rp-15-32.pdf

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Penalty Relief Program – Late Annual Reporting for Non-Title I Retirement Plans
(“One-Participant Plans” and Certain Foreign Plans)

Rev. Proc. 2015-32

SECTION 1. PURPOSE

This revenue procedure establishes a permanent program providing
administrative relief to plan administrators and plan sponsors of certain retirement plans
from the penalties otherwise applicable under §§ 6652(e) and 6692 of the Internal
Revenue Code (the “Code”) for failing to timely comply with the annual reporting
requirements imposed under §§ 6047(e), 6058, and 6059. This permanent program
replaces the temporary pilot program established by Rev. Proc. 2014-32, 2014-23 I.R.B.
1073. The administrative relief provided under this revenue procedure applies only to
plan administrators (as defined in § 414(g)) and plan sponsors of retirement plans that
are subject to the reporting requirements of §§ 6047(e), 6058, and 6059, but that are
not subject to the reporting requirements of Title I of the Employee Retirement Income
Security Act of 1974 (“ERISA”) (Pub. L. No. 93-406).

SECTION 2. BACKGROUND

Both the Code and Title I of ERISA impose annual reporting requirements with
respect to certain retirement plans. To minimize the filing burden on plan sponsors and
plan administrators of employee benefit plans, the Internal Revenue Service (the “IRS”),
the Department of Labor (the “DOL”), and the Pension Benefit Guaranty Corporation
have consolidated these various annual reporting requirements by issuing a series of
forms that filers can use to satisfy their annual reporting requirements under both the
Code and Title I of ERISA. This Form 5500 series includes Form 5500, Annual
Return/Report of Employee Benefit Plan; Form 5500-SF, Short Form Annual
Return/Report of Employee Benefit Plan; and Form 5500-EZ, Annual Return of One-
Participant (Owners and Their Spouses) Retirement Plan.
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Plan sponsors and plan administrators who fail to timely file Form 5500 series
returns for their retirement plans may be subject to civil penalties under the Code. In
particular, the IRS may assess penalties under §§ 6652(e) and 6692 for the failure to
satisfy the requirements for annual returns. Section 6652(e) generally provides, in part,
that in the case of any failure to timely file a return or statement required under § 6058
(annual return of employee benefit plans) or § 6047(e) (returns and reports for
employee stock ownership plans), the late filer shall pay, upon notice and demand, a
penalty of $25 for each day the failure continues, up to $15,000 per return or statement.

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In general, returns satisfy Code reporting requirements, and reports satisfy Title I of ERISA reporting
requirements. Form 5500 and Form 5500-SF returns/reports can be used to satisfy the reporting
requirements of both the Code and Title I of ERISA. Form 5500-EZ returns are used only by plan
administrators and plan sponsors of retirement plans that are not subject to the reporting requirements of
Title I of ERISA and hence are used to satisfy only the reporting requirements of the Code.

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Section 6692 generally provides that, in the case of any failure to timely file a report
required by § 6059 (actuarial report for employee benefit plans), the late filer shall pay a
penalty of $1,000 for each failure. No penalty is imposed under these sections if it is
shown that such failure to timely file is due to reasonable cause. Failure to timely file
returns/reports may also result in civil penalties under Title I of ERISA.

In 1995, the DOL sought to encourage voluntary compliance by establishing the
Delinquent Filer Voluntary Compliance (“DFVC”) program. The DFVC program includes
reduced late filing monetary penalties on filers of delinquent annual reports. In Notice
2002-23, 2002-1 C.B. 742, the IRS determined that it would not impose the penalties
under §§ 6652(c)(1), (d), (e) and 6692 (to the extent applicable) on a person who is
eligible for, and satisfies the requirements of, the DFVC program with respect to the
filing of a Form 5500 return. The relief under Notice 2002-23 was available only to filers
who were required to file both a report under Title I of ERISA and a return under the
Code. Notice 2002-23 has been superseded by Notice 2014-35, 2014-23 I.R.B. 1072.
As under Notice 2002-23, the penalty relief provided by Notice 2014-35 does not apply
to a delinquent filing of a Form 5500-EZ return for retirement plans that are not subject
to the annual reporting requirements of Title I of ERISA (such as a “one-participant plan”
under which a sole owner of a business and the owner’s spouse are the only
participants). See 29 C.F.R. 2510.3-3(b) and (c).

