5500-EZ or 5500-SF for an s-corp with only family members

[Jakyasar]

Plan cover the 4 children of the owner (sponsor is s-corp) - owner is not a participant.

Can this plan file 5500EZ?

I say yes, agree?

[FORMER ESQ.]

I second your opinion. Assuming the plan covers only the children, under Section 1372(b), applying 318 attribution, each child is deemed to be a 100% shareholder of the S-Corp. 

[ratherbereading]

I don't agree.  The Form 5500-EZ is generally limited to a one-participant plan, meaning a plan that covers only:

• The business owner (or owners/partners), and/or
• The owner's spouse. 

In your situation:

• The plan sponsor is an S corporation.
• The owner is not a participant.
• The plan covers the owner's four children.

Because the participants are employees other than the owner and spouse, the plan is not a one-participant plan eligible for Form 5500-EZ. The plan would generally be subject to ERISA Title I reporting and should file Form 5500 or Form 5500-SF (assuming it otherwise qualifies for the short form).

One question to confirm: Are the four children actually receiving W-2 compensation from the S corporation and participating as employees? If so, I am comfortable concluding the plan cannot use Form 5500-EZ.

[FORMER ESQ.]

28 minutes ago, ratherbereading said:

I don't agree.  The Form 5500-EZ is generally limited to a one-participant plan, meaning a plan that covers only:

• The business owner (or owners/partners), and/or
• The owner's spouse. 

In your situation:

• The plan sponsor is an S corporation.
• The owner is not a participant.
• The plan covers the owner's four children.

Because the participants are employees other than the owner and spouse, the plan is not a one-participant plan eligible for Form 5500-EZ. The plan would generally be subject to ERISA Title I reporting and should file Form 5500 or Form 5500-SF (assuming it otherwise qualifies for the short form).

One question to confirm: Are the four children actually receiving W-2 compensation from the S corporation and participating as employees? If so, I am comfortable concluding the plan cannot use Form 5500-EZ.

No, I don't think so. The 4 children are attributed ownership under the 1372/318 rules and deemed owners. There are 4 owners because of attribution, and they all participate. Also, what does receiving W-2 compensation have to do with anything? S-corp owners receive W-2 compensation, and they are still "owners". 

[401kWhisperer]

I just had a similar question, not the exact same situation, but involved parents as owners and children as employees.  I also spoke with a CPA last week, who wrote a book on S corps.  I asked him his opinion.  He said he never really considered it, but thinking through it, an owner and spouse normally file one tax return and partners normally file one return for the partnership.  A parent and children would file separate, so how could they be considered "one participant".  

 

[FORMER ESQ.]

2 hours ago, 401kWhisperer said:

I just had a similar question, not the exact same situation, but involved parents as owners and children as employees.  I also spoke with a CPA last week, who wrote a book on S corps.  I asked him his opinion.  He said he never really considered it, but thinking through it, an owner and spouse normally file one tax return and partners normally file one return for the partnership.  A parent and children would file separate, so how could they be considered "one participant".  

 

Instructions to the Form 5500 EZ:

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 (treating 2% shareholder of an S corporation, as defined in IRC §1372(b), as a partner); 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).

1372(b)2-percent shareholder defined

For purposes of this section, the term “2-percent shareholder” means any person who owns (or is considered as owning within the meaning of section 318) on any day during the taxable year of the S corporation more than 2 percent of the outstanding stock of such corporation or stock possessing more than 2 percent of the total combined voting power of all stock of such corporation.

Section 318(a)(1)(A):

(1)Members of family

(A)In generalAn individual shall be considered as owning the stock owned, directly or indirectly, by or for—

(i)

his spouse (other than a spouse who is legally separated from the individual under a decree of divorce or separate maintenance), and

(ii)

his children, grandchildren, and parents.

 

 

 

 

 

[truphao]

Former Esq., I do  not believe you get to the "parents" concept because of this:

[Paul I]

The conundrum is a disconnect between the IRS attribution rules and the DOL definition of an employee which reads:

"(c) Employees.  For purposes of this section and except as provided in § 2510.3-55(d):

(1) An individual and his or her spouse shall not be deemed to be employees with respect to a trade or business, whether incorporated or unincorporated, which is wholly owned by the individual or by the individual and his or her spouse, and

(2) A partner in a partnership and his or her spouse shall not be deemed to be employees with respect to the partnership."

The IRS could look at the 318 rules and conclude the children are owners, and the DOL could look at the definition of employee and conclude that the children who get paid from the company are employees.  Translating this into the world of 5500's, the IRS could conclude the plan in the OP is an owners-only plan and can file a Form 5500-EZ.  This is an IRS-only form which the DOL does not recognize as a 5500 valid 5500 filing, although they possibly could let a 5500-EZ filer retroactive 5500s or 5500-SFs without assessing big penalties.

Each side - IRS or DOL - has a reasonable supporting argument.  The client or its advisors should consider all of the potential consequences of filing the "wrong" form (as viewed by each agency).

Definitely file one of the other, document the decision, and keep copies of every filing.

[ratherbereading]

6 hours ago, FORMER ESQ. said:

No, I don't think so. The 4 children are attributed ownership under the 1372/318 rules and deemed owners. There are 4 owners because of attribution, and they all participate. Also, what does receiving W-2 compensation have to do with anything? S-corp owners receive W-2 compensation, and they are still "owners". 

The EZ is still not applicable in this situation.   

[Paul I]

Check out the EOB discussion on this topic.  It presents both sides and says neither is conclusive.

[Jakyasar]

On 9/21/2026 at 9:27 AM, 401kWhisperer said:

I just had a similar question, not the exact same situation, but involved parents as owners and children as employees.  I also spoke with a CPA last week, who wrote a book on S corps.  I asked him his opinion.  He said he never really considered it, but thinking through it, an owner and spouse normally file one tax return and partners normally file one return for the partnership.  A parent and children would file separate, so how could they be considered "one participant".  

 

Filing separately has nothing to do with family attribution rules under 318 and 1372, the instructions as explicit on being an "s-corp" and family members thus parents are covered under attribution rules. This also is an exception to Title I coverage (FYI, this plan is title IV - covered by PBGC)

[Jakyasar]

In previous various discussions on this board going back a few years, it was somewhat agreed that it an EZ filing. 

The reason I brought this up again is because the owner is not participating, if he was, IMHO, it is an EZ filing.

FWIW.

[Peter Gulia]

If it’s unclear or uncertain whether a report or return ought to be on Form 5500-SF or 5500-EZ, consider asking EBSA’s Office of the Chief Accountant.

While any response you might get doesn’t bind any government agency (or protect against a participant’s, beneficiary’s, or alternate payee’s claim), making a record of having asked might be some evidence of a good-faith effort to pursue an answer.

Also, an inquiry might help EBSA spot a need to improve the instructions.

This isn’t advice to anyone.

[Jakyasar]

Good point, thank you

[Bill Presson]

And post the response here. 😇

[Jakyasar]

Will do but a project after 10/15, hope all is well.