Jump to content

5558 and Plan Sponsor change


pmacduff
 Share

Recommended Posts

This has been discussed but most of the threads were older so I'd like to see what others think now.

Plan Sponsor name and EIN (as well as the Plan name) were changed effective 01/01/2021.  When preparing the extension for the 2021 plan year, the FT Wm software is using the old name and EIN, even after I updated them on the website.  Can I assume this is the correct way to file the extension and then when the client files the 5500-SF form and reports the Plan Sponsor name/EIN/Plan name change on that it will line up with the extension that was filed under the old name/EIN? 

It makes sense to me because the EBSA has no record of the new information until the 5500-SF is actually filed. 

Just paranoid I guess and want to be sure.....

 

Link to comment
Share on other sites

Quote
Quote

I would put the new plan sponsor name, then include a parenthetical stating "formerly known as ...", the new EIN (with formerly[EIN]), the name of the new plan with "(formerly known as the ...Plan)]/ So if the new company is ABC, the old company was XYZ, the new EIN is 98-7654321 and the old EIN is 12-3456789, I would say Plan Sponsor: "ABC Company (formerly known as XYZ Company)," EIN "98-7654321 (formerly 12-3456789"  and Plan Name: "ABC 401 (k) Savings Plan (formerly known as the "XYZ Company 401(k) Savings Plan)."

 

 

Link to comment
Share on other sites

I suppose that since 5330s are typically mailed, they would therefore be subject to manual data entry.  In which case the expository details would indeed get picked up by someone at the Service.  Whether that actually helps, though......

Link to comment
Share on other sites

I have had the same issue ad infinitum in the past, have used the new sponsor name and EIN, and noted Item 4 with the name of the prior year sponsor.

IRS has sent the client notices, which we have answered, they send another notice and an invoice from IRS for a delinquent filing mentioning we have not replied. 

This has taken many months to clear up -with IRS Notices and our responses;  and many irate clients.

Who do you think they blame - the TPA.

Recently we were informed that we should either send or fax IRS in Ogden, UT informing of the sponsorship change, enumerating old sponsor with EIN and new sponsor with EIN.  Apparently Ogden is the one to make the change.

Perhaps this has worked as there have been no repercussions... or perhaps due to COVID (and the Hurricane Ida extensions), IRS is backed up.

Link to comment
Share on other sites

Plan sponsor and plan name changes can be made directly on the Form 5500.  The EIN change triggers the penalty notices.

When a client received a penalty notice about the failure to file under the old EIN/plan name/plan sponsor, the IRS told me to file a Form 5500 marked "final return/report" under the old EIN and a Form 5500 marked "first return/report" under the new EIN.    

If you follow this route, file an amended 2020 return as the final return/report and the 2021 Form 5500 as a new return/report.  The extension for 2021 would be filed using the new plan sponsor, plan name and EIN since that's the Form 5500 being extended.

YMMV, but we were able to resolve the issue this way, and the penalties went away.

Link to comment
Share on other sites

7 hours ago, Jon C. Schultze said:

Plan sponsor and plan name changes can be made directly on the Form 5500.  The EIN change triggers the penalty notices.

When a client received a penalty notice about the failure to file under the old EIN/plan name/plan sponsor, the IRS told me to file a Form 5500 marked "final return/report" under the old EIN and a Form 5500 marked "first return/report" under the new EIN.    

If you follow this route, file an amended 2020 return as the final return/report and the 2021 Form 5500 as a new return/report.  The extension for 2021 would be filed using the new plan sponsor, plan name and EIN since that's the Form 5500 being extended.

YMMV, but we were able to resolve the issue this way, and the penalties went away.

I seem to recall a discussion on this in the past.  So for the 2020 return, do you report zero participants and zero assets at the end of the plan year?  If non-zero, can you really file it as a final return?  Then for 2021, do you start with zero participants and zero assets, or end of 2020 participants and assets... With first day of the plan year as an entry date, I can understand non-zero participants at the beginning of 2021.  But non-zero assets at the beginning of 2021?

Link to comment
Share on other sites

7 hours ago, Jon C. Schultze said:

When a client received a penalty notice about the failure to file under the old EIN/plan name/plan sponsor, the IRS told me to file a Form 5500 marked "final return/report" under the old EIN and a Form 5500 marked "first return/report" under the new EIN.    

 

Is this the position of the IRS as a whole, or a suggestion made by a single agent?  While it may solve the issue, that just doesn't seem like the proper way to handle a change to the plan sponsor.

...but then again, What Do I Know?

Link to comment
Share on other sites

I don't know if it's the position of the IRS in general because I didn't ask.  However, the agent did not hesitate in explaining to me what to do.  Maybe the IRS handles changes through Ogden as well, but it seems as though they try to discourage procedures that require human involvement.

Looking at Form 5500 again, Line 4 does report changes in EIN as well as plan sponsor and plan name.  As I think about it more, I think our issue perhaps was that the new sponsor had a prexisting plan with the same plan number that we had to fix by filing an amended and new returns because Line 4 does not change plan numbers (?).  The IRS definitely issued a penalty notice for failing to file a Form 5500 after the EIN/sponsor changed, and the issue was resolved per the IRS agent's instructions.

Even if one follows the steps I outlined, there is no indication that the "old" plan was terminated.  The reporting would be similar to a plan merger with the assets and participants being treated as having been transferred to the "new" plan, and 1099-Rs are not issued for plan mergers.  The old plan files a final return and goes away.

Link to comment
Share on other sites

Not sure if I started a firestorm!?!?

Anyway reading Item 4 on the first page of the 5500-SF it reads pretty straight-forward:

"If the name and/or EIN of the plan sponsor or the plan name has changed since the last return/report filed for this plan, enter the plan sponsor's name EIN, the plan name and the plan number from the last return/report."  We've never had issues when we have reported it in this section with these types of changes.  

However none of the prior filings for those "name change" clients were extended or needed to be extended.  Therein lies my dilemma with the extension filing.  I would like to think the connection will be made but I have my concerns.........😬

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...