Form 5500 Process Changes Announced for PR Plans

Retirement plans qualified in Puerto Rico should have an easier time filing required annual documentation under recent rule changes.  

A client alert from Willis Towers Watson outlines key changes to the way retirement plans qualified for favorable tax treatment in Puerto Rico prepare and submit annual IRS and DOL documents.

According to the firm, “plan sponsors no longer need to file Form 480.70(OE), which in many instances also required an accompanying copy of the Form 5500 that was filed with the Department of Labor (DOL).” Instead, sponsors of Puerto Rico qualified plans must file Form 6042.

This form has been required since 2011, Willis Towers Watson experts explain, and it is generally filed alongside a corporate tax return. Form 6042 is “used to substantiate the deductions for plan contributions claimed by the sponsor on its tax return.”

“This change should lighten the compliance burden for these plan sponsors,” the firm predicts. “It also makes filing Form 6042 doubly important, as failing to do so would now violate the annual reporting requirement for Puerto Rico qualified plans. The new rules take effect for plan years beginning on or after January 2015.”

Willis Towers Watson gives additional background in the client alert, explaining the current filing rules were set in 2011. “Since 2011, [Puerto Rico] has allowed sponsors of plans that file Form 5500 to file a limited Form 480.70(OE), which required only the identifying information on the first page of the form, as long as the sponsor also filed a copy of the plan’s Form 5500. The copy had to include all attachments, the auditor’s report, a copy of the electronic filing receipt for the 5500 and, if applicable, the Form 5558 extension request that was filed with the DOL.”

With the rule change, sponsors of Puerto Rico qualified plans that do not file a Puerto Rico corporate tax return must still file Form 6042 on behalf of the plan, although they “only need to complete the general information section and Section V.”  

“For these sponsors, Form 6042 is due on the last day of the seventh month following the close of the plan’s tax year,” the client alert explains. “Sponsors may obtain an automatic extension to the 15th day of the third month following that due date, provided the request is received by the original due date.”

The reporting changes come amid wider transformations for Puerto Rico’s economy and retirement system, which have been working through years of post-financial crisis challenges and reform