5500 or 5500ez

[tertue]

Employee 1: 20% owner

wife of Employee 1: 20% owner

brother of employee 1: 20% owner

wife of brother: 20% owner

mother of Employee 1: 20% owner

This is a C-Corp, with 1 employee (20% owner) as the only W2 employee. None of the 4 other owners participate in the 401k nor do they draw any pay. Use form 5500 or 5500ez?

[Belgarath]

You can't file an EZ.

[BG5150]

Why not? Plan consists solely of owners.

[Belgarath]

Since this is a corporation, I don't think number two applies. Therefore, since the corporation is not owned solely by 1 owner and spouse, they don't satisfy #1, and cannot file an EZ. At least IMHO.

A one-participant plan means a retirement plan (that is,
a defined benefit pension plan or a defined contribution
profit-sharing or money purchase pension plan), other
than an Employee Stock Ownership Plan (ESOP), which:
1. Covers only you (or you and your spouse) and you
(or you and your spouse) own the entire business (which
may be incorporated or unincorporated); or
2. Covers only one or more partners (or partners and
their spouses) in a business partnership; and
3. Does not provide benefits for anyone except you (or
you and your spouse) or one or more partners (or partners
and their spouses).

[tertue]

Is there a way to find out for sure the answer to the question?

It seems like it go go either way, depending on who you ask.

[ETA Consulting LLC]

Even though the plan will pass every non-discrimination test ever created (since everyone is an HCE due to ownership), the plan is, technically, subject to ERISA for not meeting the criteria explained by Belgarath.

Good Luck!

[John Feldt ERPA CPC QPA]

If it's a DB plan, it's exempt from PBGC, but I agree, it's not eligible for the EZ.

[Dinosaur]

If you have a plan with an 80% owner and a 20% owner (not married) or 60/40, 70/30, what form is filed? Form 5500 or Form 5500-EZ?

The instructions to the EZ say

2. Covers only one or more partners (or partners and
their spouses) in a business partnership

These instructions do not define "partners". Any ideas?

[jpod]

It means partners in an entity that is a partnership under state law, as opposed to shareholders of a corporation. Not clear if it also includes members of an LLC that is a partnership for Federal tax purposes.

[Mike Preston]

Yes it is. It does.

[jpod]

Mike, thanks. Is that stated somewhere in the instructions or in a DOL Advisory Opinion?

[Mike Preston]

What part of "is a partnership for federal tax purposes" is unclear?

[jpod]

Not following you, Mike. The issue I raised is whether members of an LLC that is treated as a partnership for tax purposes are treated the same as partners in a partnership for purposes of Title I of ERISA (i.e., the DOL reg saying that a plan that only covers partners in a partnership is not an employee benefit plan).

[Mike Preston]

I believe that the members are treated as partners.