A quick guide on form 5500 for retirement plans

Aquick guide on form 5500 for retirement plans

By Congruent Solutions

ThefilingofForm5500isapartoftheoverallreportingframeworkoftheEmployee RetirementIncomeSecurityActof1974(ERISA).Itprovidesfederalagencieswith informationregardingtheplansponsor’soperations.Itisamandatory“annualreport”thatall 401KsubscribersmustsubmitbyJuly31eachyear. TheForm5500seriesisareportingand disclosuretoolfortheU.S.DepartmentofLabor(DOL)andtheInternalRevenueCode.Plan Sponsorsareunderconstantpressuretoensurecompliancewiththecomplexrulesand regulationsamidstincreasingscrutinyfromDOL. Plansponsorsseekhelpfromtheirplan providersorthird-partyadministrators(TPA)tofulfillingtheirannualfilingobligations. OutsourcingForm5500filing/preparationallowsthemtocompletetheregulatoryreporting requirementandevadepenaltieswithoutthehassleofmanaginglargevolumesofdata.

WhatisForm5500?

RetirementPlanAdministratorsoremployersuseForm5500toshareinformationabouttheir 401(k)plan’squalification,financialcondition,investments,andoperations.Itisanannual reportingrequirementtoensuretheplanimplementationisinthebestinterestofemployees. TheymustabidebythefiduciaryresponsibilityspecifiedinERISAandtheInternalRevenue Code. FollowingarethethreetypesofForm5500:

Form5500:Applicableforemployerswith100ormoreplanparticipants.

Form5500-SF:Applicableforemployerswithlessthan100participants.

Form5500-EZ:Applicableforone-participantplans.Thisformisrequiredonlyifthe individual’stotalplanassetsaremorethan$250,000.

BesidesoneoftheaboveversionsofForm5500,someplanadministratorsmayneedtofile someadditionalschedulessuchasScheduleA,ScheduleH,ScheduleIorScheduleR.Filing oftheseschedulesdependsupontheemployeebenefitsbeingofferedintheplan.

ChallengesinFilingForm5500

Form5500isanimportantdocument.Itmustbecompletedontimeandwithaccuracy. However,managingalargeamountofplanparticipants’datathroughtraditionalmethodsis difficult.ManualfilingofForm5500mayleadtoseveralmistakes,fromincorrectly reportingbenefits,leavingafieldblank,miscountingplanparticipants,orother misinformation. ThelackofunderstandingofERISAreportingobligationsleadstoincorrect andincompleteForm5500filings.

© 2020-2021All Rights Reserved, No part of this document should be modified / used without prior consent. Congruent Solutions

Delayedfiling,incompletereturns,orfurnishinginsufficientinformationisboundtoattract heftypenalties.Willfulviolationsandintentionalmisrepresentationswillalsoleadto additionalpenalties. Asignificantchallengeisputting togethertherightteamfortheprocess withoutoverspending.Form5500filingisanannualprocedureandhiringexpertsin-house forthesameisacostburdenontheplanprovider.IfnotoutsourcedtoacompetentTPAor filingexpert,itbecomesanadditionalworkloadfortheexistingretirementplanadministrator.

TheRiskofDOLInvestigation

DOLhasmandatedtheelectronicfilingofForm5500,alongwithallrequiredschedulesand attachments.ThefilingcanbecompletedusingIFILEorEFAST2-approvedthird-party software. ThemovehastransformedhowplansponsorsfiletheformandprovidedDOLwith amoresophisticatedwaytoreviewfilings.Allrecordscanbecross-checkedusingtheplan administrator’semployeridentificationnumber(EIN).DOLcananalyzethereportsto pinpointplansponsorsthathavenotfiledForm5500appropriately. Thenewregulationsalso allowDOLtoaccessinformationgatheredagainsttheinformationreportingrequirements underInternalRevenueCodesection6055and6056.AdvancedtechnologyenhancesDOL’s abilitytoidentifyForm5500filingsthatareinaccurate,incomplete,late,ormissing.

PenaltiesRelatedtoFilingofForm5500

PlansponsorsandretirementplanadministratorsaresubjecttopenaltyfromERISAuponthe lateorincompletefilingofForm5500.Anydeficiencyordiscrepancyintheannualreportsis subjecttopenalties. TheduedateforfilingForm5500isonthelastdayoftheseventhmonth fromtheendoftheplanyearorJuly31foracalendar-yearplan.OnlyifJuly31isonthe weekendwouldtheduedateshifttothenextbusinessday Thefilingmustbedone electronicallythroughEFAST2.IncaseoflatefilingofForm5500,theemployerissubjected toanIRSpenaltyof$250perdayuptoamaximumof$150,000.Additionally,aDOLfineof upto$2,259perdaywithnoupperlimitisalsoapplicable. Form5558mustbefiledbythe duedateofForm5500toavailexemptioninthefilingdeadlineby2½months.DOLalso offerstheDelinquentFilerVoluntaryCorrectionProgram(DFVCP).Optingforithelpsavoid latefilingpenalties. Organizationsmustestablishprocessesandlistdownbestpracticesfor handlingthefilingofform5500.Thepaperworkmaybehandledinternallyoroutsourcedto anexperiencedretirementplanadministrationservices providerfortimelyandefficient filing.

