Form 5500 For Retirement Plans: An FAQ For Employers
If you sponsor a retirement plan at your company, there are a lot of requirements under ERISA that you’ll need to meet to ensure compliance.One of the most important is filing Form 5500 every year. But it can be challenging to get this step right to ensure you avoid audits, penalties, or even plan disqualification.
At Complete Payroll Solutions, we’re a third-party administrator (TPA) for 401(k)s, and work with thousands of companies to help design and administer these plans for their employees. We know how overwhelming the compliance requirements for 401(k)s can be, like Form 5500, and the importance of making sure you meet them.
To help you understand what you need to do to properly submit Form 5500, here we’ll discuss:
- What is Form 5500 for a 401(k)
- Who is required to file a Form 5500
- Who prepares Form 5500
- When is Form 5500 due
- How do I file Form 5500
- What are the penalties for filing Form 5500 late
After reading this article, you’ll know what’s required of you to avoid Form 5500 problems and costly consequences.
What is Form 5500 for a 401(k)?
Form 5500 is used by employers or pension plan administrators to satisfy annual reporting requirements for your 401(k) under ERISA and the Internal Revenue Code. The form requires information about the qualification of the plan, its financial condition, investments, and operations. This data is used to determine if you’re acting in your employees’ best interests.
It's important to point out that there are 3 types of Form 5500:
- Form 5500: You’ll file Form 5500 if you have 100 or more participants in your plan.
- Form 5500-SF: If your plan has fewer than 100 participants, you can use this short form, regardless of the amount of assets in the plan or combined assets in all your plans.
- Form 5500-EZ: This form is used for one-participant plans only. So if you have a plan that just covers you as a business owner or you and your spouse, you’ll need to file Form 5500-EZ. Keep in mind, however, that you don’t need to file Form 5500-EZ at all if your total plan assets are $250,000 or less.
In addition to Form 5500, in some cases, you may need to file an additional schedule to provide more detailed financial information about your plan and finances. These could include:
- Schedule A: This schedule is required if your plan offers employee benefits provided by an insurance company.
- Schedule H: If you have a pension benefit plan, including a 401(k) or profit-sharing plan with 100 or more participants, you’ll need to file this.
- Schedule I: For pension benefit plans, including 401(k) and profit-sharing plans, that have 99 or fewer participants, this schedule needs to be filed.
- Schedule R: This schedule is filed by defined benefit pension plans.
Who is required to file?
Any retirement plan subject to ERISA must file Form 5500. These include 401(k)s, certain solo 401(k)s, profit sharing plans, and some 403(b) plans. There are some exceptions to the filing requirements, for instance, for government-sponsored plans like state pension plans as well as retirement plans set up by churches. In addition, “top hat” plans, meaning those unfunded, nonqualified deferred compensation plans covering a select group of management or highly compensated employees, may be exempt.
Who prepares the form?
You as the employer will prepare and file the form if you maintain the plan. If you outsource plan administration to a third-party administrator (TPA), they will take care of preparing the form on your behalf. Even if you use a TPA, however, it’s important that you understand it remains your responsibility to make sure it’s completed accurately and filed on time.
When is Form 5500 due?
This form is due the last day of the seventh month after the plan year ends (so July 31 for a calendar-year plan or the next business day if July 31 is on a weekend). A Form 5558 can be filed to extend the filing deadline by 2 ½ months but must be filed by the original due date for Form 5500.
How do I file Form 5500?
All Form 5500 reports and any required schedules or attachments must be filed electronically through EFAST2-approved third-party software or using IFILE. The only exception to this submission process is if you aren’t subject to the IRS e-filing requirements, for example, if you’re a one-participant plan. In those cases, you can file a Form 5500-EZ on paper with the IRS.
Remember that you’ll need to sign off on the form before submitting. If you use a TPA, you’ll need a signature from the administrator before filing as well.
What are the penalties for late filing?
A frequent issue among companies is filing Form 5500 late, which can result in an IRS penalty of $250 a day up to a maximum of $150,000 and a DOL fine of up to $2,259 a day, with no limit.
If you realize you didn’t file Form 5500, you should do so as soon as possible. The DOL has a Delinquent Filer Voluntary Correction Program which you may be able to use to avoid late filing penalties. Keep in mind to qualify for IRS penalty relief, you must also file any missing Form 8955-SSA, Annual Registration Statement identifying Separated Participants with Deferred Vested Benefits.
While you may have to pay penalties for late Form 5500 filings, the failure to submit them likely won’t disqualify your plan.
How to Best Meet Your Form 5500 Filing Requirements
We know complying with retirement plan rules can be complex. Hopefully, this article provided a clear understanding of what you need to do when it comes to preparing and filing Form 5500 for your 401(k).
If taking on the responsibility seems like it’s too much for you to handle in house, you may consider outsourcing administration of your plan to a TPA. With this approach, the TPA would handle the day-to-day tasks involved with maintaining your 401(k) like Form 5500 to take the some of the responsibility off your plate and keep you compliant with ERISA.
If you’re thinking about this approach, read our checklist of what to look for in a 401(k) provider. If you’re wondering if Complete Payroll Solutions may be a good fit for your business, we’re an ideal partner if you want:
- Help with avoiding the year-end data crunch. We maintain all the necessary data on our platform to file Form 5500 and complete the compliance testing for the plan, minimizing the data collection work on your end.
- Specialized assistance in meeting your legal obligations. Some TPAs may provide the necessary allocations or legal documents late in the filing process, putting you at risk of missing deadlines, so we make it a priority to give you any documentation well in advance of the due date.
- Great value with our administration pricing starting at $750 a year.
- Added benefits that make administration even more seamless for you, like uploading 401(k) contributions to your product provider.
- Creative plan design by using new comparability and age-weighted formulas.
To learn more about our retirement plan administration services, visit our dedicated benefits page. For more information about all the 401(k) solutions we offer, read our next article on our offerings.