Form 5500

What Is Form 5500?

Form 5500 is an annual information return/report that must be filed with the Internal Revenue Service (IRS) and the US Department of Labor (DOL) by most companies that offer employee welfare benefit plans.

Its purpose is to provide detailed financial and other information about these plans, including the number of participants, plan contributions and investments, service provider fees, insurance contracts held, and benefits paid out of the plan.

It is required under Section 6057(a) of the Employee Retirement Income Security Act (ERISA). Compliance with Form 5500 filing requirements helps protect employees' rights to their retirement funds and ensures compliance with laws regarding health care coverage.

Who Must File Form 5500?

The filing of Form 5500 is required for any pension, profit-sharing, or welfare benefit plan that has 100 or more participants. It must be filed annually by the end of the seventh month following the close of a plan year unless an extension is requested and granted.

Pension Benefit Plan

All companies offering ERISA pension benefit plans must file Form 5500. The report must be filed annually regardless of tax qualification, benefit accrual, or contribution stoppage. It applies to defined benefit and defined contribution plans.

It includes 401(k) plans, SIMPLE 401(k)s, profit-sharing, money purchase, stock bonus plans, employer-established tax-sheltered annuities and custodial accounts under Code 403(b), and employer-sponsored individual retirement accounts (IRAs).

Church pension plans electing coverage and pension plans for Puerto Rico, US Virgin Islands, Wake Islands, Guam, and American Samoa residents must also file Form 5500. Some foreign and one-participant plans are required to report using Form 5500-EZ.

Pension benefit plans that are exempted from Form 5500 filing include non-employer-sponsored tax-sheltered annuities, custodial accounts, SIMPLE IRAs, and simplified employer pension (SEP) plans under Code section 408(k).

Church pension plans not electing coverage and certain pension plans outside the United States are also exempt. Unfunded management and highly-compensated employee (HCE) pensions and excess benefit plans must not file Form 5500.

Governmental pension plans and some IRAs and annuities not considered pension plans are also exempted from annual Form 5500 filing.

Welfare Benefit Plan

Form 5500 must be filed annually for any welfare benefit plans that cover 100 participants or more. It includes medical, dental, life insurance, disability, vacation pay, severance pay, scholarship funds, and apprenticeship training.

Multiple-Employer Welfare Arrangements (MEWA), Certain Entities Claiming Exception (CECE), and any welfare benefit plan that files Form M-1 are also required to report through Form 5500 annually.

Welfare benefit plans that are exempted from Form 5500 filing are those with less than 100 participants, maintained outside the US for non-resident aliens, governmental plans, and welfare plans for management and HCEs.

One-participant and partnership welfare benefit plans and some employee benefit plans that are maintained for compliance with workers' and unemployment compensation or disability insurance laws are also exempted.

Direct Filing Entity (DFE)

A DFE is an entity other than its employer-participant or union which voluntarily files Form 5500 on behalf of a pension or welfare benefit plan.

DFEs must include the names and addresses of employer participants and unions in forms they submit annually. They must also file any amendments or updates to those plans that have been filed with the IRS.

DFEs must provide information regarding their investments, contributions, benefits paid out, and administrative fees taken by their firms.

Examples include a master trust investment account (MTIA), common/collective trust (CCT), pooled separate account (PSA), 103-12 investment entity (103-12 IE), and group insurance arrangement (GIA).

Types of Form 5500

There are three kinds: Form 5500, 5500-SF, and 5500-EZ.

Form 5500

It is the generally used form by employers who sponsor a retirement or welfare plan with more than 100 participants to report pertinent information about the plan.

Form 5500-SF

It is used by employers who sponsor smaller plans, usually those with fewer than 100 participants and no benefit of deferred compensation. Form 5500-SF is filed on the first day of the plan year.

This simplified form is filed by companies who qualify based on eligible plan assets that have defined fair values like variable annuities or mutual funds, plans with no employer securities, and plans that meet audit waiver requirements set by the DOL.

Form 5500-EZ

It is designed to be used by one-participant and owner-only retirement plans. Form 5500 is for solo 401(k) sponsors with over $250,000 in assets. It is filed on the last day of the plan year.

It is also used to file foreign plans. Form 5500-EZ has no schedules attached and is usually used for smaller business owners who are sole proprietors or partnership members.

Form 5500 Electronic Filing Requirement

Under the ERISA Filing Acceptance System (EFAST2), companies must file Form 5500 electronically through the EFAST2 website or any accredited vendor.

Amended Return/Report

Before an employer can file Form 5500 electronically, they must obtain an Employer Identification Number (EIN) from the IRS.

The EFAST2 website also requires employers to register for an electronic account separate from one used for other purposes, such as filing taxes or creating a retirement plan.

Once registered and approved, employers will log in to their accounts and submit the form and any required documents, such as financial statement reports and audit reports.

After the submission is complete, a confirmation page will be displayed, which contains information about your filings like the filing date, filing number, and a link to view or print Form 5500.

