instructions for Form 5500 is very specific. Box A(1) Multiemployer Plan should be checked if the Form 5500 is filed for a multiemployer plan. According to the instructions, a plan is a multiemployer plan if: (a) more than one employer is required to contribute, (b) the plan is maintained pursuant to one or more collective bargaining agreements between one or more employee organizations and more than one employer, and (c) an election under Code Sec. 414(f)(5) and ERISA §3(37)(E) has not been made. Participating employers do not file individually for these plans.
All members of either a controlled group of corporations under Code Sec. 414(b), partnerships, or proprietors under common control under Code Sec. 414(c), or an affiliated service group are treated as a "single employer" for purposes of reporting on Form 5500. Under such circumstances, the related employers adopting the plan are actually treated as a "single employer" and the multiemployer box should not be checked.
The multiemployer plan criterion labeled (b) above (i.e., the plan is maintained pursuant to one or more collective bargaining agreements between one or more employee organizations and more than one employer) accounts for most of the errors identified by the IRS. The compliance planning group finds many Form 5500 returns indicating plans sponsored by doctors, lawyers, car dealerships, etc. that may have more than one employer, but are not subject to a collectively bargained agreement. These plan sponsors are incorrectly identifying their plans as multiemployer plans.
The second error identified by the IRS is the failure of the plan to indicate multiemployer status. If the plan meets the criteria in the multiemployer plan definition above, then the box indicating that a multiemployer plan exists should be checked. In most cases, this box is checked by plans sponsored by a union such as for plumbers, carpenters, electrical workers, painters, etc. that have more than one employer making contributions.
The third error consists of failing to check Box C indicating that the employees covered by the plan are subject to a collective bargaining agreement. Again, the instructions for Form 5500 regarding which plans need to check box C are specific.
Box C should be checked when the contributions to the plan and/or the benefits paid by the plan are subject to the collective bargaining process (even if the plan is not established and administered by a joint board of trustees and even if only some of the employees covered by the plan are covered by a collectively bargained unit that negotiates contributions and/or benefits). The contributions and/or benefits do not have to be identical for all employees under the plan.
According to the IRS, Box C generally should be checked by plans whose participant contributions and/or benefits are subject to a collective bargaining agreement, such as those sponsored by unions representing plumbers, carpenters, electrical workers, painters, etc.
For more information on this and related topics, consult the CCH Pension Plan Guide.
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