The IRS recently released a draft of Form 5500-SUP (Annual Return of Employee Benefit Plan Supplemental Information). This new paper-only form will be required for the 2015 filing season, and is aimed at those who do not file electronically—for example, those filing Form 5500-EZ. However, the IRS’ announcement of this form states that the IRS intends to add the questions that are currently on Form 5500-SUP to the electronic versions contained in the Form 5500 series.

What is the IRS interested in?

The questions on Form 5500-SUP focus on the following issues, among others:

  • Non-discrimination in 401(k) plans: How did the plan satisfy the non-discrimination tests relating to employee deferrals and employer matches, and if the plan used the current year testing method.
  • Coverage requirements: How did the plan satisfy the IRC 410(b) coverage requirements, and were the permissive aggregation rules used.
  • Are your documents current? Data requested includes dates of amendments and IRS-favorable letter information.
  • Did you make in-service distributions?
  • Did the trust have unrelated taxable business income?
  • If the plan is an Employee Stock Ownership Plan, did it receive dividends from the employer? Information requested includes dividend rates and whether the dividends were used to repurchase stock.

You can see a draft of the form at–dft.pdf.

What action needs to be taken now?

In my experience, there are a number of smaller employers who do not pay a lot of attention to some of the items discussed above—including non-discrimination tests and currency of documents. Plan sponsors should review these issues and have them corrected during 2015 so that truthful answers to the questions will not raise IRS scrutiny.

We would be pleased to discuss issues related to these and other compliance issues related to tax- qualified retirement programs. For more information on this topic, post a comment below or contact our Compensation & Benefits Advisory Services Group at 440-449-6800.

Skoda Minotti Speaker Series CTA