Certain retirement plans that are not subject to Title I of ERISA are exempt from
some of the annual reporting requirements if they satisfy certain criteria specified by
statute or by the IRS in published guidance. For example, for years beginning after
2006, section 1103 of the Pension Protection Act of 2006 (Pub. L. No. 109-280)
provides that “one-participant plans” that are not subject to Title I of ERISA with assets
of $250,000 or less at the end of the plan year are not required to file a Form 5500
series return. The IRS has determined that such plans must, however, file an annual
return when the plan is terminated and all assets have been distributed.

SECTION 3. PENALTY RELIEF UNDER REV. PROC. 2014-32

Rev. Proc. 2014-32 established a one-year pilot program that provides
administrative relief from the penalties imposed under §§ 6652(e) and 6692 for a failure
to timely comply with the annual reporting requirements under §§ 6047(e), 6058, and
6059. The relief applies to “one-participant plans” and certain foreign plans, which are
not subject to the annual reporting requirements of Title I of ERISA and thus are not
eligible for the penalty relief provided by Notice 2014-35.

Under the pilot program, applicants are required to file a complete Form 5500
series return for each year for which the applicant is seeking penalty relief. A complete
return consists of a signed, filled-out paper version of the applicable Form 5500 series
return, including all required schedules and attachments.

The Form 5500 series return to be submitted under the pilot program is generally
the specific Form 5500 series return that was required to be submitted for the plan year.

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For example, if a 2005 Form 5500 return should have been filed for the 2005 plan year
but was not, a 2005 Form 5500 return must be submitted. For 2009 plan years and
later, only the Form 5500-EZ return applicable to the plan year may be submitted.
Thus, a delinquent Form 5500-SF return cannot be filed for the plan year, either on
paper with the IRS or electronically through the EFAST2 system (even if a Form 5500-
SF return could have been timely filed for the plan year through EFAST2).

No penalty or other payment is required to be paid under the pilot program.
Section 5.01 of Rev. Proc. 2014-32 states, however, that a fee or other payment will be
required if the pilot program is made permanent.

SECTION 4. COMMENTS ON REV. PROC. 2014-32

Section 7 of Rev. Proc. 2014-32 requested comments as to whether the pilot
program should be replaced by a permanent program and how the fee for such a
permanent program should be determined. All of the comments received were in favor
of replacing the pilot program with a permanent program, and two commenters
suggested potential fee structures. Commenters noted that a permanent program is
needed so that one-participant and foreign plans, which are prohibited from seeking
relief under DOL’s DFVC program, may also seek relief from late-filer penalties.

SECTION 5. PERMANENT PENALTY RELIEF PROGRAM

This revenue procedure establishes a permanent program to provide
administrative relief from the penalties imposed under §§ 6652(e) and 6692 for a failure
to timely comply with the annual reporting requirements under §§ 6047(e), 6058, and
6059. The relief applies to filers who are eligible to participate under Section 6 of this
revenue procedure and who satisfy the procedural requirements of Section 7 of this
revenue procedure. As an alternative to making a submission under this program, filers
may instead file for the relief currently available for a failure to timely file that is due to
reasonable cause.
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However, a filer who is denied relief for reasonable cause with
respect to a particular delinquent return will receive a CP 283 Notice, Penalty Charged
on Your Form 5500 Return, and, in accordance with Section 6.05, will not be eligible for
relief as to that return under this program. Also, filers may not seek relief for reasonable
cause as part of their submission under this program.

The permanent program generally follows the requirements of the pilot program,
but some changes have been made to reflect the comments received as well as to
reflect the addition of a payment requirement.

The most significant change is the addition of a payment requirement with all

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A request for relief due to reasonable cause may be attached to a delinquent return when the return is
filed or may be filed separately. The request should state the reason why the return was late and be
signed by a person in authority. See §§ 301.6652-3(b) and 301.6692-1(c) of the Regulations on
Procedure and Administration. The request (with the delinquent return, if applicable) should be mailed to
the filing address provided in the instructions for the most current Form 5500-EZ available to taxpayers.

