Effective June 2, 2014, the Internal Revenue Service (“IRS”) established a new temporary “pilot” program which provides penalty relief to plan sponsors and plan administrators of certain retirement plans. More specifically, the relief applies to the late-filing of Form 5500-EZ, Annual Return of One-Participant (Owners and Their Spouses) Retirement Plan (“Form 5500-EZ”), or, in limited circumstances, Form 5500, Annual Return / Report of Employee Benefit Plan (“Form 5500”), with regard to plans which are not subject to Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). Due to the new program’s availability only to non-ERISA plans, this relief is generally limited to plans sponsored by certain small businesses (owner-only or business partnerships) or certain foreign plans. The following discusses the new guidance in greater detail.

Currently, the Internal Revenue Service (“IRS”) requires that all “Cash Balance” plans employ an “individually designed” plan document. While individually designed plan documents do provide the greatest degree of flexibility with regard to plan design, there is a “trade-off” that occurs when such a plan document is used. This is because an individually designed plan document also happens to be the most expensive form of plan document for a plan sponsor to adopt and maintain. Therefore, the increased plan design flexibility available through an individually designed plan document comes at a very real and direct cost.

On November 15, 2013, the Internal Revenue Service (“IRS”) issued final regulations regarding how a plan sponsor is permitted to exit a safe harbor 401(k) feature in the middle of the current plan year (“Final Regulations”). These rules both clarified and supplemented the existing operational rules regarding safe harbor 401(k) matching and non-elective (commonly referred to as “profit sharing”) “full year” contribution requirements.