What's IRS Form 5500?

What’s the purpose of Form 5500?  

Let’s start by discussing the purpose of this form. ERISA qualified retirement plans are subject to a myriad of rules related to investments, participation, distributions, and administration. The IRS and U.S. Department of Labor (DOL) use IRS Form 5500 to help ensure plans are complying with these rules and to identify potential red flags that may require further investigation. 

Who’s required to file a 5500?  

The reporting requirement generally applies to all ERISA qualified retirement plans. Which version of the form you’ll need to file depends primarily on the size of your plan. You can find more details about the eligibility requirements for each version in the IRS Form 5500 Corner.

What do you have to report?  

Form 5500 captures basic details about your plan, such as:

• The plan administrator’s name and contact information
• The number of participants broken down by status (active, retired, etc.)
• The plan’s funding arrangement

In addition, you may need to complete different schedules to report certain plan activities. Your plan’s financial professional, third-party administrator (TPA), or recordkeeper can help you determine which of these schedules apply to your plan.

Is there any other information you have to provide?  

There are two additional documents you may need to include in your Form 5500 submission.

1 Form 8955-SSA—This form is required if any participants separated from service during the year with deferred vested benefits.  

2 Accountant’s report—If your plan has more than 100 participants, you’re required to include an audit report from an independent accountant verifying the accuracy of the plan’s financial information. The rules for these audits are beyond the scope of this article. Please consult with your plan’s advisory team to learn more.

What’s the process for submitting your 5500?

As you can see, there’s a lot of information you need to gather and disclose to comply with the annual reporting requirement. The good news is that the majority of TPAs and recordkeepers provide 5500 services, which can help you streamline the process; they’ll often complete the form and related schedules on your behalf based on the data you provide. Once completed, either you or your plan provider will submit the form electronically through EFAST, the system created specifically for filing Form 5500.

You’ll want to check with your plan providers to see what specific support they offer and, remember, while these services can ease your workload, they won’t ease your fiduciary duty. You’re still responsible for the accuracy of the information and for ensuring the form is filed on time.

What’s the deadline for filing Form 5500?

The deadline to file a Form 5500 is the last day of the seventh month after the plan year ends; for example, calendar year plans must submit their forms by July 31 unless they file for an extension, in which case, they’d have until October 15 to file.  

Are there penalties for not filing a 5500?

The DOL may assess the following penalties if you miss the deadline or don’t file at all.

• Late filers—$50 per day, with no limit, for the period you failed to file
• Nonfilers—$300 per day, up to $30,000 per year until the 5500 is filed

On top of that, the IRS may impose a penalty of $250 per day, up to $150,000.

If you find yourself in one of these situations, you’ll want to work with your plan advisory team to see if you’re eligible for the Delinquent Filer Voluntary Compliance Program. The DOL and IRS often reduce their penalties for plans that use this program to submit missing and late forms.  

Do you have to share your Form 5500 with participants?

As part of the annual reporting requirement, you have to provide participants with a summary annual report (SAR). Similar to a summary plan description, the SAR summarizes the information reported on your 5500. It must be sent to participants no later than two months following your Form 5500 deadline, including extensions; for example, the deadline for calendar year plans is generally September 30. Failure to provide this summary can result in significant penalties.

How can you avoid common filing errors?

Many of the errors the DOL sees are related to missing or inaccurate information such as not attaching the audited financial statements, if required, and using the wrong schedules. Having written Form 5500 policies and procedures can help you avoid these mistakes and the penalties noted above. Your procedures should include:

• Roles and responsibilities for your benefits team, TPA, and recordkeeper  
• Key dates and deadlines for gathering and sending plan information
• Process for validating your plan data before providing it to your TPA
• Process for verifying the accuracy of the completed Form 5500 prior to submission

It’s a window into your plan—make sure it’s clear

The DOL and IRS use Form 5500 to gain insight into your plan’s operations and to determine compliance with different rules and regulations. Approaching this annual reporting requirement with the same care and diligence as your other fiduciary duties can help ensure everything is in good order.