Many employers utilize “wrap plan” documents to consolidate their health and other employee welfare benefit programs into a single plan for ERISA purposes. Basically, a wrap plan document incorporates by reference the insurance policies and benefits booklets that comprise the entire plan. By consolidating employee welfare benefit programs into a single plan, a wrap plan document, when properly drafted, will ease the plan sponsor’s compliance obligations under ERISA’s plan document, reporting, and disclosure requirements. If welfare benefits are properly consolidated under a wrap plan, employers may be able to file a single Form 5500 for all their employee welfare benefit programs. Problems may arise if not all of the benefits programs that are considered ERISA “employee welfare benefit plans” are covered by the wrap document. It is thus critical that employers review all their welfare benefit programs to ensure they are properly covered under the wrap plan and included with the… Continue Reading
Filing a Form 5558 for Retroactively Adopted Plans Does Not Establish a 2020 Form 5500 Filing Requirement
In August 2021, the IRS issued guidance clarifying that certain plans retroactively adopted after the end of the plan year would not have to file a 2020 Form 5500 series return, which we previously discussed in our blog post here. Recently, the IRS further clarified that if a plan sponsor already submitted a Form 5558 (Application for Extension of Time to File Certain Employee Plan Returns) for a retroactively adopted plan, the submission of such Form 5558 would not require such plan to file a 2020 Form 5500. The IRS stated that the filing of the Form 5558 will not result in an IRS delinquency notice if no 2020 Form 5500 is ever filed for the plan specified in the Form 5558. The delinquency notices are based on when the Form 5500 is filed and not the filing of aForm 5558. IRS newsletters are available here.
The DOL, PBGC, and IRS (the “Agencies”) recently issued a Notice of Proposed Revision (the “Notice”) to update the Form 5500 Annual Return/Report filed for employee pension and welfare benefit plans. The DOL simultaneously issued a Notice of Proposed Rulemaking to implement the revisions proposed in the Notice. These proposed revisions primarily relate to certain statutory amendments to ERISA and the Code enacted as part of the SECURE Act and include other changes intended to improve Form 5500 reporting. Specifically, the Notice describes the following proposed revisions to the Form 5500 Annual Return/Report: Consolidation of the Form 5500 reporting requirement for defined contribution retirement plan groups by (i) adding a new type of direct filing entity called a “defined contribution group” reporting arrangement, and (ii) establishing a new reporting schedule for such arrangement; Modifications to reflect pooled employer plans as a type of multiple employer pension plan (“MEP”) and implement… Continue Reading
IRS Explains Certain Plans Retroactively Adopted After the End of Plan Year Are Not Required to File a Form 5500 for 2020
The IRS recently explained in an announcement that certain retirement plans adopted after the close of the employer’s taxable year will not be required to file a Form 5500 for 2020. Specifically, under the SECURE Act, an employer may adopt a retirement plan after the close of the employer’s taxable year (by the due date, including extensions, for filing its tax return for the taxable year) and elect to treat the plan as having been adopted as of the last day of the taxable year. This provision of the SECURE Act only applies to plans adopted for taxable years beginning after December 31, 2019. In its announcement, the IRS explained that if an employer adopted a plan during the employer’s 2021 taxable year, by the specified deadline, and elected to treat the plan as having been adopted as of the last day of the employer’s 2020 taxable year, then the… Continue Reading
The DOL recently issued a final rule that adjusts for inflation the amounts of civil monetary penalties assessed or enforced in its regulations, including for certain ERISA violations. The adjusted penalty amounts apply to penalties assessed after January 15, 2021 and for which the associated violations occurred after November 2, 2015. Some of the penalties that were increased include the following: The maximum penalty for failing to properly file a pension or welfare benefit plan?ÇÖs annual Form 5500 increased from $2,233 per day to $2,259 per day. The maximum penalty for failing to provide notices of blackout periods or of the right to divest employer securities increased from $141 per day to $143 per day (each statutory recipient is a separate violation). The maximum penalty for failing to provide employees the required Children?ÇÖs Health Insurance Program (CHIP) coverage notices increased from $119 per day to $120 per day (each employee… Continue Reading
