It is February already and in less than six months, the deadline for filing Form 5500 will come up. An annual report filed with the U.S. Department of Labor (DOL), the Form provides the Internal Revenue Service and the DOL information about an employer’s 401(k) plan operation and compliance with government regulations. It details the financial conditions, investments, and operations of the plan. It is one of the fiduciary responsibilities of the plan sponsor.
It needs to be filed electronically before July 31 every year, or two-and-a-half months later provided a request for extension is filed for in a timely and complete manner. The plan administrator should also keep a copy of the Form 5500, along with schedules and attachments and the authorized signatures.
Delays, incomplete returns or rejection due to insufficient information attract penalties, with the maximum penalty increasing from $2,140 to $2,194 per day. Willful violations and misrepresentations will lead to additional penalties.
Since it is a once in a year activity, many plan administrators find themselves overwhelmed by the process. Finding resources for just this one event is also difficult. Overworked administrators are also likely to make mistakes that could prove costly.
Some of the common errors include:
- Providing incorrect information
- Leaving a field blank
- Noting “zero” plan participants, without realizing that all employees and employees with balances in the plan are eligible for Form 5500.
- Excess deferral
- Not documenting plan termination
- Reporting fraud
- Non-active plans
- Incorrect entry of the EIN and plan number when filing
- Excessive, and unnecessary, information, such as returns dated over 12 months
- Not using the prescribed vendors such as EFAST for filing the form
To make sure your form is filled correctly, you have to re-read it after filling up to avoid making common errors. Recheck the codes and write the form afresh instead of copying text from previous years.
If you feel overwhelmed, reach out to us. Congruent is a specialist retirement plan administration services provider. We work with small, medium and Fortune 500 companies, solving their retirement plan administration challenges in more ways than one. Our team has the experience and the expertise needed to help you with this seasonal but essential activity.
Drop in a note at firstname.lastname@example.org and we will get back to you.