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submissions. The payment for each submission is $500 for each delinquent return for
each plan, up to a maximum of $1,500 per plan. Because applicants under this
program will typically be smaller than filers under the DFVC program, a smaller payment
is required under this program for two or fewer delinquent returns than is required under
the DFVC program, but the maximum amount per plan (which applies under this
program to three or more delinquent returns) is the same. In order to keep the
calculation of the payment simple, payments are not based on the number of days the
return is delinquent.
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As under the pilot program, the permanent program requires that a Form 5500-
EZ return be filed even though the applicant could have filed a Form 5500-SF return
electronically if the return had been timely filed. Because a Form 5500-SF return must
be electronically filed under DOL’s EFAST2 filing system and any payment under this
program must be submitted directly to the IRS, the Department of the Treasury and the
IRS are concerned that it would be difficult to match a payment with a delinquent,
electronically-filed Form 5500-SF return. The Department of the Treasury and the IRS
will consider future changes in the program to allow electronic filing of delinquent
returns as administrative and technological capacities improve.

The permanent program provides that the applicant must submit the delinquent
return on the Form 5500-EZ that applied for the plan year for which the return was
delinquent. An exception is provided for returns for plan years prior to 1990 because
those returns are more difficult for applicants to obtain. For returns for plan years prior
to 1990, the applicant may use a current-year Form 5500-EZ filled out with the
beginning and ending dates for the plan year for which the return was delinquent.

As noted in Rev. Proc. 2014-32, prior to 2009, some plans that are not subject to
Title I of ERISA were required to file returns on Form 5500 rather than Form 5500-EZ.
Under the pilot program, these filers were required to file a Form 5500 return for the
applicable year rather than a Form 5500-EZ return. To simplify the program for both
filers and the IRS, filers that would have been required to file a Form 5500 return under
the pilot program are instead required under the permanent program to file a current-
year Form 5500-EZ return, filled out with the beginning and ending dates for the plan
year for which the return was delinquent.

The pilot program also provided that multiple returns for multiple plans could be
included in a submission. Because the permanent program requires a payment based
on the number of delinquent returns for each plan, however, the permanent program
requires that delinquent returns for each plan must be submitted separately. Thus,
multiple delinquent returns for a single plan should be submitted in a single package,
but delinquent returns for different plans must be submitted in different packages.

Under the permanent program, applicants must include a Form 14704,

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Because the lowest payment under this permanent program is $500 for a delinquent return, some filers
who file a delinquent return less than 20 days late may prefer to pay the penalty of $25 per day under §
6652(e) rather than file under this program.

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Transmittal Schedule – Form 5500-EZ Delinquent Filer Penalty Relief Program (Rev.
Proc. 2015-32), with each submission, as further described in Section 7.03(3).
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Unlike
the pilot program, the IRS will contact the applicant if the Form 14704 is not included,
the documents submitted are inconsistent with the Form 14704, a required signature on
a delinquent return is not provided, or the amount of payment is incorrect. As under the
pilot program, however, the IRS generally does not expect to contact the applicant in
other cases. Filers may use a tracking or other system provided by the United States
Postal Service (or by a private delivery service if a delivery service is used) to determine
when delivery of a submission is completed. Filers may also receive notice from their
bank or other financial institution when a check has been processed by the IRS.

The Department of the Treasury and the IRS intend that this program will be of
indefinite duration, but the program, upon publication of further guidance, may be
modified from time to time or terminated.

SECTION 6. PROGRAM ELIGIBILITY

.01 General rule. The relief provided by this revenue procedure is only available to
the plan administrator or plan sponsor of a retirement plan that is subject to the filing
requirements of §§ 6047(e), 6058, or 6059 but is not subject to Title I of ERISA for the
plan year that a Form 5500 series return is delinquent. Thus, the relief under this
revenue procedure is only available to the plan administrator or plan sponsor of (1)
small business (owner-spouse) plans and plans of business partnerships (together,
“one-participant plans”) described in Section 6.02 and (2) foreign plans described in
Section 6.03.

.02 One-participant plans. For purposes of this revenue procedure, a one-
participant plan is a retirement plan with one or more participants that:

 Covers only the owner of the entire business (or the owner and the owner’s
spouse) or covers only one or more partners (or partners and their spouses) in a
business partnership, and

 Does not provide benefits for anyone except the owner (or the owner and the
owner’s spouse) or one or more partners (or partners and their spouses).

