Form 5500: Everything You Ever Wanted to Know

Form 5500: Everything You Ever Wanted to Know

If you’re an employer that provides benefits to your employees, staying on the up and up with the big government institutions is imperative. The Department of Labor (DOL), the Internal Revenue Service (IRS), and the Pension Benefit Guaranty Corporation (PBGC), to name a few, are examples that require a host of forms to ensure compliance with their reporting requirements.

But did you know that there is a form that touches all of these agencies? The Form 5500 Series is one of the most diversely used forms that you’ll ever file. Know the ins-and-outs? Read on to find out more:

A Form 5500 is required when a plan has 100 or more employee participants or when a plan is funded through a trust (regardless of the number of participants). The form is due on the last day of the seventh month following the plan year end. However, a one-time two-and-a-half month extension can be requested when filing using Form 5558.

The Basics of Form 5500

Let’s break down the basics of Form 5500.

The form is an annual report of the information in an employee benefit plan, prepared for the use of the Department of Labor.  Under the requirements of ERISA, the form must be filed every year. Examples of plans that are subject to ERISA and, therefore, must file aForm 5500 include:

  • Profit sharing plans and 401(k) plans
  • Church pension plans that elect to be covered by ERISA
  • Individual retirement arrangements
  • Welfare benefits plans that provide benefits including medical, dental, and life insurance

To file, insured benefits are required to attach a Schedule A for each contract, other schedule attachments are required if the plan is self-funded through a trust. A “Schedule A” contains insurance information and must be filed with a Form 5500 if a pension, group health plan, or welfare plan has insurance contracts.

You may have also heard of a “Schedule C”, which contain Service Provider Information. If a service provider failed to provide information necessary for the completion of Part I, Part II must now also be completed. Part I refers to any information concerning insurance contract coverage, fees, and commissions. For Part II, you must enter the current value of the plan’s interest at year end in the contract, along with any investment and annuity contract information.

In more extreme cases, where an accountant or actuary was terminated, Part III is also required. These “Schedule C” rules do not apply to small pension and welfare plans. Determining whether you are a small or large plan filer is quite simple: If the participant count is 99 or less, you can file as a small plan. If you have 100 or more participants, you’re considered a large plan.

Form 5500 comes with some pretty steep penalties for late filers and non-filers, with some penalties going as high as $30,000 per year for non-filers, until the Form 5500 is filed.

How to File Form 5500

If the plan is considered a “funded” self-funded plan, and has 100 or more employee participants then an audit is required and must be attached to the Form 5500. A “funded” plan is one where funds are set aside in a trust fund or custodial account for the exclusive benefit of the plan participants. This keeps it separate from the general assets of the employer.

Form 5500 must be filed electronically using either a third-party software or the DOL website. The DOL, IRS, and PBGC all endeavored to develop the Form 5500 series so that employee benefit plans could satisfy the annual reporting requirements under ERISA and the IRS.

The Form 5500 series is an integral part of ERISA’s overall reporting and disclosure network. The form is widely used across agencies. The DOL utilizes it as a research tool and also as a means of gauging compliance. Federal agencies view the Form 5500 a comprehensive disclosure document for plan participants and beneficiaries, as well as a source of information and data.

Compliance. It’s what we do.

Want to learn more about staying compliant and competitive? Contact Boon!

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