IRS Announces 2015 Pension Plan Limitations; Taxpayers May Contribute up to $18,000 to their 401(k) plans in 2015

WASHINGTON — The Internal Revenue Service today announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2015.  Many of the pension plan limitations will change for 2015 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment.  However, other limitations will remain unchanged because the increase in the index did not meet the statutory thresholds that trigger their adjustment.  Highlights include the following:

• The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $17,500 to $18,000.
• The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $5,500 to $6,000.
• The limit on annual contributions to an Individual Retirement Arrangement (IRA) remains unchanged at $5,500.  The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
• The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $61,000 and $71,000, up from $60,000 and $70,000 in 2014.  For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $98,000 to $118,000, up from $96,000 to $116,000.  For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $183,000 and $193,000, up from $181,000 and $191,000.  For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
• The AGI phase-out range for taxpayers making contributions to a Roth IRA is $183,000 to $193,000 for married couples filing jointly, up from $181,000 to $191,000 in 2014.  For singles and heads of household, the income phase-out range is $116,000 to $131,000, up from $114,000 to $129,000.  For a married individual filing a separate return, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
• The AGI limit for the saver’s credit (also known as the retirement savings contribution credit) for low- and moderate-income workers is $61,000 for married couples filing jointly, up from $60,000 in 2014; $45,750 for heads of household, up from $45,000; and $30,500 for married individuals filing separately and for singles, up from $30,000.

Below are details on both the adjusted and unchanged limitations.

Section 415 of the Internal Revenue Code provides for dollar limitations on benefits and contributions under qualified retirement plans.  Section 415(d) requires that the Secretary of the Treasury annually adjust these limits for cost of living increases.  Other limitations applicable to deferred compensation plans are also affected by these adjustments under Section 415.  Under Section 415(d), the adjustments are to be made under adjustment procedures similar to those used to adjust benefit amounts under Section 215(i)(2)(A) of the Social Security Act.

Effective January 1, 2015, the limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) remains unchanged at $210,000.  For a participant who separated from service before January 1, 2015, the limitation for defined benefit plans under Section 415(b)(1)(B) is computed by multiplying the participant's compensation limitation, as adjusted through 2014, by 1.0178.

The limitation for defined contribution plans under Section 415(c)(1)(A) is increased in 2015 from $52,000 to $53,000.

The Code provides that various other dollar amounts are to be adjusted at the same time and in the same manner as the dollar limitation of Section 415(b)(1)(A).  After taking into account the applicable rounding rules, the amounts for 2015 are as follows:

The limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3) is increased from $17,500 to $18,000.

The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $260,000 to $265,000.

The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan remains unchanged at $170,000..

The dollar amount under Section 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a 5 year distribution period is increased from $1,050,000 to $1,070,000, while the dollar amount used to determine the lengthening of the 5 year distribution period remains unchanged at $210,000.

The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) is increased from $115,000 to $120,000.

The dollar limitation under Section 414(v)(2)(B)(i) for catch-up contributions to an applicable employer plan other than a plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over is increased from $5,500 to $6,000.  The dollar limitation under Section 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over is increased from $2,500 to $3,000.

The annual compensation limitation under Section 401(a)(17) for eligible participants in certain governmental plans that, under the plan as in effect on July 1, 1993, allowed cost of living adjustments to the compensation limitation under the plan under Section 401(a)(17) to be taken into account, is increased from $385,000 to $395,000.

The compensation amount under Section 408(k)(2)(C) regarding simplified employee pensions (SEPs) is increased from $550 to $600.

The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts is increased from $12,000 to $12,500.

The limitation on deferrals under Section 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations is increased from $17,500 to $18,000.

The compensation amount under Section 1.61 21(f)(5)(i) of the Income Tax Regulations concerning the definition of “control employee” for fringe benefit valuation remains unchanged at $105,000.  The compensation amount under Section 1.61 21(f)(5)(iii) is increased from $210,000 to $215,000.

The Code also provides that several retirement-related amounts are to be adjusted using the cost-of-living adjustment under Section 1(f)(3).  After taking the applicable rounding rules into account, the amounts for 2015 are as follows:

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for married taxpayers filing a joint return is increased from $36,000 to $36,500; the limitation under Section 25B(b)(1)(B) is increased from $39,000 to $39,500; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $60,000 to $61,000.