OutsourcingForm5500Filing/Preparation

ThecomplexityassociatedwithfilingForm5500accuratelyisgrowing.Soarethepenalties associatedwithincorrectormissedfilings.Ithascompelledplansponsorsandadministrators toremainvigilantoroutsourcetheprocesstoathird-partyvendor. Formpreparationand filingareseasonalprocessessohiringateamtohandlethemisnotfeasible.Outsourcing form5500filingisabetteroptionasitsavestheadditionalexpenditureonmaintainingan internalteamaroundtheyear. PlansponsorscanbenefitfromtheguidanceofaForm5500 preparationvendor.Besidesend-to-endfilingassistance,reputedvendorsbringindustry expertise.Theysupporteverythingfromreviewingtheaccuracyofcompletedformsto sharingadviceontheForm5500filingprocess.

Thekeyservicesavailableare:

QualityAssuranceReview

ThemostcrucialtaskisreviewingForm5500andSchedules.Vendorsreviewfilingsfor accuracyandexaminethecorrectnessofsmalldetails,aseverythingmatters.Theyfollowa structuredprocesstoverifytheinformationprovidedinthefilingandensurecompliancewith DOLguidelines.Thefocusisonensuringtheappropriatedepictionoftheplansponsor’s welfareplan,fundingarrangements,andbenefitofferings.

VendorsofferapprovedsoftwaretosimplifytheForm5500filingprocess.Thesoftwareaids inpreparingelectronicreturns,facilitateselectronicsignaturesonthem,andensurestimely submissions.Alongsidefilings,theyalsoassistinpreparingcontent-compliantSummary AnnualReport(SAR)asspecifiedbyDOL.

5500FilingConsolidation

Vendorscanrelievetheadministrativeburdenbypreparingastrategyforconsolidating multipleForm5500filingsintoasingleplan.Theycarefullyreviewtheexistingwelfare plansoftheplansponsorandsuggesttheonesthatcanbeeliminatedormerged.The planningisfollowedbypreparingtheappropriatedocumentsfortransition.

AssistancewithDOLCorrectionPrograms

PlanadministratorswhohavemissedfilingscanoptforDOLcorrectionprogramslikethe VoluntaryFiduciaryCorrectionProgram(VFCP)andDelinquentFilerVoluntaryCompliance Program(DFVCP).Vendorscanhelpthemcompletenecessarydocumentationandpay reducedpenaltiesbybringingtheirplanstothecurrentfilingstatus.Theindustryexpertiseof vendorscomesinhandyintheVFCPandDFVCprocessingasthesearepeculiartohandle.

AmendedFilings

FilingaForm5500withomissionsormistakesalsoattractsscrutinyandpenaltiesfromDOL. Vendorsassistfilerswithamendmentsandrevisedfilingswhenneeded.Theyhavethe knowledgeandexpertisetoselectandpreparethecorrectformforelectronicorpaper-based filing.

ChoosingtheRightRetirementPlanAdministrationServices Provider

Findingtheright401(k)planadministrationservicesprovidercanbedaunting.Considerthe followingpointswhenfinalizingtherightpartnertomeettheplanadministrationneeds:

1.Expertise:IndustryknowledgeandtechnicalexpertisetopthelistwhenconsideringaTPA forretirementplanadministration.Ensuretheyhavetheexperiencetounderstandtheplans’ goalsandknowallcompliancerequirements.

2.Price:Theretirementplanadministrationservice costsmayvaryforeachserviceprovider andwoulddependonthecomplexityoftheplan.Takingquotesfromdifferentprovidersand clarifyingdoubtsregardinghiddenfeeswillallowpickingthebestpartnerasperplanneeds. TheplandesignmayalsobealteredtolowertheTPAexpenses.

3.PlanSupport:Planadministrationserviceproviderssupportdifferentretirementplans,so itishelpfultocheckiftheyspecializeintherequiredplantype. Theextenttowhichtasks relatedtoForm5500mustbeoutsourceddependsontheplansponsor’sinternalresources.If thein-houseteamistrainedtoperformtherequiredfunctions,adesignatedplanadministrator canhelpthemtoprepareandfileForm5500.Thevendorwillworkalongsideinternal departmentssuchashumanresourcesandpayroll.Iteasescoordinationwithinvestment advisersandplanauditors.

Congruent – The Best Partner for Form 5500 Filing/Preparation

In case expertise is needed externally, hiring a qualified retirement plan service provider after a thorough evaluation is best. The vendors must still be monitored under the plan sponsor’s fiduciary responsibility Avoid the year-end stress by partnering with Congruent Solutions. We offer specialist plan administration services to help the retirement plan industry of all sizes prepare their sponsors’5500 forms. With years of expertise, Congruent uses its experience and well-trained resources to deliver comprehensive 401(k) administration. Contact our team of experts to discuss your form 5500 filing worries today.

Congruent Solutions