Final Return/Report 

Companies must submit their Final Return/Report electronically within seven months of the plan year end. The filing deadline is extended to October 15th if an audit report is attached or no audit report is required and an extension was requested.

Examples of plans that need to file final returns include mergers and consolidations, and terminated pension or welfare plans without full asset distribution. Welfare plans that must complete paying benefits cannot file a final report.

Failure to meet these deadlines will result in penalties being assessed by the Department of Labor. Filing extensions may be granted if a company can prove that extenuating circumstances prevented them from meeting the original filing deadline.

To apply for an extension, employers must submit a written request with supporting documentation before the original due date.

Signature and Date

Form 5500 must be signed and dated by either a plan administrator, an authorized signer of the employer, or a participant in the plan.

Employers should keep their Form 5500 filing confirmation page for at least six years to prove they have filed the form. Companies may also choose to retain copies of their filed Forms 5500 for future reference.

Change in Plan Year

If a company's plan year changes, it must refile Form 5500 by the due date of the new plan year. They may choose to submit an amended return for the prior year or file a new form for the current plan year.

Companies should consider consulting with their legal advisors or tax professionals to determine which filing option is best suited for their specific situation.

Penalties

Employers who fail to properly file Form 5500 by its due date are subject to civil penalties. The Department of Labor can assess a penalty of up to $1,100 per day per violation, with no maximum penalty amount set.

Employers may also be liable for fines and enforcement actions taken against them by state authorities.

Form 5500 Schedules

Form 5500 contains different information depending on the type of pension plan, DFE, or welfare benefit plan.

Schedule A

It is also known as Insurance Information. It must be filed if a pension or welfare plan includes benefits secured by an insurance company. Schedule A includes guaranteed investment contracts and PSAs.

Schedule A reports details of premiums and commissions received by insurance companies and their agents.

Schedule C

It contains Service Provider Information. It must be filed by large pension or welfare plans, MTIA, 103-12 IE, or GIA if the service provider was paid $5,000 or more. Schedule C covers information regarding administrative and broker fees.

Schedule D

It is also known as DFE or Participating Plan Information. Schedule D must be filed if plans and DFEs participated in an MTIA, CCT, 103-12 IE, or PSA. Part I is for pension and welfare plans, and Part II is for DFEs.

Schedule G

It is also called Financial Transactions Schedule. Large plans, MTIAs, 103-12 IEs, or GIAs file Schedule G to report defaulted or uncollected loans, fixed-income liabilities, and leases. It also includes nonexempt transactions.

Schedule H

The purpose of this form is to provide the DOL with information on the financial activities and investments of large employee benefit plans subject to ERISA. It is also known as the Financial Information Schedule.

Schedule H reports information such as investment expenses, broker fees, and current values of assets held by the plan. It also details assets bought and sold within a specific year, reportable transactions, and delinquent participant contributions.

Schedule I

It contains the same financial information included in Schedule H, but is specifically designed for use by small pension and welfare benefit plans.

Schedule MB

It reflects Multiemployer Defined Benefit Plan and Certain Money Purchase Plan Actuarial Information. It is filed based on the minimum funding standards set by the DOL. Schedule MB is specific to large and small pension benefit plans.

Actuarial information includes the plan’s funded percentage, target attainment percentage, and the plan's unfunded liability. It is used to identify any potential problems with a pension plan, such as inadequate funding levels that could put participants at risk.

Schedule R

It is used to report information related to retirement plans. Schedule R includes the plan administrator's identity, the plan type, and participant counts.

It also contains information about contributions made to the plan by employers or employees, as well as any loans taken out against the funds in a plan.

How to File Form 5500

Consider the following steps in filing Form 5500 to ensure compliance.

Determine the Filing Requirements

Identify the filing requirements for the plan. It is based on whether the plan is an employee benefit, defined contribution, or defined benefit. Companies must also take note of the number of plan participants and beneficiaries.

It also includes former and retired employees and the beneficiaries of deceased workers. All of these will directly affect filing requirements and specific information to report.

Set up a Department of Labor (DOL) Account

To file Form 5500 electronically, companies must set up a DOL account. It will enable filers to securely submit the form and access the EFAST2 system. They can also review their records and check for updates on filing deadlines.

Remember that only authorized company representatives must create an account and file on behalf of the company.

Begin the Filing Process

Company representatives must supply basic plan information, including the type of plan, starting date, the number of plan participants and beneficiaries, contributing employers, plan sponsors, benefits, plan schedules, and funding sources.

Other pertinent information potentially needed are accounting reports, actuary contact details, insurance contracts, and liabilities and asset schedules.

Proofread Thoroughly

It is important to read and review the information listed in Form 5500 before submitting it. Ensure that all information is accurate, up-to-date, and listed in the specific sections and spaces provided.

Reviewing answers for replication and typographical errors will prevent issues in processing the filing. It can also help avoid penalties and fines. Companies must also take note of any changes or additional information needed to be included in the form.

Submit Before the Due Date

Form 5500 must be submitted to the DOL through the EFAST2 website before the due date. It is the last day of the seventh month after the plan year ends. If a company plan follows the calendar year, the deadline is July 31.