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for taxpayers filing as head of household is increased from $27,000 to $27,375; the limitation under Section 25B(b)(1)(B) is increased from $29,250 to $29,625; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $45,000 to $45,750.

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for all other taxpayers is increased from $18,000 to $18,250; the limitation under Section 25B(b)(1)(B) is increased from $19,500 to $19,750; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $30,000 to $30,500.

The deductible amount under Section 219(b)(5)(A) for an individual making qualified retirement contributions remains unchanged at $5,500.

The applicable dollar amount under Section 219(g)(3)(B)(i) for determining the deductible amount of an IRA contribution for taxpayers who are active participants filing a joint return or as a qualifying widow(er) is increased from $96,000 to $98,000.  The applicable dollar amount under Section 219(g)(3)(B)(ii) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $60,000 to $61,000.  The applicable dollar amount under Section 219(g)(3)(B)(iii) for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0.  The applicable dollar amount under Section 219(g)(7)(A) for a taxpayer who is not an active participant but whose spouse is an active participant is increased from $181,000 to $183,000.

The adjusted gross income limitation under Section 408A(c)(3)(B)(ii)(I) for determining the maximum Roth IRA contribution for married taxpayers filing a joint return or for taxpayers filing as a qualifying widow(er) is increased from $181,000 to $183,000.  The adjusted gross income limitation under Section 408A(c)(3)(B)(ii)(II) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $114,000 to $116,000.  The applicable dollar amount under Section 408A(c)(3)(B)(ii)(III) for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0.

The dollar amount under Section 430(c)(7)(D)(i)(II) used to determine excess employee compensation with respect to a single-employer defined benefit pension plan for which the special election under Section 430(c)(2)(D) has been made is increased from $1,084,000 to $1,101,000.

Information for Employers about Their Responsibilities Under the Affordable Care Act

IRS Health Care Tax Tip 2014-21, Oct. 16, 2014

If you are an employer, the number of employees in your business will affect what you need to know about the Affordable Care Act (ACA).

Employers with 50 or more full-time and full-time-equivalent employees are generally considered to be “applicable large employers” (ALEs) under the employer shared responsibility provisions of the ACA.  Applicable large employers are subject to the employer shared responsibility provisions.

However, more than 95 percent of employers are not ALEs and are not subject to these provisions because they have fewer than 50 full-time and full-time-equivalent employees.

Whether an employer is an ALE is determined each calendar year based on employment and hours of service data from the prior calendar year. An employer can find information about determining the size of its workforce in the employer shared responsibility provision questions and answers section of the IRS.gov/aca website and in the related final regulations.

In general, beginning January 1, 2015, ALEs with at least 100 full-time and full-time equivalent employees must offer affordable health coverage that provides minimum value to their full-time employees and their dependents or they may be subject to an employer shared responsibility payment.  This payment would apply only if at least one of its full-time employees receives a premium tax credit through enrollment in a state based Marketplace or a federally facilitated or Marketplace.  Also, starting in 2016 ALEs must report to the IRS information about the health care coverage, if any, they offered to their full-time employees for calendar year 2015, and must also furnish related statements to their full-time employees.

For 2014, the IRS will not assess employer shared responsibility payments and the information reporting related to the employer shared responsibility provisions is voluntary.  In addition, the employer shared responsibility provisions will be phased in for smaller ALEs from 2015 to 2016.

Specifically, ALEs that meet certain conditions regarding maintenance of workforce size and coverage in 2014 are not subject to the employer shared responsibility provision for 2015.  For these employers, no employer shared responsibility payment will apply for any calendar month during 2015 (including, for an employer with a non-calendar year plan, the months in 2016 that are part of the 2015 plan year). However these employers are required to meet the information reporting requirements for 2015.  The employer shared responsibility provision questions and answers section of the IRS.gov/aca website and the preamble to the employer shared responsibility final regulations describe the requirements for this relief in more detail.  Both resources also describe additional forms of transition relief that apply for 2015.

Small employers, specifically those with fewer than 25 full-time equivalent employees, may be eligible for the small business health care tax credit.

Regardless of the number of employees, if an employer sponsors a self-insured health plan, it must report to the IRS certain information about its health insurance coverage plan for each covered employee.

