Form 5500 filings verify employee benefits plans’ annual reporting requirements. Documenting thorough and accurate data is critical to ensure compliance and avoid penalties. These details can help.
Is your employee benefits plan subject to the Employee Retirement Income Security Act (ERISA)? If so, it’s crucial to understand the Department of Labor (DOL)’s annual filing requirements for IRS Form 5500.
Form 5500 ensures that benefits plans meet annual reporting requirements and regulations under the Internal Revenue Code and ERISA. Providing accurate information validates plans’ financial stability, protects employees’ benefits and legal rights, and enhances trust in employee benefits plans.
Applicable benefits plans include health and welfare, retirement and self-funded plans.
You must file Form 5500 if your benefits plan holds its assets in a trust or has 100 participants or more at the beginning of the plan year. To support your filing efforts, let’s examine deadlines and documentation requirements for Form 5500.
Deadlines
You must file Form 5500 electronically by the last day of the seventh month following the end of the plan year. For calendar year plans, the Form 5500 deadline is July 31.
File your form using the ERISA Filing Acceptance System (EFAST2).
Once you register electronically through EFAST2, you’ll be asked to provide plan information and upload the required documentation.
If you need an extension, you must file Form 5558 before your plan’s deadline. The one-time extension provides an additional 2½ months to complete Form 5500. Your new deadline will be Oct. 15, notes the legal news site LexBlog.
Meeting Form 5500 deadlines is critical to avoid penalties. The advisory and public accounting firm Withum reports that late filings can result in fines from the IRS and DOL. The IRS penalty is $250 each day that Form 5500 is late, up to $150,000 for the plan year. The DOL penalty is $2,670 a day, and there is no maximum to this penalty.
Summary annual report
The payroll solutions company Justworks notes that you must also provide plan participants with a summary annual report outlining the information in Form 5500. This report includes information on your plan’s financial condition and highlights participants’ right to receive a copy of the full annual report. You must distribute the summary annual report to plan participants within two months of your Form 5500 deadline.
- For calendar year plans, the summary annual report deadline is Sept. 30.
- If you receive a Form 5500 filing extension to Oct. 15, your summary annual report deadline is Dec. 15.
Documentation requirements
With Form 5500, the IRS and DOL want to understand the financial stability of your employee benefits plans. They also want participants and beneficiaries to have access to information protecting their plan benefits and rights.
Each year, you’ll need to identify the following information on Form 5500:
- The type of benefits plan you’re offering
- Whether this form is a first filing or an amended return
- Any benefits subject to collective bargaining
- If you’re requesting a deadline extension
- If your plan is retroactively adopted as allowed by Section 201 of the SECURE Act
You’ll need to upload the required documentation, including:
- General information about the plan sponsor and plan administrator
- Plan details such as benefits provided, insurance contracts and funding arrangements
- Total plan participants, including active participants, vested participants and beneficiaries
- An auditing statement from an independent qualified public accountant reporting on your plan’s financial statements and any schedules you need to include in your filing
According to Forbes magazine, relevant schedules typically include Schedules A, C, G and R, which require the following details:
- Schedule A: Insurance information
- Schedule C: Service provider information
- Schedule G: Financial transaction schedules
- Schedule R: Retirement plan information
You’ll also need to file your administrative expenses. Administrative expense reporting is intended to ensure your plan is paying reasonable fees and receiving appropriate services in return. According to LexBlog, you must report the following administrative expenses:
- Salaries and allowances for plan employees
- Actuarial fees
- Auditing fees
- Legal fees
- Recordkeeping fees
- Trustee/custodial fees
- Valuation/appraisal fees
- Other expenses, such as office equipment, supplies, rent and similar costs related to the operation of your plan
LexBlog notes that the DOL often uses Form 5500 to spot violations. Providing thorough and accurate data is essential to avoid fines, penalties and litigation. The DOL and IRS can penalize organizations for inaccurate or incomplete submissions, particularly if they suspect willful neglect or falsified data.
The DOL encourages employers to voluntarily self-correct ERISA violations. The Delinquent Filer Voluntary Compliance Program (DFVCP) can help you correct violations if you file Form 5500 late or fail to file. The DFVCP allows you to satisfy DOL requirements and reduce civil penalties.
For more information about the DFVCP, visit the Employee Benefits Security Administration (EBSA)’s Correction Programs webpage.
Filing your Form 5500
The DOL’s EFAST2 site can help you find, fill out and file your Form 5500 quickly and efficiently.
Many organizations turn to third parties for Form 5500 preparation and completion. However, plan fiduciaries still have ultimate responsibility. Understanding the details behind Form 5500 can protect your organization, plan and participants.
If you have multiple welfare benefits plans, you may want to consolidate them into a single plan with a wrap document. Doing so enables you to file one Form 5500 instead of multiple forms for each benefits plan.
A wrap document can reduce costs by simplifying your reporting, administrative and compliance requirements. OneGroup’s Employee Benefits Team can help you create a wrap document that is compliant with plan documentation, communication and deadline requirements.
This content is for informational purposes only and not for the purpose of providing professional, financial, medical or legal advice. You should contact your licensed professional to obtain advice with respect to any particular issue or problem. Please refer to your policy contract for any specific information or questions on applicability of coverage.
Please note coverage can not be bound or a claim reported without written acknowledgment from a OneGroup Representative.
This content is for informational purposes only and not for the purpose of providing professional, financial, medical or legal advice. You should contact your licensed professional to obtain advice with respect to any particular issue or problem.
Copyright © 2024 Applied Systems, Inc. All rights reserved.