If you are an employer with an employee benefit plan, you will have to file Form 5500 with the IRS or Department of Labor (DOL). The information you provide on this form satisfies annual reporting requirements under the Employee Retirement Income Security Act (ERISA) and ensures your plan’s operation is compliant with government standards.
This article discusses the ins and outs of Form 5500 to help you through every step of the process.
What is Form 5500?
Form 5500 is a tax form that outlines the financial activity of retirement plans governed by ERISA, such as profit-sharing and 401(k) plans.
There are three variations of Form 5500, and each pertains to different-sized companies:
- Form 5500-SF pertains to small group plans with less than 100 participants as of the beginning of the plan year
- Form 5500 pertains to large group plans with 100 participants or more as of the beginning of the plan year
- Form 5500-EZ pertains to “one-participant” plans (just the owners/partners of the business and their spouses)
When is Form 5500 due?
Form 5500 is due on the last day of the seventh month after the end of the plan year (typically July 31st for group plans ending on December 31st). You’ll need to file an extension with the IRS before July 31st to avoid late filing fees. Even if you terminate your plan, you’ll still have to file a Form 5500 if the plan still has associated assets.
Filing this form late can result in hefty late fees. IRS penalties for late filing without notice or qualified extension are $250 per day with a maximum of $150,000. That’s not all, either — the Department of Labor inflicts penalties of up to $2,400 per day with no maximum.
Save yourself the headache. To ensure an accurate, timely filing of this form, consider hiring an accountant or broker to assemble the appropriate information. Contact us today to learn more about how the collective experience of J5 Consulting can help you save time and money on this complicated process.
How Do I File Form 5500?
If you’ve recently started offering retirement savings or employee benefits plans and you’re new to filing this form, follow these steps:
1. Determine the correct variation to file
See the breakdown of the three variations under “What Is Form 5500?” Small plans, large plans, and “one-participant” plans each have a unique variation associated with them. Plan participants include:
- all eligible employees whether or not they’re enrolled,
- anyone who receives benefits from the plan, including employees that have retired or separated, and
- beneficiaries of deceased employees.
2. Create an account on the Department of Labor website
Visit this link to create an account on the EFAST2 website if you’ve never filed this form before. This website provides the necessary documentation and a portal where you can submit the form once completed.
Filing this form is typically the responsibility of the plan administrator, such as an HR or operations department employee. However, companies often opt to hire third-party assistance from employee benefits brokers and accountants that specialize in handling this paperwork.
3. Proceed with the filing process
You’ll need the following information to begin filing Form 5500:
- Start date of the plan
- Number of participants
- Plan funding information
- Provided benefits
- Details on the plan’s sponsor and administrator
This list is not comprehensive. Depending on your individual circumstance, you may need to provide supplemental information to complete this form.
Consider hiring professional help to ensure your filing is complete. Inaccurate filing can result in fines from both the IRS and the DOL, as well as increase your non-compliance risk.
J5 takes your compliance as seriously as you do. We’re committed to helping clients like you find affordable prices for your employee benefits plans while remaining compliant with the IRS. Reach out today and see how J5 can help you save time and money.