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IRS Clarifies 5500 Instructions Regarding Unpaid RMDs

The IRS has clarified the instructions for two schedules to Form 5500 and to a line of Form 5500-SF.

Lines 4l of Schedules H and I of the Form 5500 and line 10f of Form 5500-SF ask, “Has the plan failed to provide any benefit when due under the plan?” This question was added to these schedules and to Form 5500-SF as part of the revisions effective for the 2009 plan year.

The instructions did not include examples of what constituted a reportable failure to provide any benefit when due under the plan. The IRS has clarified the instructions in connection with the 2015 Form 5500 and Form 5500-SF to explain that a reportable failure included unpaid required minimum distributions (RMDs) to:

  • 5% owners who have reached age 70½; and

  • non-5% owners who have attained 70½ and have retired or separated from service.

Based on comments it received regarding the 2016 Form 5500 and Form 5500, the IRS says that filers do not need to report on line 4I of Schedules H and I to the Form 5500 and line 10f of the Form 5500-SF unpaid RMDs for participants who:

  • have retired or separated from service, or their beneficiaries, who cannot be located after reasonable efforts; or

  • where the plan is in the process of engaging in such reasonable efforts at the end of the plan year reporting period.

The IRS suggests that plan administrators and employers review their plan documents for written procedures on locating missing participants. It also points out that Department of Labor’s Field Assistance Bulletin (FAB) 2014-01 is specifically applicable to terminated defined contribution plans, employers and plan administrators of ongoing plans and suggests that they may want to consider periodically using one or more of the search methods described in the FAB in connection with making reasonable efforts to locate RMD-eligible missing participants.