Getting Your 401(K) Retirement Plan Ready for the New Form 5500

The Department of Labor has just released draft “Form 5500’s” (to be used in 2016 for 2015 plan years) which contain new compliance questions for 401(k) and other qualified retirement plans.


The Updated Form Asks the Plan Sponsor to Identify (among other things):


  1. How the plan meets certain coverage and discrimination tests;

  2. Whether the plan incurred unrelated business taxable income;

  3. Whether the plan had in service distributions (such as hardship distributions);

  4. Whether the plan has been amended for all required law changes; and

  5. The date of the last required amendment/restatement (including information regarding IRS approval/opinion/determination letters).

See: Department of Labor on Form 5500


Do You Need to Answer Them?

The new questions are optional for 2015, but the IRS “strongly encourages” plan sponsors to complete them. However, the new questions are expected to be mandatory for 2016, so plan sponsors may want to answer them now in preparation for next year (1) to make sure that plan administrators have the information they need to answer them; and (2) to determine if the answers reflect compliance.More importantly: if compliance problems are found though the process of answering these questions, they can then be proactively resolved through the various voluntary compliance programs available (either the IRS’s “Employee Plans Compliance Resolution System” or “EPCRS” or the DOL’s voluntary fiduciary compliance program “VFCP”). Discovering possible compliance issues through this question answering process can save time and money as voluntary compliance is generally less costly than repairing failures found in a regulatory investigation.


More importantly: if compliance problems are found though the process of answering these questions, they can then be proactively resolved through the various voluntary compliance programs available (either the IRS’s “Employee Plans Compliance Resolution System” or “EPCRS” or the DOL’s voluntary fiduciary compliance program “VFCP”). Discovering possible compliance issues through this question answering process can save time and money as voluntary compliance is generally less costly than repairing failures found in a regulatory investigation.


To Ensure Accuracy when Addressing the New Questions:


Look to the FAQ’s: The IRS has issued a set of FAQ’s regarding how to answer the new compliance questions.


See: IRS FAQ's on New 5500 Questions


Get help: The new questions appear to focus on areas that the IRS has identified as frequent avenues of non-compliance in 401(k)/other retirement plans. Because the new questions point to potential plan qualification failures, resolution through voluntary compliance will generally result in significant cost savings over the cost of compliance following regulatory involvement.


Please contact us if you would like assistance in completing the questions, and/or would like a compliance review for required plan amendments.



© Boutwell Fay LLP 2016, All Rights Reserved. This handout is for information purposes only, and may constitute attorney advertising. It should not be construed as legal advice and does not create an attorney-client relationship. If you have questions or would like our advice with respect to any of this information, please contact us. The information contained in this article is effective as of January 31, 2016.



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