What is Form 5500?
This is an annual report that your business needs to file with the Department of Labor (DOL) to report information about your 401(k) plan operations, investments, and financial conditions. In general, if you have a retirement plan such as the 401(k) and profit-sharing plans, you need to file a Form 5500 every year you have the plan. The following are important Form 5500 facts.
Who is Required to File the ERISA Form 5500?
Any sponsor of a plan that is subject to the Employee Retirement Income Security Act (ERISA) needs to complete Form 550. These may include:
1. Pension plans
2. Severance pay, life insurance, dental, or medical plans
3. Retirement arrangements
4. Annuity arrangements
5. Stock bonus, money purchase, 401(k), or profit-sharing plans
When Should it be Filed?
The deadline for filing Form 5500 is the last day of the month after the seventh month following the end of the plan year. If your plan follows a calendar year plan, you must file the form by July 31st. Nonetheless, you can always file Form 5558, which gets you an automatic two-and-a-half-month extension. However, you have to file your Form 5558 before your Form 5500 deadline.
How to file Form 5500 Filed
Since January 1st, 2010, the US Department of Labor has required that you file your Form 5500 through the EFAST system at https://www.efast.dol.gov/welcome.html
The Different Plans Available
One Participant Plans
The one-participant plan applies to you if you are a business owner with no employees. However, the plan can cover you and your spouse.
If you are running a one-participant plan, you could either file a Form 5500-SF or the Form 5500-EZ. Form 5500-SF needs to be filed electronically, while Form 5500-EZ needs to be filled in on paper and submitted to the IRS. In some instances, you may not have to file any 5500 form when you are operating under the one-participant plan. Generally, if the assets in your plan are no more than $250,000, you may be exempted from filing—plans with less than 100 participants.
If your plan has less than 100 participants, you must file Form 5500-SF through EFAST.
Plans with 100 or more participants
If you have a plan that has 100 or more participants, then you have to file Form 5500 electronically.
Penalties for Non-Compliance
There are stiff penalties for compliance that may include:
1. A fine of $10,000 or imprisonment for five years or both for any person that makes false representations or false statements or knowingly conceals or fails to disclose any fact required by ERISA.
2. A fine of $2,063 for every day the sponsor refuses or fails to file an accurate or complete report.
3. Imprisonment of up to 10 years or a fine of $100,000 or both for knowingly violating the requirements of ERISA
4. A fine of $1,000 for failing to submit an actuarial statement according to the provisions.
5. A fine of $25 per day up to a maximum of $15,000 for failing to file returns for bond purchase plans, annuities, trusts, and certain deferred compensation plans by the due date.
Retirement plans need to file Form 5500 every year to avoid heavy penalties. As a sponsor, it is very important to file Form 5500 on time and ensure the accuracy of the data reported to avoid stiff penalties. While it is not your typical tax return, the form is an important data source for the DOL and the IRS for identifying what plans need an audit. The time spent reviewing that information will be time well spent.
Overall, both the DOL, the IRS, and you, as the plan sponsor, will benefit from having a well-operated employee benefit plan.
Get help now with Form 5500 and benefits compliance.