.03 Foreign plans. The plan administrator or plan sponsor of a foreign plan (that is,
a retirement plan maintained outside the United States primarily for nonresident aliens)
is eligible for relief under this revenue procedure if the employer that maintains the plan
is a domestic employer or a foreign employer with income derived from sources within
the United States (including foreign subsidiaries of domestic employers) that deducts
contributions to the plan on its U.S. income tax return.

.04 Title I plans ineligible. A plan administrator or plan sponsor is not eligible for

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Under the pilot program, the transmittal schedule is an appendix to Rev. Proc. 2014-32. Under this
permanent program, the transmittal schedule is a new IRS form.

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penalty relief under this revenue procedure if the affected retirement plan is subject to
Title I of ERISA for the plan year for which a filing is delinquent. Instead, a plan
administrator or plan sponsor of a Title I retirement plan may request relief from
penalties under ERISA and the Code in accordance with the DFVC program and Notice
2014-35. Please refer to http://www.dol.gov/ebsa/ for more information regarding the
DFVC program.

.05 Penalty assessment notices. The relief provided by this revenue procedure is
not available with respect to a delinquent return if a penalty has been assessed (that is,
if a CP 283 Notice has been issued by the IRS to a plan sponsor or administrator) with
respect to that delinquent return.

SECTION 7. PROCEDURAL REQUIREMENTS

.01 Payment. The correct payment must be included with each submission. The
amount of the payment is $500 per delinquent return up to a maximum of $1,500 per
submission (that is, the payment is equal to $500 for a single return, $1,000 for two
returns for the same plan, and $1,500 for three or more returns for the same plan). All
payments under this program must be submitted by a check payable to the United
States Treasury and must be attached to the Form 14704 that is included as part of the
submission. The applicant’s EIN and the plan number should be written on the check.

.02 Submission limited to a single plan. Multiple delinquent returns for a single plan
may be submitted in a single submission, but separate submissions are required for
separate plans. For example, if an employer maintains a defined contribution plan and
a defined benefit plan, and returns for each plan are delinquent for three plan years, the
applicant must submit two separate submissions, one for each plan. In all cases, the
requirements of Section 7.03 of this revenue procedure must be satisfied for each such
submission (including a Form 14704 and check).

.03 Filing contents. The applicant must submit the following information to the IRS
in order to receive penalty relief:

(1) A complete Form 5500-EZ return. The submission must include a complete
Form 5500-EZ return, including all required schedules and attachments, for each plan
year for which the applicant is seeking penalty relief under this revenue procedure. All
returns submitted in accordance with this revenue procedure must be sent to the IRS at
the address listed in Section 7.04 below and cannot be filed through the DOL’s EFAST2
filing system. Filings sent to the DOL’s EFAST2 filing system will not be treated as
submissions under this program and will continue to be subject to applicable penalties
under the Code. For purposes of this revenue procedure:

(a) In general, the Form 5500-EZ return that applied for the delinquent plan
year must be submitted on paper. Thus, a delinquent Form 5500-SF return
cannot be filed for a plan year, either on paper or electronically (even if a

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timely Form 5500-SF return could have been filed electronically for the plan
year through EFAST2).

(b) A Form 5500-EZ return for the current plan year (rather than the Form 5500
series return that applied for the delinquent plan year) may be filed on paper
if either (i) the filer would otherwise be required to file a Form 5500 return
for the delinquent plan year, or (ii) the return is delinquent for a year prior to
1990. Any such current-year Form 5500-EZ return must be filled out with
the beginning and ending dates for the plan year for which the return was
delinquent.

(c) All schedules applicable to the plan for the year for which the return is
delinquent must be included with the return. For example:

 For plan years prior to 2005, a Schedule B (Actuarial Information) was
required to be submitted with the Form 5500 series return for non-Title I
defined benefit pension plans and certain money purchase pension plans.
Accordingly, a submission for these plans for these plan years must
include a Schedule B.

