New Form 5500-EZ
Rev. 05/27/10; E-mail Alert 2010-8

On May 10, 2010, the IRS issued the 2009 Form 5500-EZ and instructions.  This article will discuss the changes made that practitioners will need to become familiar with. 

Background
One-participant plans with assets greater than $250,000 must file an annual report.  Form 5500-EZ cannot be filed electronically using the EFAST2 system; returns must be filed by mailing paper forms to the IRS.  One-participant plans with less than 100 participants that meet additional requirements can elect to file Form 5500-SF, which is a new short form 5500.  The 2009 Form 5500-SF instructions provide additional requirements for 5500-SF eligibility.  Plan sponsors that prefer their financial information to be kept as private as possible may prefer filing a 5500-EZ versus the 5500-SF, since the 5500-EZ will not be posted on the DOL web site and is not open to public examination. 

One-Participant Plans
For 2009 changes have been made to the definition of a one-participant plan that allow for any one-participant plan to now file a 5500-EZ.  A one-participant plan:

• Covers only an owner (and their spouse) who owns the entire business.  The business may be incorporated or unincorporated. Corporations that have more than one owner are not eligible to file a 5500-EZ; or
• Covers only one or more partners (and their spouses) in a partnership; and
• Only provides benefits to the owner or partner(s) and their spouse(s)

The following one-participant plan requirements effective in years prior to 2009 have now been eliminated:  

• The plan must be able to satisfy 410(b) coverage requirements without aggregating other plans of the same employer
• The plan could not be a member of a controlled group
• The employer could not have any leased employees performing services

The IRS now requires that plan sponsors of one participant plans who were required to file a Form 5500 in prior years will no longer have the option to continue filing a Form 5500 and must now file a 5500-EZ (or 5500-SF) for 2009. 

Example: Elaine owns 100% of her dental practice as a sole proprietor and also owns 100% of a food store under an LLC.  Her spouse is her only employee.  She sponsors a profit sharing plan that covers both businesses.  Prior to 2009 she had to file a Form 5500 because the plan was a controlled group.  Beginning in 2009 she can no longer file a Form 5500 and must file a 5500-EZ or 5500-SF.

A foreign plan means a pension plan that is maintained outside the United States primarily for nonresident aliens. 
A foreign plan is required to file an annual return 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) if contributions to the plan are deducted on its US income tax return.

The use of these codes will identify several additional plan features that were not included on the prior year 5500-EZ returns:

• Foreign plan identification
• A plan needs to combined with another plan of the employer to pass 410(b) coverage testing
• Employers who have leased employees
• Plans that are members of a controlled group or affiliated service group

Attachments
Filers of Form 5500-EZ are not required to file schedules or attachments related to Form 5500 with the 2009 Form 5500-EZ. However, you must collect and retain for your records completed Schedule MB (Form 5500) for certain money purchase plans, if applicable, and completed and signed Schedule SB (Form 5500) for single-employer defined benefit plans, if applicable. Even though you don't have to file the Schedule MB or Schedule SB with the 2009 Form 5500-EZ, you are still required to both perform an annual valuation and maintain the funding standard account for all plans subject to the minimum funding requirements of section 412.

The 2009 Schedule MB (Form 5500) and the 2009 Schedule SB (Form 5500) are available only electronically from the Department of Labor (DOL) web site at www.efast.dol.gov. You can complete the schedules online and print them out for your records. If you are a Form 5500-EZ filer, do not attempt to electronically file the Schedule MB or Schedule SB related to your 2009 Form 5500-EZ filing.

Specific Instructions Only for “One-Participant Plans” Filing on Form 5500-SF
A “one-participant plan” is: (1) a pension benefit plan that covers only an individual or an individual and his or her spouse who wholly own a trade or business, whether incorporated or unincorporated; or (2) a pension benefit plan for a partnership that covers only the partners or the partners and the partners' spouses. Thus, a “one-participant plan” can cover more than one participant. On the other hand, merely covering only one participant does not make you eligible to file as a “one-participant plan” unless you are one of the types of plans described above.

The Form 5500-EZ generally is used by one-participant plans that are not subject to the requirements of section 104(a) of ERISA to satisfy certain annual reporting and filing obligations imposed by the Code. One-participant plans that meet the Conditions for Filing below may file the Form 5500-SF electronically in place of a Form 5500-EZ (on paper) to satisfy the filing obligations under the Code. One-participant plans that file the Form 5500-SF electronically complete only certain questions on the Form 5500-SF. These are the questions that would be completed if the filer filed Form 5500-EZ on paper. For more information on filing with the IRS, go to www.irs.gov or call 1-877-829-5500. Note: A Form 5500-SF may be filed for one-participant plans that are either defined contribution plans (which include profit-sharing and money purchase pension plans, but not an ESOP or stock bonus plan) or defined benefit plans.

Note: Information filed on Form 5500-EZ is required to be made available to the public. Form 5500-SF is open to public inspection and the contents are public information subject to publication on the Internet.

Conditions for Filing.   One-participant plan filers that meet the following conditions are eligible to file a Form 5500-SF.

The plan is a “one-participant plan.” This means either:

• The plan only covers you (or you and your spouse) and you (or you and your spouse) own the entire business (which may be incorporated or unincorporated) or
• The plan only covers one or more partners (or partner(s) and spouse(s)) in a business partnership.

The plan does not provide benefits for anyone except you, or you and your spouse, or one or more partners and their spouses.

The plan covered fewer than 100 participants at the beginning of the plan year.

If you do not meet ALL the conditions listed above, you are not a one-participant plan filer who is eligible to file Form 5500-SF instead of Form 5500-EZ. You must file a paper Form 5500-EZ with the IRS if you meet the first two conditions but do not meet the third condition.

Eligible one-participant plans need complete only the following questions on the Form 5500-SF:

• Part I, lines A, B, and C;
• Part II, lines 1a–5b;
• Part III, lines 7a–c, and 8a;
• Part IV, line 9a;
• Part V, line 10g; and
• Part VI, lines 11–12e.