February Compliance Corner: An Overview of Form 5500

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If your company offers an employee benefit plan under the Employee Retirement Income Security Act (“ERISA”), you are likely required to file Form 5500. Form 5500 is an annual report that contains information about a company’s benefits, including welfare benefit plans (including medical, dental, life insurance and disability benefits), retirement plans, fully-insured plans, and self-funded plans. In this month’s Compliance Corner, we cover the essentials of Form 5500, including who is required to file, the filing deadline, and the potential penalties for failing to file.

Who is Required to File Form 5500?

As a general rule, plans with 100 or more participants at the beginning of a plan year must file Form 5500 with the Department of Labor (“DOL”). Additionally, any plan funded through a trust—regardless of the number of participants—must also file Form 5500. Welfare plans with fewer than 100 participants that are either unfunded or insured (i.e., do not hold assets in trust) are typically exempt from filing. This exemption also applies to government entities and church plans.

For the purposes of Form 5500 filing, “plan participants” include all eligible employees, regardless of whether they have enrolled, as well as others who receive benefits from the plan, such as former employees (retirees or those who have separated from the company) and beneficiaries of deceased employees.

What is the Deadline to File Form 5500?

Form 5500 is due on the last day of the seventh month following the end of the plan year. For example, for a calendar-year plan, the deadline is July 31 (or the following business day if July 31 falls on a weekend). Employers can file Form 5558 on or before the Form 5500 deadline to request an extension of up to 2 ½ months. Employers granted an extension must file Form 5500 by the extension deadline to avoid penalties. Additionally, any penalties incurred are retroactive to the original Form 5500 due date if the extended deadline is missed.

What Information is Included in Form 5500?

Form 5500 includes the main form, along with various schedules and attachments that provide additional details. While the required schedules depend on the specifics of your employee benefit plan, the form covers a range of topics, including:

• The plan’s start date;
• The number of plan participants;
• Information about the plan sponsor and administrator; and
• Details regarding the plan's funding and benefits provided.

Additionally, a separate Form 5500 must be filed for each plan that meets the filing requirements. Employers may choose to "wrap" multiple benefit plans together for the purpose of filing Form 5500. However, it is essential for employers to have proper documentation that confirms the benefits are covered under a single plan. If the necessary “wrap plan” documentation is not provided, individual filings will be required for each plan.

What are the Penalties for Failure to File Form 5500?

Employers who file Form 5500 late could face penalties from both the Internal Revenue Service (“IRS”) and the DOL. The IRS penalty for late filing of a Form 5500 is $250 per day, up to a maximum of $150,000. The DOL penalty for late filing can run up to $2,529 per day, with no maximum. However, these penalties can be reduced by participating in the Delinquent Filer Voluntary Compliance Program (DFVCP).

In an effort to encourage plan administrators to file overdue Form 5500s, the DFVCP provides administrators with the opportunity to pay reduced civil penalties for voluntarily complying with the annual reporting requirements. The DOL offers an online DFVCP penalty calculator to assist administrators in determining the applicable payment needed to participate in the program.

Conclusion

Filing Form 5500 is an essential part of maintaining compliance with regulations for employee benefit plans under ERISA. Since late filings can result in significant penalties from both the IRS and the DOL, it is important to understand the filing requirements and deadlines to avoid costly penalties.