5500 Reporting: When Do I File?
5500 reporting, named for – you guessed it -- IRS Form 5500 that is used for this type of filing, is required annually for retirement plans such as 401(k) and profit-sharing plans. However, 5500 reporting doesn’t just pertain to retirement plans.
“In my experience, most people know that Form 5500 is required for their retirement plan,” says Ann Myers, a principal with KIG partner 5500 Tax Group. “What I find as the biggest area where non-filing occurs is in the area of health and welfare plans. Many people have no idea that when you have health, dental, vision, life insurance, disability insurance or an FSA plan, you are subject to the same 5500 rules.”
5500 reporting provides the IRS and Department of Labor (DOL) with information about the plan’s operation and compliance with government regulations. Fine print: According to the IRS, “the 5500 Series forms satisfy annual reporting requirements under Title I and Title IV of ERISA and the Internal Revenue Code. It is a compliance, research and disclosure tool for the DOL, and a disclosure document for plan participants and beneficiaries. … The series is part of ERISA’s overall reporting and disclosure framework, which is intended to assure that employee benefit plans are operated and managed in accordance with certain prescribed standards.”
When is it due?
Form 5500 is due on the last day of the seventh month after the plan year ends. If the plan follows a calendar year, that would be July 31 for the previous year.
The plan administrator is responsible for electronically signing and filing the report with the DOL through its EFAST2 program. The DOL no longer accepts paper filings, except for Form 5500-EZ (see below). The administrator is also required to keep a copy of Form 5500, including schedules and attachments, with ink signatures on file.
If you can’t file on time, you can file for a one-time extension by using Form 5558, which affords another 2.5 months. Filing for an extension is important, because both the IRS and DOL can assess penalties and fees for missing the deadline. And these can be steep: $250 per day from the IRS and up to a whopping $2,259 per day by the DOL. Yikes! The extension must be filed on or before the original due date to be valid, Ann warns. It’s worth mentioning that if you do miss the deadline and haven’t filed for an extension, there are penalty-relief programs available.
What form do I use?
That depends on the size of the plan.
- Form 5500 is for businesses with 100 or more plan participants. Most public entities are excluded from filing, including any branch of government down to school districts.
- Form 5500-SF is the short-form version for plans with 100 or fewer participants.
- Form 5500-EZ is designated for plans with only one participant, such as a business owner and their spouse. Remember, this is the only one of the three that can be filed on paper.
Caveat #1: With 401(k) plans, plan participants include not only those who are actively deferring but those who are eligible to defer. In other words, Ann says, a plan could have 100 participants even if fewer than 100 are actually contributing to a 401(k).
Caveat #2: The “80-120 rule” allows a 401(k) plan with between 80 and 120 participants on the first day of the plan year to file in the same category (small or large plan) as in the prior year.
What other forms do I need?
Which schedules are required to be completed and attached depends, again, on the size of the plan. With some stipulations, large plans must file Schedules H and R and an independent audit report. They may also be subject to Schedules A, C, D and G. Small plans must file Schedules I and R and may be subject to Schedules A, C and D. An independent audit report is generally not required for small plans.
Form 5500 returns can be rejected for a number of reasons such as failing to attach all required schedules and failing to use EFAST2-approved software. For a more comprehensive list of common mistakes, click here.
We recognize that there is a lot to know. If you need help with your 5500 reporting, give us a call, and we can guide you in the right direction. While you’re at it, find out what other HR and compliance services we provide.