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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.
Compliance issues involving 403(b) plans sponsored by higher education organizations, Form 5500 series returns, Rollovers as Business Start-Ups (ROBS) plans, and international plans are among the projects on the Employee Plans Compliance Unit's radar screen, according to Monika Templeman, Director of EP examinations.
403(b) plans
The EPCU's newest project is confirming higher educational organizations' compliance with the universal availability rule, "which is one of the main errors we find in 403(b) plan examinations," said Templeman (see also CCH Pension Plan Guide Newsletter, Report No. 1889, May 23, 2011). The EPCU has completed a 403(b) Universal Availability K-12 Schools Follow-up Project in which it contacted over 5,000 school districts in over 40 states. "We found that more than 20% of the plans had universal availability problems, which they voluntarily corrected," said Templeman. This resulted in the inclusion of improperly excluded teachers, school bus drivers, cafeteria workers, janitors and substitute teachers in the plan.
Form 5500 returns
Another recent EPCU project focuses on Form 5500 series returns that show no plan participants, yet the plan received employer contributions (see CCH Pension Plan Guide Newsletter, Report No. 1896, June 11, 2011). The EPCU is sending compliance check letters to these sponsors to learn if this information is accurate and, if so, why these plans have no participants, but still have assets and continue to receive contributions.
The EPCU is also conducting a Form 5500 Non-Filer Project. Plan sponsors are contacted if their latest Form 5500 return was not marked "final" and they have not filed a subsequent return. The EPCU began by selecting returns that were due for the plan year ending January 31, 2010 (originally due August 31 if no extension was filed) and that had still not filed by February 2011. The EPCU is finding that not everyone is aware they need to file Form 5500 through EFAST2. Some Form 5500-EZ filers were not aware they must now mail their return to the IRS Campus in Ogden, Utah. Instead, they may have erroneously mailed their Form 5500-EZ to the Department of Labor. Of the over 150 contacts closed, 32% resulted in a filed return, Templeman noted.
ROBS plans
The EPCU's Qualifying Employer Securities Project contacted plan sponsors who reported over 10% of their plan's net assets were invested in employer securities. The EPCU found in 32% of over 150 cases closed to date that the stock is not being valued at fair market value, especially in non-publicly traded companies sponsoring small plans and Rollovers as Business Start-Ups (ROBS) plans.
International plans
Two EPCU projects are focused on improving international compliance. The first project is confirming whether a foreign entity sponsoring a qualified plan maintains a domestic trust. In general, trusts must be administered exclusively in the U.S. and U.S. persons must control substantive decisions. So far, the responses indicate that approximately 95% of foreign companies understand their plans must maintain domestic trusts.
The second project identifies individuals with foreign addresses who failed to report premature distributions subject to the additional 10% early distribution tax under Code Sec. 72(t). The EPCU sent compliance letters to individuals in every continent except Antarctica. To date, they have determined that global taxpayers are generally unaware they had to file a U.S. tax return to report and pay taxes on their worldwide income and were subject to the additional early distribution tax. International employers and tax preparers don't appear to be sufficiently knowledgeable of U.S. taxation filing, withholding and reporting requirements, Templeman said.
The EPCU also found that Form 1099-R payers are inaccurately completing the form for global U.S. taxpayers using their "global" address. As globalization continues to escalate, U.S. citizens must be aware of the tax laws affecting them regardless of their current non-U.S. address, she added. Templeman said that a new EP International Hacienda Compliance Check Project will begin later this year. It will initially focus on Form 5500 coding to ensure adherence to Puerto Rico or U.S. law.
Source: IRS website, August 9, 2011.
For more information, visit http://www.wolterskluwerlb.com/rbcs.
For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.
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