More information

Find out more about the small business health care tax credit, applicable large employers, the employer shared responsibility provision, information reporting requirements and the premium tax credit at IRS.gov/aca.

Find out more about the health care law at HealthCare.gov.

CPAs and tax preparers do not normally owe a fiduciary duty to their clients

Plaintiff sued his accountant for negligence and was trying to get around the 3-year statute of limitations of 52-577.  In opposition to the defendant’s summary judgment, the plaintiff alleged the accountant owed him a fiduciary duty to disclose his mistake and this tolled the statute of limitation.  The majority of the Supreme Court affirmed the recent Appellate Court decision in this dispute that CPAs and tax preparers do not normally owe a fiduciary duty to their clients absent more involvement in their client’s affairs, such as: representing them in tax disputes with the IRS; providing investment advice; handling their finances; or recommending financial transactions they might participate in.  The dissent objected to such a bright line rule for CPAs and would have left the issue to the jury to decide.  The majority responded in a footnote that their decision was consistent with the majority of states and was not a bright line rule.  They said the plaintiff here simply failed to put forth any evidence of anything more by the CPA other than preparing tax returns.  The plaintiff’s opposition to summary judgment was full of conclusory statements like “he trusted them,” “he relied upon them,” “they had superior knowledge,” etc.  But such generic statements are not enough.

The decision also looked to when fiduciary roles can toll the statute of limitations.  Tolling due to fraudulent concealment under CGS 52-595 require three elements: [1] knowledge of the mistake; [2] intentional concealment; and [3] for the purpose of delaying the claim.  The federal rule allows concealment element #2 to be satisfied by showing a fiduciary relationship.   [The Court said it did not need to decide in this case whether CT would adopt the federal rule but it looks to me like they would if presented with the correct fact pattern.]

Premium Payment Instructions & Addresses

Premium Payment Instructions, including illustrative forms:

• Plan years beginning in 2014
• Plan years beginning in 2013
• Earlier years

Premium Payment Instructions & Contact Information

Payment outside of My PAA is permitted for any filing and is required if multiple filings are uploaded at the same time (i.e., a batch upload). However, separate payments must be submitted for each plan. Do not combine premiums for two or more plans into one payment.
The preferred payment option outside of My PAA is Pay.gov, which is fast, secure, and free for premium payers.

For fast, automatic posting to the premium account, the payment must reference the plan's employer identification number, plan number and the plan year commencement date. If you send a paper check, we request that you include a completed paper check voucher. Note that these addresses are also used for all prior year premium filings and payments (outside of My PAA).

• Pay.gov for secure electronic payments:Go to http://www.Pay.gov. This is a direct link to the PBGC Premium Insurance Payments Form. This link can also be found at www.Pay.gov. You will be automatically directed to a secure site. Select Pension Benefit Guaranty Corporation from the Agency List. You will need the plan's EIN, PN, and Plan Year Commencement Date to complete the payment.
• Mailing Address if using the United States Postal Service:
  Pension Benefit Guaranty Corporation
  P.O. Box 105758
  Atlanta, GA 30348-5758
• Deliver to Address, if you send a paper check or correspondence via a delivery service that does not deliver to a P.O. Box (e.g., FedEx, UPS):Bank of America
  1075 Inner Loop Road (2nd Floor)
  Atlanta, GA 30337
  ATTN: PBGC Box 105758
  Phone: 404-209-6322
• Electronic Funds Transfers other than Pay.gov:
  JPMorgan Chase Bank, N.A.
  ABA: 071000013
  Account: 656510666
  Beneficiary: PBGC
  Reference: "EIN/PN: XXXXXXXXX/XXX         PYC: MM/DD/YY"

Customer Service

E-mail: Premiums@PBGC.gov

Phone: 1-800-736-2444 and select the premium option

Paper Check Voucher (for printing) [PDF]
Notice to Customers Making Payment by Check

When you provide a check as payment, you authorize us either to use information from your check to make a one-time electronic fund transfer from your account or to process the payment as a check transaction.

Privacy Act — A Privacy Act Statement required by 5 U.S.C. § 552a(e)(3) stating our authority for soliciting and collecting the information from your check, and explaining the purposes and routine uses which will be made of your check information, is available from our internet site at (http://www.fms.treas.gov/otcnet/legal.html), or call toll free at (1-866-945-7920) to obtain a copy by mail. Furnishing the check information is voluntary, but a decision not to do so may require you to make payment by some other method.

