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What is Form 5500 for 401(k) plans? Learning Your Filing Requirements

by Jacquelyn Burke on May 2, 2023 8:42:03 AM

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. To help you better understand your responsibilities, we’ll break down what you need to know here.

In this article, we’ll explain the compliance requirements for your 401(k) Form 5500, including who needs to file one, when it’s due, how to submit the form, and more. After reading this, 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 401(k)s 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 Schedule H.
  • 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.

When is Form 5500 due?

The deadline for Form 5500 is 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.

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 $2,586 a day, with no limit.

If you realize you didn’t file by the deadline for 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.

Who prepares the form?

You as the employer will prepare and file your 401(k) Form 5500 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.

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 Form 5500-EZ on paper with the IRS.

Remember that you’ll need to sign off on the form before submitting it. If you use a TPA, you’ll need a signature from the administrator before filing as well.

How to Best Meet Your 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 your 401(k) Form 5500.

If taking on the responsibility seems like it’s too much for you to handle in-house, you may want to consider outsourcing the 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 some of the responsibility off your plate and keep you compliant with ERISA.

If you’re thinking about this approach, it’s important to understand what to look for in a 401(k) provider before making the leap. Already have an idea of what you want in a TPA? See if Complete Payroll Solutions may be a good fit for your business by learning more about the 401(k) solutions we offer.

Footnote: This blog was originally published in July of 2021 and was updated in May of 2023 for accuracy and comprehensiveness.

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