Certain smaller employer clients that have failed to meet their deadlines for filing their 5500 forms with the Internal Revenue Service may have a one year reprieve, beginning June 1.
The IRS just announced a pilot relief plan covering ESOPs or employee stock ownership plans and retirement plans where the only beneficiary is the business owner. Specifically, the break applies to plans covered under sections 6047(e), 6058 and 6059 of the Internal Revenue Code and could be an important piece of news for some benefit advisers, who specialize in these types of plans, to provide current or potential clients.
This announcement (
The new pilot program gives late filers a break from the $25 per day (to a maximum of $15,000) per late 5500. A flat $1,000 penalty applies to late actuarial reports. Benefit advisers clients have always had the opportunity to ask for late filing penalties to be waived if they can establish a reasonable cause. However, what may seem reasonable to your client may not appear so to the IRS.
Plans that have already been assessed a penalty for late filing or failure to file by the IRS are ineligible for relief under this pilot program.
The same principle applies to the
By taking advantage of the program, the potential penalties can be reduced to $10 per day (to a maximum of $750) for plans with fewer than 100 participants. Taking advantage of the program essentially involves only stating on the electronically filed 5500 that the plan is taking advantage of the DFVC, using an IRS-supplied penalty calculator, and paying the penalty.
Stolz is a freelance writer based in Rockville, Md.