Premium Contact Information

• E-mail a question
• Call: 1-800-736-2444 or (202) 326-4242 and select the "premium" option.
  TTY/ASCII users should call the Federal Relay Service toll-free at 1-800-877-8339 and ask to be connected to 1-800-736-2444.
• Mail correspondence to:
  Pension Benefit Guaranty Corporation
  P.O. Box 105758
  Atlanta, GA 30348-5758

Technical Update 14-1: Effect of HATFA on PBGC Premiums

September 24, 2014

This Technical Update 14-1 provides Pension Benefit Guaranty Corporation (PBGC) guidance on the effect of the Highway and Transportation Funding Act of 2014 (HATFA) on PBGC premiums.

The guidance in this Technical Update 14-1 supersedes any inconsistent guidance in PBGC's 2014 premium instructions. It does not affect the guidance in PBGC Technical Update 12-1 (Effect of MAP-21 on PBGC Premiums), which continues to apply for plan years to which HATFA applies.

I. Background and Guidance

A. 2014 premium underpayments that may result from decision to use 2013 HATFA rates

The Moving Ahead for Progress in the 21st Century Act (MAP-21) provided stabilization rules that limited the volatility of discount rates used for certain funding and benefit restriction purposes by constraining them within a corridor around 25-year average rates. The MAP-21 corridor was scheduled to widen over time, starting with a slightly wider corridor for plan years beginning in 2013. HATFA extends, through 2017 plan years, the period during which the narrowest corridor applies. The change is retroactive to 2013 plan years, but plan sponsors may decide whether to have the narrowest corridor (under HATFA) or the slightly wider corridor (under MAP-21) apply to 2013.

The choice of a rate corridor for the plan year beginning in 2013 affects a plan's variable-rate premium for the 2014 plan year. This is because –

• The discounted value of contributions made for the 2013 plan year after the end of that plan year is included in the value of assets for purposes of determining the 2014 variable-rate premium; and
• The discount rate used for this purpose is the effective interest rate for 2013, which is affected by the 2013 rate corridor.

The effect of using HATFA rates rather than MAP-21 rates is relatively modest. For example, if a $1 million contribution made six months after year-end is discounted with the HATFA effective interest rate rather than the MAP-21 rate, the variable-rate premium will increase by less than $30.

PBGC believes most plans have already determined the 2013 effective interest rate based on the wider MAP-21 rate corridor and many (but not all) plans have not determined the 2013 effective interest rate based on the narrower HATFA corridor. Under IRS Notice 2014-53, plans may decide whether to use MAP-21 or HATFA rates for 2013 funding determinations as late as December 31, 2014 (or, if later, the due date for the 2013 5500).

PBGC expects most plans with premium filings due in calendar year 2014 that haven't already filed a 2013 Schedule SB based on HATFA calculations will find it administratively less burdensome to determine their 2014 variable-rate premium based on an asset value that includes contributions receivable discounted at the MAP-21 effective interest rate, even though many of those plans will ultimately use 2013 HATFA rates. Under PBGC's regulations, a plan in this situation that ultimately uses 2013 HATFA rates should amend its premium filing and pay the additional premium and late payment charges.

The situation created by HATFA for the 2013 effective interest rate is unique. HATFA was enacted August 8, 2014, long after the end of most 2013 plan years (and close to the deadline for filing the Form 5500 annual report for calendar 2013 plan years). Yet it has retroactive application to 2013 years depending on decisions that may be made as late as December 31, 2014 (or, if later, the due date for the 2013 5500). Like the 2013 Form 5500, the 2014 PBGC premium filing for calendar-year plans is due less than ten weeks after HATFA became law. In addition, the discrepancy in the variable-rate premium resulting from HATFA rates is generally modest — in most cases likely less than the cost of making an amended premium filing.

