The Form 5500 is near and dear to the many ASPPA members who prepare these forms each year. A recent concern in this area has been the new IRS “compliance” or “5500-SUP” questions that were originally to be required for the 2015 form but have been delayed ever since. Those delays have come principally as a result of ASPPA GAC’s lobbying work. It now appears that the IRS is finally in agreement with ASPPA’s original recommendation, which was to roll out the new questions as part of the broader Form 5500 modernization initiative which is a tri-agency project which includes the DOL and PBGC.
The reason for the optimism is the recent filing by the Department of Labor (DOL) with Office of Management and Budget (OMB) of draft copies of the 2017 Form 5500, including the related schedules and instructions. (OMB approval is required under the Paperwork Reduction Act.) It is noteworthy that the 2017 form DOES NOT INCLUDE the new IRS “compliance” questions.
Since the questions are being removed entirely from the 2017 form, it is a strong indication that the new questions will only be implemented in the future in conjunction with the Form 5500 modernization proposal. And that proposal still has a long way to go. Although slated to be effective for the 2019 plan year, it is quite likely that schedule will be slowed down. There is new leadership at DOL and the Treasury Department and as the Trump Administration appointees take the reins, existing regulatory projects will be reviewed and reconsidered.
The work of ASPPA GAC is not done. Although we are appreciative that the IRS is following ASPPA GAC’s recommendation to coordinate the effective date of future IRS Form 5500 modifications with the DOL and PBGC, there still remain concerns with the new questions and information being solicited.
One of the most significant proposed modifications made as part of the new compliance questions was to mandate, rather than make optional, the disclosure of the name of the person that prepared the Form 5500. This mandate does not emanate from the tax preparer rules under the Internal Revenue Code (IRC) since Form 5500 is generally considered to be an information return rather than a tax return. Instead, the IRS relies upon the general authority of IRC Section 6058(a) to collect this information without any specific Congressional directive.
Congress, over the years, has adopted laws to regulate the activities of tax return preparers. In the case of Form 5500 preparers, the IRS will exceed Congressional intent if it seeks to regulate TPAs and other Form 5500 preparers who are not tax return preparers. Irrespective of the question of IRS authority, the greatest concern of the small businesses that prepare Form 5500s is that unlike a tax return, the Form 5500 report is a public document that the DOL publishes on their website.
As a result, “data mining” firms already process and sell Form 5500 data. Those firms would be able to aggregate the data on Form 5500 preparers and essentially compile a client list for each TPA firm based on the mandatory preparer question data. The IRS should not exceed the structure laid down by Congress for regulating tax return preparers. Form 5500 preparer information should not be published on the internet and ASPPA GAC will continue to make that point.
Lastly, the herculean effort made by many ASPPA members to assist in this lobbying effort should be noted. First and foremost, the ASPPA GAC Reporting and Disclosure Sub-Committee, chaired by Kizzy Gaul, continues to do a great job drafting our thoughtful and substantive comment letters. Also critical contributors to our efforts were senior advisors Janice Wegesin and Peter “Mad Dog” Gould who both took a great deal of time out of their otherwise busy schedules to further the cause, including coming into Washington to meet with OMB and IRS. And finally, a big thank you to all the ASPPA members who wrote their own individual comment letters when rallied to the cause by Mad Dog Gould. Those letters really did make a difference. ASPPA GAC will continue to monitor developments with regard to the ongoing modernization initiative and provide additional comments as it proceeds.
Craig Hoffman is General Counsel of the American Retirement Association.
The reason for the optimism is the recent filing by the Department of Labor (DOL) with Office of Management and Budget (OMB) of draft copies of the 2017 Form 5500, including the related schedules and instructions. (OMB approval is required under the Paperwork Reduction Act.) It is noteworthy that the 2017 form DOES NOT INCLUDE the new IRS “compliance” questions.
Since the questions are being removed entirely from the 2017 form, it is a strong indication that the new questions will only be implemented in the future in conjunction with the Form 5500 modernization proposal. And that proposal still has a long way to go. Although slated to be effective for the 2019 plan year, it is quite likely that schedule will be slowed down. There is new leadership at DOL and the Treasury Department and as the Trump Administration appointees take the reins, existing regulatory projects will be reviewed and reconsidered.
The work of ASPPA GAC is not done. Although we are appreciative that the IRS is following ASPPA GAC’s recommendation to coordinate the effective date of future IRS Form 5500 modifications with the DOL and PBGC, there still remain concerns with the new questions and information being solicited.
One of the most significant proposed modifications made as part of the new compliance questions was to mandate, rather than make optional, the disclosure of the name of the person that prepared the Form 5500. This mandate does not emanate from the tax preparer rules under the Internal Revenue Code (IRC) since Form 5500 is generally considered to be an information return rather than a tax return. Instead, the IRS relies upon the general authority of IRC Section 6058(a) to collect this information without any specific Congressional directive.
Congress, over the years, has adopted laws to regulate the activities of tax return preparers. In the case of Form 5500 preparers, the IRS will exceed Congressional intent if it seeks to regulate TPAs and other Form 5500 preparers who are not tax return preparers. Irrespective of the question of IRS authority, the greatest concern of the small businesses that prepare Form 5500s is that unlike a tax return, the Form 5500 report is a public document that the DOL publishes on their website.
As a result, “data mining” firms already process and sell Form 5500 data. Those firms would be able to aggregate the data on Form 5500 preparers and essentially compile a client list for each TPA firm based on the mandatory preparer question data. The IRS should not exceed the structure laid down by Congress for regulating tax return preparers. Form 5500 preparer information should not be published on the internet and ASPPA GAC will continue to make that point.
Lastly, the herculean effort made by many ASPPA members to assist in this lobbying effort should be noted. First and foremost, the ASPPA GAC Reporting and Disclosure Sub-Committee, chaired by Kizzy Gaul, continues to do a great job drafting our thoughtful and substantive comment letters. Also critical contributors to our efforts were senior advisors Janice Wegesin and Peter “Mad Dog” Gould who both took a great deal of time out of their otherwise busy schedules to further the cause, including coming into Washington to meet with OMB and IRS. And finally, a big thank you to all the ASPPA members who wrote their own individual comment letters when rallied to the cause by Mad Dog Gould. Those letters really did make a difference. ASPPA GAC will continue to monitor developments with regard to the ongoing modernization initiative and provide additional comments as it proceeds.
Craig Hoffman is General Counsel of the American Retirement Association.
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