In some cases, extensions can be requested and granted if the filer meets certain criteria. Make sure to submit before the due date, as any submission after will be considered late and may incur penalties and fines.

Common Mistakes on Form 5500

To ensure proper compliance and smooth filing, avoid the following mistakes:

Underestimating Plan Participants

Some employers underestimate the number of plan participants and therefore do not provide accurate information in their Form 5500 filing. It is often the case that companies report zero participants in new plans.

It is crucial to know that all eligible employees with funds or balances in a pension or welfare plan count as participants. Be sure to accurately report the number of plan participants, which can lead to costly penalties or audits.

Overstepping Deferral Limits

Another mistake to avoid is exceeding the deferral limits set by the IRS yearly. Deferrals are contributions made into a plan on behalf of an employee, such as 401(k) match contributions or bonuses.

For example, the deferral limit for most tax-qualified retirement plans is $22,500 in 2023. It is essential to stay within this limit and make sure Form 5500 reflects the correct total amounts contributed to each participant’s account.

Incorrect Plan Termination

Take care to accurately report the plan termination date. It must reflect when the plan becomes inactive. Remember that a plan is not terminated if funds remain or are undispersed.

Incorrectly reporting this information may lead to misclassification, resulting in hefty fines or penalties.

Misrepresenting Fraudulent Losses

If there have been any fraudulent losses or misappropriation of funds, it must be accurately reflected in the Form 5500 filing. Failure to report this information can put a company at risk for legal and financial penalties.

Remember to only report fraudulent losses if your company is a victim of fraud or dishonesty. If you are unsure, it is better to leave this section blank.

Incorrect Plan Status

Ensure to only report the status of a plan if it is no longer active. If a plan is still active and running, its status should not be reported on Form 5500.

Reporting incorrect information can lead to audits by the IRS or DOL, so ensure all information provided is accurate and up-to-date.

Additional Precautions

These can include entering incorrect EIN, giving outdated information, not disclosing any changes in plan type, and more. It is essential to double-check all information before submitting a Form 5500 filing.

The IRS and DOL can apply strict penalties for incomplete or incorrect filings, so it is important to ensure that your company’s filing is accurate. Reviewing the form and making sure there are no errors will help you avoid costly mistakes later.

The Bottom Line

Form 5500 is used by the IRS and DOL to report information about employee benefits plans. It is also called the Annual Return/Report of Employee Benefit Plan.

The purpose of Form 5500 is to provide the federal government with detailed information about retirement plans, health and welfare benefit plans, and other types of employee benefit plans.

Companies with pension plans, welfare benefit plans, and DFEs must file this Form to ensure compliance with ERISA. Depending on the plan type, you may be required to submit traditional Form 5500, Form 5500-SF, or Form 5500-EZ.

Remember that the DOL mandates that Form 5500 be filed electronically through the EFAST2 website. Be careful about the specific schedules and information needed.

Ensure to avoid common mistakes and review your filing thoroughly. It is essential to practice due diligence when preparing this form and follow all regulations set by the DOL or IRS. With the accurate filing, your company can ensure compliance with ERISA regulations.

Consult a financial advisor or a qualified professional to ensure you fully understand the filing requirements, and always double-check your information before submitting. Consider working with a fiduciary 401(k) advisor such as Carbon Collective on your sustainable 401(k) plan. Doing so can help guarantee a smooth filing process for your company.

Form 5500 FAQs

Is Form 5500 limited to just employee benefit plans?

No, Form 5500 is not limited to employee benefit plans. The form is also used to report other types of retirement plans and certain health or welfare plans that are subject to the Employee Retirement Income Security Act (ERISA). In addition, employers who sponsor a Multiple Employer Welfare Arrangement (MEWA) may be required to file Form 5500 with the U.S. Department of Labor (DOL). The form is also used to report certain welfare benefit funds, such as vacation and holiday plans, supplemental unemployment benefit plans, and bonus or profit-sharing arrangements that are subject to ERISA.

How many 5500 Forms must be filed?

The number of Form 5500 forms that need to be filed depends on the plan type and the plan size. Generally, a single Form 5500 must be filed for each employee benefit plan with more than 100 participants as of the beginning of the plan year. Employers that sponsor both a retirement and welfare benefit plans may have to file multiple 5500 forms.

Do all employers need to file Form 5500?

No. Generally, businesses with fewer than 100 employees do not need to file the form; however, they should check with the IRS or Department of Labor for their specific filing requirements.

When is Form 5500 required?

The filing of Form 5500 is generally required for most employee benefit plans that have more than 100 participants at the beginning of the plan year. However, an employer may be exempt from filing a Form 5500 if its plan does not offer participant-directed investments. Form 5500 must be filed before the last day of the 7th month after a plan year ends.

Where can one obtain Form 5500?

Form 5500 is available electronically from the US Department of Labor's EFAST2 website. Additionally, benefits administrators may use specialized software to complete the form electronically, if necessary.