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Understanding Form 5500: A Guide for Business Owners

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When it comes to managing your company’s retirement plan, one of the most important responsibilities is filing Form 5500. This form is crucial for maintaining compliance and protecting both your business and your employees. Let’s break down what Form 5500 is, why it matters, and share some practical advice on what to do if you’ve missed a filing.

What is Form 5500?

Form 5500 is an annual report that must be filed with the Department of Labor (DOL) if you offer any retirement or welfare benefit plans, such as 401(k) plans or health insurance.  Similar to filing your individual tax return each year, think of your company’s Form 5500 as the business tax return your organization must submit to the government. The 5500 provides a detailed snapshot of your plan’s financial health, including investments, expenses, and overall operations. It’s not just a piece of paperwork—it’s a tool for ensuring transparency and compliance with the Employee Retirement Income Security Act (ERISA). 

Your Responsibility as a Fiduciary

As the fiduciary of your company’s retirement plan, filing Form 5500 each year is your responsibility. Even if you work with a recordkeeper and or TPA who might prepare the form for you, the final responsibility for reviewing the form’s information to ensure the data is accurate, signing and submitting it ultimately lies with you. Missing, filing late, or submitting an inaccurate filing can lead to significant penalties from the DOL and IRS which is why it’s so important to stay on top of these deadlines.

What to do if You’re Late or Missed a Filing

If you’ve discovered that you are behind or missed a Form 5500 filing, it’s critical to act quickly. Here’s a practical approach to get things back on track:

  1. Contact Your Recordkeeper: Start by reaching out to your recordkeeper or your company’s TPA if you use such a service. They can help you identify which filings are late or missing and assist in preparing the necessary documentation. Remember, while they can help, the responsibility to file still rests with you as the fiduciary. Large retirement plans that do not file the 5500 short form (SF) also require an independent auditors review and opinion letter. Contact your CPA firm or a firm that provides auditing services to ensure they can start on your plan’s audit as soon as possible. If you are not sure if you are a small or large filer, contact your recordkeeper/TPA to verify.
  2. Leverage the DFVCP Program: The Department of Labor offers a Delinquent Filer Voluntary Compliance Program (DFVCP) that allows you to correct late filings at a reduced penalty. For small plans (those with fewer than 100 participants), the penalty is capped at $750 per return, For larger plans (more than 100 participants) this is capped at $2000 per return. If filing multiple late 5500s the total fine for multiple years is capped depending on the size of your plan and assuming you are submitting all the missed forms together.
  3. File Missing Forms ASAP: Your first priority should be to file any missing Form 5500s as soon as possible. This will help “stop the bleeding” in terms of accruing penalties. Working with your recordkeeper or TPA as applicable can streamline this process, ensuring that everything is done correctly.
  4. Review and Strengthen Your Processes: After addressing the immediate issue, take the time to review your internal processes for handling Form 5500. Make sure that everyone involved knows their responsibilities and that you have a reliable system in place to track deadlines and ensure timely filing each year. Mark the date on your calendar as a reminder each year in advance, allowing yourself time to review and ensure the form is submitted before the deadline. If you are a large company filer (or this year will be your first year filing as a large company), remember that your plan requires an independent auditor with the 5500 submission—don’t wait until the last month or minute to engage an auditor!

Navigating Compliance with Confidence

Filing Form 5500 is more than just a compliance requirement—it’s a key part of maintaining the health and transparency of your company’s retirement plan. By understanding your responsibilities and taking proactive steps to meet them, you can avoid unnecessary penalties and ensure that your plan remains in good standing.

If you’ve missed a filing, don’t panic. The DFVCP offers a pathway to compliance, and your recordkeeper or TPA can be a valuable partner in getting back on track. The most important thing is to act quickly and put measures in place to prevent future oversights.

For those who feel overwhelmed by the complexities of retirement plan management, there’s always the option to seek more robust support. Consider how a holistic approach, like our Corporate Advantage Retirement Solution, could streamline your processes, reduce your fiduciary burden, and enhance the overall experience for your employees. With the right partner, ensuring compliance and optimizing your plan can be both efficient and empowering.

Avoid costly penalties by understanding your 401(k) filing responsibilities. Learn more about the filing requirements here.

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