Accordingly, in the exercise of enforcement discretion, PBGC will not require a plan that makes a 2014 premium filing using an asset value that includes 2013 contributions receivable discounted using MAP-21 effective interest rates and uses HATFA rates for 2013funding purposes, to pay additional premium or late payment charges or amend its 2014 premium filing where all of the following conditions are met:

• The 2014 premium filing is due on or before December 31, 2014, and is timely made.
• As of the 2014 premium due date, the plan has not filed a 2013 Schedule SB based on HATFA calculations.
• The asset value reported in the 2014 premium filing included contributions made after the end of the 2013 plan year discounted using the effective interest rate that would have applied had HATFA not been enacted (i.e., based on the MAP‑21 corridor).
• The plan's contributions for the 2013 plan year made after the end of such plan year do not exceed $25 million.

B. Redesignation of 2013 contributions under HATFA

Section IV.D of IRS Notice 2014-53 says:

Despite the general position of the Service that a contribution designated for a particular plan year cannot be redesignated to apply for another plan year after the Schedule SB is filed, the plan sponsor may choose to redesignate all or a portion of a contribution that was originally designated as applying to the plan year beginning in 2013 to apply to a plan year that begins in 2014. This rule applies only to contributions made after the end of the 2013 plan year and on or before September 30, 2014 and applies only if the designation is on a Schedule SB for the 2013 plan year that is filed on or before December 31, 2014.

In a 2011 policy statement,¹ PBGC considered the treatment of amended premium filings, showing increased assets and decreased variable-rate premium, supported by amended Schedules SB (or B) that reflected recharacterization of contributions, and submitted with a view to obtaining premium refunds.

PBGC has reviewed its policy statement in light of IRS's explicit endorsement of one specific type of redesignation in connection with the implementation of HATFA. Under the circumstances, plans that redesignate 2013 contributions to 2014 in accordance with IRS Notice 2014‑ 53 should amend their 2014 premium filings to exclude the discounted value of such redesignated contributions from the value of assets used to determine the 2014 VRP. In general, such a redesignation will affect premiums for both 2014 and 2015. If the redesignation is made after the 2014 premium filing, the 2014 filing should be amended to reflect the higher premium.²

II. PBGC Contact

For questions about this Technical Update 14-1, contact Amy Viener, Senior Policy Actuary, Policy, Research and Analysis Department, at (202) 326‑4080, ext. 3919, or viener.amy@pbgc.gov.

---

¹76 FR 79714 (Dec. 22, 2011).

²Since the redesignation means that the original filing contained a discrepancy unrelated to the use of an effective interest rate based on MAP-21 rules instead of HATFA rules, plans that make such redesignations do not qualify for the relief described in A. above.

Fidelity Bonds and Depositing Plan Contributions

The Employee Plans Compliance Unit (EPCU) looked at the compliance rate of Virgin Island plan sponsors on two issues IRS discovered during limited audits of these plan and found that most of the sampled plans sponsors complied with their bonding and contribution deposit requirements. However, the EPCU did find a few plan sponsors who either:

• didn’t have adequate fidelity bonding, or
• didn’t deposit contributions by the required deadlines.

Fidelity bonds

Under ERISA, plan sponsors are required to secure fidelity bonds to protect the plan against loss because of fraud or dishonesty by any plan fiduciary or someone who handles the plan’s assets.
Everyone who meets the bonding requirement is required to secure a bond for at least 10% of the amount of funds handled during a plan year ($1,000 minimum and $500,000 maximum per plan). The Department of Labor increased the maximum required bond to $1,000,000 for officials of plans that hold employer securities for plan years beginning on or after January 1, 2008. For more guidance on ERISA fidelity bonding requirements, see DOL Field Assistance Bulletin 2008-04.

Contribution deposits

Plan sponsors are required to keep employee contributions and salary deferral contributions separate from the company’s general funds. The DOL requires that the employer must deposit contributions into the trust as soon as administratively possible.

Rules for when an employer must deposit matching or other contributions are different from those for elective deferrals. To obtain a current tax deduction, the employer must deposit matching contributions by the employer’s income tax return filing deadline, including extensions.

If the employer doesn’t make the contribution deposits by the required deadline the plan may have operational mistakes that may lead to prohibited transactions or plan disqualification. Although an employer can correct certain operational mistakes under the Employee Plans Compliance Resolution System, an employer can’t correct prohibited transactions using this program. Employers may resolve prohibited transactions using the DOL Voluntary Fiduciary Correction Program (VFCP). If the plan document contains language for the timing of salary deferral deposits, an employer may correct failures to follow the plan document terms under EPCRS.