Employee benefits rarely drive corporate transactions, but if the benefits of a target company are not reviewed carefully, they can sometimes derail the transaction. Even some of the most routine facets of benefit plan administration can result in significant potential financial exposure (e.g., additional employer contributions, taxes, penalties, and fees as well as fees associated with the preparation and filing of IRS and DOL correction program applications) that could negatively affect the overall value of the target company. By identifying issues early in the transaction, the seller can prevent costly purchase price reductions and identify issues that need correction, while the buyer can avoid overpaying for a target and ensure that representation and warranty insurance will be available to cover potential claims. Some of those routine compliance issues include, but are not limited to, the following: Failing to timely file an annual Form 5500. The DOL can assess a penalty… Continue Reading
The DOL’s Employee Benefits Security Administration (?Ç£EBSA?Ç¥) recently issued EBSA Disaster Relief Notice 2020-01. Notice 2020-01 applies to employee benefit plans, employers, labor organizations, and other plan sponsors, plan fiduciaries, participants and beneficiaries, and service providers subject to ERISA. Notice 2020-01 remains in effect from March 1, 2020 until 60 days after the announcement of the end of the presidentially declared national emergency due to COVID-19 (the ?Ç£National Emergency?Ç¥). Untimely Notice Relief Fiduciaries of ERISA plans generally have an obligation to provide notices and disclosures in accordance with the timing requirements of ERISA. However, under Notice 2020-01, the employee benefit plan and the responsible plan fiduciary will not be considered to violate ERISA for failing to timely furnish a notice, disclosure, or document that must be furnished between March 1, 2020 and 60 days after the announced end of the National Emergency, if the plan and responsible fiduciary act in… Continue Reading
The IRS issued Notice 2020-23 (the ?Ç£Notice?Ç¥), postponing various employee benefit related deadlines under the Internal Revenue Code. Under the Notice, the due dates of many tax payments and filings that would ordinarily fall on or after April 1, 2020 through July 14, 2020 were automatically extended to July 15, 2020. For example, Forms 990 that would have been due for calendar year filers on May 15, 2020 and Form 990-T that would have been due for calendar year filers on April 15, 2020 are now not due until July 15, 2020. Note that this relief will not apply to Forms 5500 for plans with calendar year plan years since those Forms 5500 are due July 30, 2020, which is currently outside of the relief period. The Notice also provides relief to any plan performing one of 44 time-sensitive actions that are listed under Revenue Procedure 2018-58. To the extent… Continue Reading
The recently enacted Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (the “Act“) extends the filing deadline for certain Form 5500 filers for plan years beginning after December 31, 2015. Specifically, for plan sponsors who have obtained an extension to file the Form 5500, the Act increases the extension from 2?? months to 3?? months from the initial deadline. Accordingly, for 2016, a plan sponsor’s deadline for filing the Form 5500 for a calendar year plan, assuming the plan sponsor obtained an extension, would be November 15, 2017 (rather than October 15, 2017). At this point, it is unclear whether a similar extension will apply to direct filing entities, such as master trusts, and to the deadline for filing the Form 8955-SSA. However, the extension has the effect of extending the deadline by which Summary Annual Reports (“SARs“) must be provided, since SARs must be provided within… Continue Reading
The IRS recently released Notice 2014-35 providing IRS penalty relief for failing to timely file the Form 5500 series.?á These penalties are in addition to those that the DOL could impose under ERISA. Under the Notice, the IRS will not impose penalties for failing to file a required Form 5500, Form 5500-SF, or Form 8955-SSA if (1) the requirements of the DOL?ÇÖs Delinquent Filer Voluntary Compliance Program (?Ç£DFVC?Ç¥) related to a delinquent Form 5500 series return are met and (2) a Form 8955-SSA is filed with the IRS, along with any information required to be filed for the year to which the DFVC filing relates, by the later of 30 calendar days after the DFVC filing is completed or December 1, 2014.?á The Notice can be found?áhere.