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Question 184: In light of the recent IRS guidance on PEO plans, how do we approach the 5500 filing requirement for a multiple employer plan? Should we file one Form 5500 on behalf of a multiple employer plan, or is each participating client employer in the plan required to also file a Form 5500? At one place in the instructions, we are led to believe that each participating employer in the PEO multiple employer plan should be filing a separate 5500 because forfeitures in the plan attributable to one participating employer's participants are, under the terms of the plan, only available to pay expenses of that employer's participants. However, elsewhere the instructions say that multiple employer plans file a single 5500. | |||
Answer: This is a thorny issue and is possibly one of the most commonly misunderstood issues in dealing with the Form 5500 instructions. Let me try to make it as clear as I can.
Suppose you have a situation in which the contributions for a given employer are invested totally separately and the funds are never commingled with the funds of other employers. At any moment, looking at an account, you know exactly which employer's participants own that account. At no time is it possible under the terms of the trust for an investment account of a second employer to ever be used to satisfy the claims of employees of the first. If you have such a situation, then you meet the conditions of the instruction. In essence, you have a separate trust for each participating employer. Interestingly enough, just having participant-directed accounts is not enough to trigger this clause. So, with that in mind, let's try a couple of different situations and look at the filing requirements:
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Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner or to readers. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of this and similar situations.
The law in this area changes frequently. Answers are believed to be correct as of the posting dates shown. The completeness or accuracy of a particular answer may be affected by changes in the law (statutes, regulations, rulings, court decisions, etc.) that occur after the date on which a particular Q&A is posted.
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