Switching from Form 5500 to 5500EZ

[Richard Anderson]

Two of our clients had employees in the past, but now the plans

cover only the owners(s). Plans are either sole-proprietor or partnership.

All previous filings have been small plan Form 5500. All previous participants,

other than owners, are terminated and their plan assets distributed.

Since the plans now are considered "one-participant" plans, can we switch

to filing 5500EZ?

If the answer is yes: Is a "final" Form 5500 required before filing the first 5500EZ?

Thanks.

[Andy the Actuary]

I'm inferring that the question you're asking what does "covered" mean. In particular, does covered mean on any day during plan year or as of the end of the year for purposes of determining whether to file an SF or EZ? (It is simply delightful that anything I've located in print is conveniently silent on this.)

Thus, for example, what do you file when at the beginning of the year there were 3 nonowner employees and 1 owner? The 3 nonowner employees were terminated and presumably received a distribution of their vested benefit.

This is my opinion and my reasoning. If we were required to file an SF, we would then have to provide an SAR or AFN to the covered participants. But, there are none. In short, I would file an EZ and show the number of participants at the beginning of the year on 2009 line 5a as 4.

You certainly can call the IRS hotline on this at 1-877-829-5500 Monday through Friday. At least that's what the EZ instructions contend.

[Richard Anderson]

I'm inferring that the question you're asking what does "covered" mean. In particular, does covered mean on any day during plan year or as of the end of the year for purposes of determining whether to file an SF or EZ? (It is simply delightful that anything I've located in print is conveniently silent on this.)

Thus, for example, what do you file when at the beginning of the year there were 3 nonowner employees and 1 owner? The 3 nonowner employees were terminated and presumably received a distribution of their vested benefit.

This is my opinion and my reasoning. If we were required to file an SF, we would then have to provide an SAR or AFN to the covered participants. But, there are none. In short, I would file an EZ and show the number of participants at the beginning of the year on 2009 line 5a as 4.

You certainly can call the IRS hotline on this at 1-877-829-5500 Monday through Friday. At least that's what the EZ instructions contend.

Thanks Andy,

All non-owner employees terminated prior to 2009 and received distributions before 2009,

so as of 1/1/09 there were no non-owners participants.

In the past when a plan was filing a 5500EZ and then switched to Form 5500, the Form 5500 needed to

be marked as the first return filed. When switching from Form 5500 to 5500EZ, should the last From 5500

be marked as "final"?

[Andy the Actuary]

So, as a matter of consistency, the 2008 Form possibly could have been an EZ.

Looking at the instructions for the 2008 Form it appears that "final return" means the very last return and not the last 5500.

You need to do what feels comfortable after possibly discussing with the IRS. If I were preparing the forms, I would not amend 2008 and in 2009 file an EZ since it would clearly be a one person plan in 2009.

[mwyatt]

I'd question the "final" marking of a 5500 myself. What if you add back participants in the future and then go back to 5500/5500SF filing?

[Bird]

I don't think it should be "final." It would certainly be flagged and maybe rejected since there would still be assets at the end of the year on the return. You just start filing an EZ; you might have to explain later to the DOL/IRS why they're not getting regular forms any more but in my experience (not recent) they have somehow cross-referenced the forms and not even asked about a "missing" return.