Guest Article

(From the July 24, 2006 issue of Deloitte's Washington Bulletin, a periodic update of legal and regulatory developments relating to Employee Benefits.)

Form 5500 and 5500-EZ Extension Requests Pose Potential Inadvertent Disclosure of Taxpayer's Personally Identifiable Information ("PII")

The required filing deadline for most annual returns of retirement plans, (including "one-participant retirement plans") is July 31st. A one-time extension of time to file Forms 5500 or 5500-EZ may be obtained by filing Form 5558, Application for Extension of Time to File Certain Employee Plan Returns.

In addition, certain retirement plans may be automatically granted an extension of time to file Forms 5500 or 5500-EZ until the extended due date of the Federal income tax return of the employer (and are not required to file Form 5558) if certain conditions are met. For a plan sponsor to avail itself of the automatic extension, a copy of the application of time to file the Federal income tax return of the employer must be attached to the Form 5500 or 5500-EZ at the time such return is filed.

The potential for disclosure of PII arises from the fact that Forms 5500 and 5500-EZ are open to public inspection pursuant to IRC § 6104(b) and Treas. Reg. § 301.6104(b)-1. The contents are public information and are subject to publication on the Internet. Accordingly, if the application of time to file the Federal income tax return of the employer (which typically includes the employer/individual's address, social security number, and projected tax liability) is attached to Form 5500 or 5500 EZ and the PII is not redacted, it could put the individual taxpayer at risk of publicly disclosing his or her PII.

Although the Form 5500 instructions contain a reminder to redact any social security numbers (but not projected tax liability amounts) from the Federal application of extension of time to file the employer's return prior to attaching it to the Form 5500, the Form 5500-EZ instructions do not contain such a reminder. There does not seem to be any reason for this inconsistency or the lack of an instruction to redact projected tax liability amounts.

In light of the potential for inadvertent disclosure of PII associated with relying on the automatic extension procedures, it is preferable that anyone seeking to extend the due date of a Form 5500 or Form 5500-EZ should obtain the extension by timely filing Form 5558. Any use of the automatic extension procedures should be done with the utmost caution, and the filer must be careful to redact all PII prior to attaching the employer's Federal extension request to the Form 5500 or 5500-EZ.

The information in this Washington Bulletin is general in nature only and not intended to provide advice or guidance for specific situations. If you have any questions or need additional information about articles appearing in this or previous versions of Washington Bulletin, please contact: Robert Davis 202.879.3094, Elizabeth Drigotas 202.879.4985, Taina Edlund 202.879.4956, Laura Edwards 202.879.4981, Mike Haberman 202.879.4963, Stephen LaGarde 202.879-5608, Bart Massey 202.220.2104, Martha Priddy Patterson 202.879.5634, Tom Pevarnik 202.879.5314, Carlisle Toppin 202.220.2067, Tom Veal 312.946.2595, Deborah Walker 202.879.4955. Copyright 2006, Deloitte.