/ 401(k) Basics

What is the Form 5500?

Note to Guideline 401(k) customers: If Guideline is your 401(k) administrator, we’ll take care of preparing your plan’s Form 5500 if your plan started with Guideline and has had contributions in that calendar year, as well as all future years. Our Customer Success team will reach out if we need any additional information from you.

Offering your employees a 401(k) is one thing. But you’ll also have to submit annual reports to the federal government. Enter the Form 5500, an annual report required by the federal government about employee benefits plans. There’s a lot that goes into completing the Form 5500, with its 27 pages of instructions. This is why so many employers rely on their 401(k) plan administrator to get the job done on time.

Three versions of the Form 5500

There are three versions of the Form 5500: the regular Form 5500, the Form 5500-SF, and the Form 5500-EZ.

In general, if you have fewer than 100 employees participating in your plans, you’re eligible to complete a shorter version: the Form 5500-SF. If you have a Solo 401(k) with $250,000 or more in assets, you’ll need to file the even shorter (and aptly-named) Form 5500-EZ. Solo 401(k) plans with less than $250,000 in assets are exempt from filing altogether. This is also the form you’d use if your plan is based outside of the U.S. or used primarily by non-resident aliens. Otherwise, you’ll need to file the regular Form 5500.

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Large plans vs small plans

In general, for plan years in which a plan covered fewer than 100 participants, the plan files  Form 5500-SF along with various schedules attached (“schedule” is just a term for additional forms that collect more information). Such a plan is entitled to the “small plan exception,” where it does not have to submit an audited financial report of the plan assets.

For plan years in which a plan covered at least 100 participants, often referred to as a “large plan,” the plan does not qualify for the “small plan exception” and must file the full Form 5500 with various schedules and also an audited financial report of the plan assets.

What is the 80-120 rule?

To reduce the frequency with which 401(k) plans transition back and forth between small plan and large plan status, the DOL established the 80-120 rule. Under this rule, “small plans” do not automatically become large plans in the first plan year with at least 100 participants. Instead, they transition to large plan status in the first plan year that they cover more than 120 participants. For future plan years, the plan retains its large plan status as long as it covers at least 100 participants.

Similarly, a large plan does not lose its large plan status in the first plan year that the number of participants drops below 100. Rather, a large plan changes to small plan status in the first plan year that the number of participants falls below 80. And for future plan years, the plan retains its small plan status as long it covers fewer than 100 participants.

What’s included in the Form 5500?

The 3 pages of the Form 5500 and Form 5500-SF ask for basic information about your business, your plans, number of 401(k) participants, and other details you’d expect to see. More granular details are reported on the additional schedules that need to be attached, which is determined by the benefits the plan offers and the number of participants.

Below, you’ll find a list of schedules, their respective scopes, and what plan sizes they apply to.

Form 5500 schedules

Schedule Focus area Small plans

Under 100 participants
Large Plans

100+ Participants
A Insurance Information Required Required
C Service Provider Information Not Required Required if you paid a service provider over $5,000 that plan year
D Participating Plan Information *See bottom of table *See bottom of table
G Financial Transaction Not Required Only if you answered “yes” to Schedule H lines 4b, c, or d
H Financial Information Not Required Required
I Financial Information (Small Plans) Required Not Required
R Retirement Plan Information Required Required

*Schedule D is required if your plan’s assets include more specialized accounts, like common or collective trusts, pooled separate accounts, master trust investment accounts, or 103-12 investment entities.

Deadlines and penalties

The Form 5500 must be filed by the last day of the seventh month after the plan year ends. In other words, if your plan starts on January 1, you’ll need to report on the previous year by July 31. The IRS will grant an automatic 2½ month extension if the plan sponsor files a request by the initial filing deadline. This would extend the filing deadline in the previous example to October 15, 2020. Businesses may apply for an extension by completing the Form 5558.

Late Form 5500-series returns are subject to penalties imposed by both IRS and DOL:

  • The IRS penalty for late filing of a 5500-series return is $25 per day, up to a maximum of $15,000.
  • The DOL penalty for late filing can run up to $2,194 per day, with no maximum. There are additional penalties for plan sponsors that willfully decline to file.

If the IRS contacts you about a delinquent Form 5500-series return, you should request the assistance of your professional preparer, if you used one, to file the delinquent return as soon as possible. You should also reply to the letter providing a reasonable justification for the failure to file on time and request the IRS to waive any late filing penalty.

Sometimes, the initial IRS letter is just a courtesy letter that doesn’t notify you of the intent to assess late filing penalties. In that case, you may take advantage of the Department of Labor’s Delinquent Filer Voluntary Correction Program (“DFVC”). Under this program, you file the delinquent return with the Department and pay a significantly reduced penalty. The IRS has stated that it won’t pursue any additional late filing penalties for delinquent filers who satisfy the DFVC requirements and pay the reduced penalty.

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How to file

Put the paper and pen away: Forms 5500 and 5500-SF must be filed electronically using the DOL’s EFAST2 system. The only exception to the rule is the Form 5500-EZ, a shorter version for single-participant or foreign plans.

EFAST2 is accessible via the agency’s website or through accredited vendors that integrate with the system. Guideline integrates with EFAST2 to ensure fast, accurate, and secure Form 5500 filing.

Before submitting, carefully review your form as errors could trigger penalties or even a subsequent DOL audit. Common errors include:

Inputting the wrong employer identification number (EIN) or plan number

  • Including more that 12 months’ worth of data
  • Prematurely marking a plan as “terminated” when assets haven’t been distributed yet
  • Listing retirement deferrals that add up to more than what federal limits allow

Need additional support? Work with a third-party retirement expert or reference this exhaustive DOL FAQ sheet on the EFAST2 system.

What to do after filing

Once you’ve filed, you’ll need to provide employees with the highlights–The Summary Annual Report (SAR) reports the total value of your plan’s assets, any administrative costs, and other high-level information from the Form 5500-series return.

The SAR is due to participants within nine months after the end of the plan year. If you submitted your Form 5500 on time, that means you have two months to furnish the document. You may choose to provide the SAR as a hard copy or digitally—but if you opt for the latter, you’ll need participants’ consent in advance.

In addition to receiving the SAR, participants may request a copy of the plan’s full Form 5500-series return at any time. Note that participants aren’t the only ones with access. Your return is a public document and will be accessible to the general public on the DOL’s website.

How Guideline helps you with Form 5500

Guideline helps all our customers prepare and file their Form 5500-series return on time. In addition, Guideline serves as the 3(16) fiduciary administrator for all customers using one of our integrated or quick sync payroll providers (Gusto, Quickbooks Payroll, ADP, and more). This means that we’ll take on the legal responsibility for filing your Form 5500. Want to learn more about how Guideline makes offering a 401(k) easy? Schedule a demo with our team.

Nicolle Willson, J.D., CFP®, C(k)P®

Nicolle Willson, J.D., CFP®, C(k)P®

Head of Retirement Consulting at Guideline. JD, UCLA Law. Certified Financial Planner™. Certified 401(k) Professional™. Previously a financial planner with focus on retirement & estate planning.

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