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Employee Plans News - June 22, 2011 - EPCU Project: Where are the Plan Participants?

Beginning in April 2011, EPCU sent compliance contact letters to a selection of plan sponsors who filed Form 5500 series returns showing contributions to a plan with no participants. Plan sponsors should reply to these information requests.

This project’s purpose is to determine if plan sponsors are complying with plan qualification rules and annual information-reporting requirements. Potential issues include favoring highly compensated employees and engaging in prohibited and abusive tax avoidance transactions.

How the Project Works

Contact letters ask for the number of participants at the beginning and end of the plan year, the amount of contributions and the value of plan assets. Sponsors may furnish any documents they believe will be helpful in responding to the letter.

After reviewing each response, EPCU determines whether the plan sponsor needs to make corrections. For example, the plan sponsor may need to amend returns, establish or revise operational practices, administrative policies and procedures or correct plan errors using the Employee Plans Compliance Resolution System.

What We Found

Responses received so far indicate most errors are caused by:

  1. computer software glitches,
  2. forgetting to fill in the participant count, or
  3. copying line items from a prior year’s Form 5500 return and missing the line if the new Form 5500 return has a different line number for that question.

You can prevent these errors by reviewing your Form 5500 prior to filing it. You can even file an amended return if you discover an error after filing it. Find tips for avoiding, finding and correcting plan errors on the Correcting Plan Errors Web page.

Compliance Check Tips

  1. Answer the letter as accurately as possible by the due date. If you need additional time, contact the person listed on the letter for an extension before the due date. Failure to provide the information requested could result in further action or examination of your plan.
  2. You may email requested information. However, IRS will not respond to you by email, so please include your telephone number on any correspondence.
  3. In addition to the information requested in the letter, you may furnish any other documents you believe will be helpful for us to review.
  4. If your representative, rather than the plan sponsor, plan administrator or trustee, responds to the compliance check, send us a completed Form 2848, Power of Attorney and Declaration of Representative, to allow us to contact that person directly and also to send them a copy of the compliance check closing letter.
  5. If the Form 5500 series return information is inaccurate, consider filing an amended return to correct it. Read DOL’s FAQ # 4 when amending your return. Find Forms 5500 and 5500-SF on DOL’s website. File an amended Form 5500-EZ by mailing it to IRS in Utah (see Instructions); do not use DOL’s EFAST2.

Contacting the EPCU

If you have general questions about this project, please email us and we will be glad to answer your questions. Please include the words “Plan Participant Project” in the subject line.

Page Last Reviewed or Updated: 07-Nov-2013