September 29, 2011
As part of Internal Revenue Service (IRS) tax relief related to individual and business taxpayers impacted by Hurricane Irene, where retirement plan sponsors – or the plan sponsor’s records necessary to complete the return – are located in the federally designated disaster areas listed in IR 2011-87 (originally published September 1, 2011 and subsequently updated to reflect new areas for relief), the sponsors will have until October 31, 2011 to file annual Form 5500 for their retirement and welfare benefit plans. This extension applies to Forms 5500 that had a due date for filing after August 26, 2011 and before October 31, 2011.
Plan Sponsors Qualifying for Relief
The U.S. Department of Labor (DOL) website discusses Disaster Relief Information as follows: “Filers affected by Presidentially-declared disasters are plan administrators, employers, and other entities who file Form 5500 series that are located in the areas designated as federal disaster areas (as listed in IRS’s announcements). These special extensions also apply to filers located outside the designated disaster areas who are unable to obtain the information necessary for filing from service providers, banks or insurance companies whose operations are directly affected by the disasters.”
Impact on Plan Funding and Deductions
Because the tax relief granted by IRS includes an extension of time to file business and individual tax returns, plan sponsors will be able to take a tax deduction for contributions made to their plans for the prior period if the contributions are deposited by the new extended due date of the return and provided they have met the other requirements of Internal Revenue Code (IRC) Section 404(a).
However, sponsors of plans that are subject to the minimum funding provisions of IRC Section 412 – such as defined benefit plans, cash balance plans, and money purchase pension plans – are still required to fund these plans within 8½ months after the plan’s year end, as IRS has not granted additional time to meet the minimum funding requirements under IRC section 412. For calendar year plans, this means that contributions will still need to be made by September 15, 2011 to meet the minimum funding requirements.
Designated Disaster Areas
Plan sponsors – or those with necessary records, as noted further above – located in designated counties (see list below) in Connecticut, Massachusetts, New Jersey, New York, North Carolina, Vermont, and Puerto Rico will receive the extension of time to file. The IRS may announce additional relief for taxpayers in other areas as damage assessments continue and encourages plan sponsors and tax practitioners to monitor Tax Relief in Disaster Situations for updates.
As of September 8, 2011, the IRS filing extension applies to the following counties and municipalities:
Reference to Form 5500 can be found in the announcement under the bold caption “Grant of Relief.” Whatever special extension of filing Form 5500 is granted by the IRS will also be automatically permitted by the DOL and the Pension Benefit Guarantee Corporation (PBGC). Therefore, whether or not DOL and/or PBGC announce a special extension, Form 5500 series filers to whom the IRS has granted a special extension may file their annual returns/reports by the extended due date stated in the IRS’s announcement.
Filing Form 5500 Under the Relief
Plan sponsors should follow the instructions to Form 5500 series under the section “Extension of Time to File” regarding how to file the forms when special extensions are granted. Essentially, the guidance in the instructions is included under the caption “Other Extensions of Time” which advises that, if a plan sponsor is relying on an announced special extension, the sponsor should check the appropriate box on Form 5500 which is Part I, line D, and enter a description of the announced authority for the extension.
Although there is no specific language required under the current extension, the announced authority could be described as follows: “Special extension pursuant to federally designated disaster areas as listed in IR 2011-87, originally published September 1, 2011 and subsequently updated to reflect new areas for relief, grants until October 31, 2011 to file annual Form 5500 for a retirement and welfare benefit plan.”
If you have any questions, please contact Bauerle and Company.
This publication has been prepared by EisnerAmper LLP for informational purposes only. These materials do not constitute accounting, tax or legal advice and cannot be relied upon by any taxpayer for the purpose of avoiding penalties imposed under the Internal Revenue Code.
Redistributed by Bauerle and Company, P.C. with permission
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