 For 2005 and subsequent plan years, a Schedule B (or the successor
Schedule SB (Single Employer Defined Benefit Plan Actuarial
Information)) was not required to be submitted to the IRS with the annual
Form 5500 series return for one-participant plans and foreign plans
subject to filing under the Code and not under Title I of ERISA.
Accordingly, a submission for these plans for these plan years need not
include a Schedule B (or Schedule SB). However, an applicant must
include in the submission a representation that the applicable annual
actuarial report has been prepared (even though it is not being submitted
to the IRS). This statement should be attached to the applicable return in
lieu of a Schedule B (or Schedule SB).

 For plan years prior to 2005, a Schedule E (ESOP Annual Information)
was required to be submitted with the Form 5500 series return for an
employee stock ownership plan. Accordingly, a submission for these
plans for these plan years must include a Schedule E.

(d) The Form 5500-EZ (but not required schedules) that applied for each plan
year after 1989 may be found at
http://apps.irs.gov/app/picklist/list/priorFormPublication.html?value=5500-
EZ&criteria=formNumber. In addition, an applicant can obtain a Form 5500-
EZ, plus required schedules, for any plan year by calling 1-800-TAX Form
(1-800-829-3676). Also, applicable schedules (for plan years after 1994)
can be found at http://www.dol.gov/ebsa/5500main.html.

(2) Delinquent returns must be marked. For each delinquent Form 5500 series

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return submitted to the IRS under this revenue procedure, the applicant must mark in
red letters in the top margin of the first page of the return (above the title of the form):
“Delinquent Return Submitted under Rev. Proc. 2015-32, Eligible for Penalty Relief.”
Failure to properly mark the submitted delinquent return may cause the IRS to treat the
return as ineligible for the relief provided under this revenue procedure and assess all
applicable penalties.

(3) Required Form 14704. Each submission must include a completed paper
copy of Form 14704. Form 14704 may be found at http://www.irs.gov/Forms-&-Pubs.
A completed Form 14704 must be attached to the front of the oldest delinquent return in
the submission. For example, if delinquent returns are included in the same submission
for the plan years 2010, 2011, and 2012, the completed Form 14704 must be attached
to the front of the 2010 return. Failure to include a completed Form 14704 as directed
may cause the IRS to treat the returns as ineligible for the relief provided under this
revenue procedure and assess all applicable penalties.

.04 Mailing address. Submissions under this revenue procedure should be mailed
to:

Internal Revenue Service
1973 North Rulon White Blvd.
Ogden, UT 84404-0020

.05 Private delivery services. Applicants may make their submissions using any of
the private delivery systems listed in the instructions to the most recent Form 5500-EZ.
The private delivery service can provide information on how to obtain written proof of
the mailing date.

SECTION 8. EFFECTIVE DATE

The relief provided under this revenue procedure is effective June 3, 2015.
Returns submitted before June 3, 2015 will be processed in accordance with Rev. Proc.
2014-32.

SECTION 9. PAPERWORK REDUCTION ACT
The collection of information contained in this revenue procedure has been
reviewed and approved by the Office of Management and Budget in accordance with
the Paperwork Reduction Act (44 U.S.C. 3507) under control number 1545-0956.

An agency may not conduct or sponsor, and a person is not required to respond
to, a collection of information unless the collection of information displays a valid OMB
control number.

The collection of information in this revenue procedure is in Form 14704. This
information is required to enable the Commissioner, Tax Exempt and Government
Entities Division, to ensure the proper processing of the delinquent returns and the

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associated payments. The likely respondents are individuals and small businesses or
organizations.

The estimated total annual reporting recordkeeping burden is 167 hours.

The estimated annual burden per respondent/recordkeeper is five minutes.

The estimated number of respondents/recordkeepers is 2,000.

The estimated frequency of responses is occasional.

Books or records relating to a collection of information must be retained as long
as their contents may become material in the administration of any internal revenue law.
Generally, tax returns and tax return information are confidential as required by 26
U.S.C. § 6103.

SECTION 10. DRAFTING INFORMATION

The principal drafter of this revenue procedure is Robert M. Walsh of the Office
of the Associate Chief Counsel (Tax Exempt and Government Entities). However, other
personnel from the Department of the Treasury and the IRS participated in the
development of this guidance. For further information regarding this revenue
procedure, you may contact Mr. Walsh at 202-317-4102 (not a toll-free number). For
questions regarding submissions under this revenue procedure, please contact the
Employee Plans' taxpayer assistance telephone service at 1-877-829-5500 (a toll-free
number).