Planning tips

Review your plan’s administrative procedures so these mistakes don’t happen and consult with your benefits professional to ensure that you have administrative procedures in place to prevent these operational errors. If you find errors, take prompt action to correct them.

We have many resources to help you monitor compliance with your retirement plan. If you find a mistake or problem in your retirement plan, learn how to fix plan errors and avoid future errors.

Contact us

If you have questions about this project, email us and include “Virgin Islands” in the subject line. Make sure to include your telephone number so we can contact you with answers.

Additional resources

• Information for International Taxpayers and International Businesses
• International Issues Affecting Retirement Plans
• Check-Ups
• Fix-It Guides
• Fixing Common Plan Mistakes
• A Guide to Common Qualified Plan Requirements
• “Maintaining Your Plan” Video
• Form 5500 Corner

Mandatory Electronic Filing for Certain Form 8955-SSA and 5500-series Returns

• Final Regulations issued under Internal Revenue Code Sections 6057, 6058 and 6059 (T.D. 9695) generally require filers who have to file at least 250 returns with the IRS during the calendar year to file Form 5500-series returns and Form 8955-SSA electronically.
  
  
• The preamble to the regulations notes that the IRS anticipates adding items on the 2015 Forms 5500 and 5500-SF that relate solely to the Internal Revenue Code requirements and providing an optional paper-only form containing those Code-related items to filers who aren’t required to file electronically.

If you don’t file electronically when required to do so, you’ll be considered to not have filed the return, and you may incur appropriate penalties.

Effective date

• Form 8955-SSA, Annual Registration Statement Identifying Separated Participants with Deferred Vested Benefits, must be filed electronically for plan years beginning on or after January 1, 2014, but only for returns with a filing date on or after July 31, 2015 (not including extensions).
  
  
• Form 5500 series returns must be filed electronically for plan years that begin on or after January 1, 2015, but only for returns with a filing deadline (not including extensions) after December 31, 2015.

Electronic filing systems

Use EFAST2 (ERISA Filing Acceptance System) to electronically file:

• Form 5500, Annual Return/Report of Employee Benefit Plan, and
• Form 5500-SF, Short Form Annual Return/Report of Small Employee Benefit Plan.

Use FIRE (Filing Information Returns Electronically) to electronically file Form 8955-SSA.

One-participant plans

Electronic filing isn’t available for Form 5500-EZ, Annual Return of One-Participant (Owners and their Spouses) Retirement Plan. However, Form 5500-EZ filers required to file their returns electronically under the final regulations, who would otherwise file a paper Form 5500-EZ, must instead file Form 5500-SF electronically through EFAST2, but aren’t required to attach:

• Schedule SB, Single-Employer Defined Benefit Plan Actuarial Information, or
• Schedule MB, Multiemployer Defined Benefit Plan and Certain Money Purchase Plan Actuarial Information.

250-return threshold

When determining the 250-return threshold, aggregate all returns, including information returns. For example, include the following returns:

• Forms W-2 and 1099-R; and
• income, employment and excise tax returns.

Certain delinquent returns

Late filers who want relief under the following programs must file paper returns and meet other program requirements:

• Penalty Relief Program for Form 5500-EZ Late Filers
• Changes to IRS Penalty Relief for DOL DFVC Filers of Late Annual Reports

Additional resources

• Form 5500 Corner
• Form 8955-SSA Resources

IRS Simplifies Procedures for Favorable Tax Treatment on Canadian Retirement Plans and Annual Reporting Requirements

IR-2014-97, Oct. 7, 2014

WASHINGTON ― The Internal Revenue Service today made it easier for taxpayers who hold interests in either of two popular Canadian retirement plans to get favorable U.S. tax treatment and took additional steps to simplify procedures for U.S. taxpayers with these plans.

As part of this, the IRS provided retroactive relief to eligible taxpayers who failed to properly choose this benefit in the past. In addition, the IRS is eliminating a special annual reporting requirement that has long applied to taxpayers with these retirement plans.

Under this change, many Americans and Canadians with registered retirement savings plans (RRSPs) and registered retirement income funds (RRIFs) now automatically qualify for tax deferral similar to that available to participants in U.S. individual retirement accounts (IRAs) and 401(k) plans. In general, U.S. citizens and resident aliens qualify for this special treatment as long as they filed and continue to file U.S. returns for any year they held an interest in an RRSP or RRIF and include any distributions as income on their U.S. returns.

