Are You Current with Your Form 5500 Filings?
It is that time of year where plan administrators and third party administrators are working on processing information in order to complete the various Form 5500s for their respective companies. Though many times certain Form 5500s may be overlooked or even forgotten about, which may result in significant fines imposed by the Department of Labor (DOL). Here are a few items you will want to consider:
What type of pension plan requires a Form 5500?
All defined contribution (i.e. 401k, profit sharing, etc.) and defined benefit plans are required to file a Form 5500. However, it would depend on the number of eligible participants to determine if you are a small plan or large plan filer, which is discussed later. For Health & Welfare (H&W) benefit plans (i.e. medical, dental, vision, life insurance, short-term and long-term, health FSA plans, etc.), there are certain exceptions where there is no filing requirement. Based on our experience, we find that most companies get confused and overlook or do not file a Form 5500 for their H&W benefit plans, when in fact they are required to file a Form 5500.
What is the difference between a small filer and a large filer?
This depends on the number of eligible participants at the beginning of the plan year OR if this is a new plan, the number of participants at the end of the plan year. For defined contribution and defined benefit plans, if you have less than 100 eligible participants, then you are considered a small plan filer. This would require you to complete Form 5500 and Schedule I – Financial Information – Small Plan along with other required schedules. If you have over 100 participants, then you would be considered to be a large plan filer and would require you to complete Form 5500 and Schedule H – Financial Information along with other required schedules. Large plan filers are generally required to have an audit of the plan and attach an audited financial statement with the filing. However, there is an exception to this rule, which is known as the 80/120 rule. Under the 80/120 rule, if a plan has less than 120 eligible participants at the beginning of the plan year, then you can continue to file as a small plan filer until you go over 120 eligible participants.
For H&W benefit plans, if you have a less than 100 participants and it is unfunded, fully insured or a combination of both, then you are NOT required to file a Form 5500. If you have over 100 participants, you are required to file a Form 5500, but you may not need to file an audited financial statement if the plan assets are paid out of general assets of the company. Whereas, if the plan assets are held in a separate trust, then you would be required to file as a large plan filer and attach a Schedule H – Financial Information and attach an audited financial statement.
When is the Form 5500 Due?
Regardless if the plan is a defined contribution, defined benefit or an H&W benefit plan, the Form 5500 and any required schedules are due within seven months of the plan year-end. Although a two and one-half month extension is available. As an example, for a calendar year-end plan, the Form 5500 is due by July 31st, but if extended, it would be due by October 15th.
What do you do if you are late filing and/or failed to file a Form 5500?
Form 5500 and applicable schedules, are required to be filed annually for ALL defined contribution, defined benefit and H&W benefit plans. Failure to do so, the DOL may impose civil penalties of up to $1,100 per day. In addition, the IRS may also impose a $25 fee each day the Form 5500 is not filed, up to $15,000 per return. If you find that you are either late filing and/or failed to file a Form 5500 and the DOL has not issued a notification of a failure to file, then you can file under the DOL’s Delinquent Filer Voluntary Compliance (DFVC) Program. Under this program, filers are eligible for reduced civil penalties if a Form 5500 is filed for every year it was required. It is HIGHLY RECOMMENDED that you file under this program.
If you have any questions about whether you are required to file a Form 5500, if you are a small plan filer or a large plan filer and/or if you need assistance in preparing a Form 5500 or filing under the DFVC program, please do not hesitate to contact us.
To learn more, contact Joseph Chemotti, CPA, CCIFP, of Dannible & McKee, LLP today at (315) 472-9127 or via e-mail at firstname.lastname@example.org