The change relates to a longstanding provision in the U.S.-Canada tax treaty that enables U.S. citizens and resident aliens to defer tax on income accruing in their RRSP or RRIF until it is distributed. Otherwise, U.S. tax is due each year on this income, even if it is not distributed.

In the past, however, taxpayers generally would get tax deferral by attaching Form 8891 to their return and choosing this tax treaty benefit, something many eligible taxpayers failed to do. Before today’s change, a primary way to correct this omission and retroactively obtain the treaty benefit was to request a private letter ruling from the IRS, a costly and often time-consuming process.

Many taxpayers also failed to comply with another requirement; namely that they file Form 8891 each year reporting details about each RRSP and RRIF, including contributions made, income earned and distributions made. This requirement applied regardless of whether they chose the special tax treatment. The IRS is eliminating Form 8891, and taxpayers are no longer required to file this form for any year, past or present.

The revenue procedure does not modify any other U.S. reporting requirements that may apply under the Bank Secrecy Act (BSA) and section 6038D. See FinCEN Form 114 due by June 30 of each year, and Form 8938 attached to a U.S. income tax return for more information about the reporting requirements under the BSA and section 6038D. Different reporting thresholds and special rules apply to each of these forms.

Further details on today’s change can be found in Revenue Procedure 2014-55, posted on IRS.gov.

New Single Distribution Rule for Retirement Plans

Beginning January 1, 2015, when participants choose to direct their retirement plan distribution to go to multiple destinations, the amounts will be treated as a single distribution for allocating pre-tax and after-tax basis (Notice 2014-54 and REG-105739-11). This will allow 401(a) qualified, 403(b) and 457(b) governmental retirement plan participants to:

• roll over amounts to both a Roth IRA and a non-Roth IRA,
• allocate the pre-tax amount of the distribution to the non-Roth IRA and the after-tax amount to the Roth IRA, and
• avoid having to pay income tax on pre-tax amounts rolled over to the non-Roth IRA.

Current separate distributions rule

Under current rules, each destination of a retirement plan distribution (for example, a distribution split between a direct rollover to an IRA and an actual distribution of funds) is considered a separate distribution. If a participant’s account balance contains both pre-tax and after-tax amounts, each distribution includes a pro rata share of both. A participant can’t choose to transfer the pre-tax amount to a traditional IRA and the after-tax amount to a Roth IRA.

Transition rules

The new single distribution allocation rules aren’t mandatory for plan distributions prior to January 2015. However, plan sponsors may apply this allocation rule to distributions made on or after September 18, 2014, and apply a reasonable interpretation of the allocation rules for distributions made prior to September 18.

Additional resources

• Rollovers of retirement plan and IRA distributions
• Rollover chart
• Individual Retirement Arrangements (IRAs)
• Types of retirement plans

Business E-File Jumps 10 Percent This Year; Doubles in 4 Years; 7 in 10 Corporate and Partnership Tax Returns Now Filed Electronically

WASHINGTON — Business e-file rose nearly 10 percent this year, continuing the growth that has seen the number of corporate and partnership returns filed electronically double in just four years, the Internal Revenue Service said today. An additional 600,000 corporations and partnerships e-filed their tax returns this year.

As of Sept. 21, more than 7 million corporations and partnerships e-filed, an increase of almost 10 percent over the prior year’s total, and twice the nearly 3.5 million returns e-filed during the 2010 fiscal year. About 70 percent of all corporate and partnership returns have been e-filed during 2014. Many corporations and partnerships operating on a calendar year receive filing extensions. The extended due date is usually Sept. 15.

Most large corporations and partnerships are required to e-file.

Large and mid-size corporations, generally those with $10 million or more in total assets, are required to electronically file their Forms 1120 or 1120S. Partnerships with more than 100 partners (Schedules K-1) are also required to e-file their tax returns. The IRS is seeing growth in e-filing by these businesses and by businesses not required to e-file.

This year, 92,494 large corporations e-filed their returns, an increase of 8.6 percent compared to the same time last year. The greatest rate of growth in e-filing among these businesses is by large partnerships. This year, 122,879 large partnerships e-filed, up more than 14 percent from the same time the year before.




Corporations and partnerships can get more information about IRS e-file at IRS.gov.