What is Form 5500? Everything You Need to Know

If you're a plan sponsor, make sure to avoid these common errors around Form 5500 filing. Read on for important details, filing deadlines, and more.

What is Form 5500?

The Internal Revenue Service (IRS), Department of Labor (DOL), and Pension Benefit Guaranty Corporation (PDGC) collectively developed the Form 5500-series returns for employee retirement plans to satisfy annual reporting requirements under ERISA and the Internal Revenue Code. Form 5500 is filed with the DOL and contains information about a 401(k) plan's financial condition, plan qualifications, and operation. The purpose of the form is to provide the IRS and DOL with information about the plan's operation and compliance with government regulations.

In general, all employers who adopt and sponsor a retirement plan governed by ERISA such as profit-sharing and 401(k) plans, must file a Form 5500 annually with the DOL. Which version of Form 5500 you complete will depend on the size of your business and the structure of your retirement plan. Certain employer plans are exempt from the annual reporting requirements or are eligible for limited reporting options.

There are three general types of Form 5500 filers>

1. Form 5500-SF: Small plans (those with fewer than 100 participants as of the beginning of the plan year
2. Form 5500: Large plans (those with 100 or more participants as of the beginning of the plan year)
3. Form 5500-EZ: “One-participant” plan (owners/partners and their spouses)

Form 5500 Reporting Employee Deferrals and Loan Repayments

Understanding Form 5500 is crucial to businesses with retirement plans. Among the many fiduciary responsibilities that must be reported on the Form 5500, plan sponsors must deposit 401(k) employees' salary or wage deferrals and loan repayments into their accounts as soon as administratively feasible, but no later than the 15^th business day of the month following the month in which the contributions occurred.

Essentially, a plan is required to make those deposits at the earliest reasonable date so that it can segregate participant contributions from the employer's general assets. Small employers — classified as those with 100 or fewer employees — are subject to a safe harbor deadline that gives them seven business days after collecting employee deferrals to deposit them into the plan.

Form 5500 Filing Due Dates

For most plans, Form 5500 and Form 8955-SSA is due by the last day of the seventh month after the plan year ends, or typically July 31 for a calendar-year plan (or the following business day if July 31 falls on a weekend). If you cannot complete your form by July 31, you will need to file an extension with the IRS before July 31 to avoid late filing penalties. Terminated Plans with assets are still required to file a Form 5500 and Form 8955-SSA annually, including the year in which final assets have been distributed from the plan.

The plan administrator must electronically file Form 5500 with the DOL. Plan Administrators may file Form 8955-SSA electronically or by paper mailing to the IRS, depending on certain conditions. In addition, the plan administrator must keep a copy of the Form 5500, including schedules and attachments, and the Form 8955-SSA with all required ink signatures on file with the plan's records.

Think You'll be Late in 5500 Filing?

If you know ahead of time that you won't be able to make the original deadline, you can file an extension for your company's Form 5500 and Form 8955-SSA by using Form 5558: The Application for Extension of Time to File Certain Employee Plan Returns. If the extension is filed in a timely and complete manner, your Form 5500 and Form 8955-SSA will be due two-and-a-half months after the original due date.

It's worth the effort to file Form 5558 if you know you will be late, as this can save you thousands in penalties and fees. Remember, Form 5558 must be mailed to the IRS by the original Form 5500 filing deadline to be approved for an extension.

Missed the Deadlines?

If you've already missed the original Form 5500 filing deadline and haven't properly filed an extension form, you'll still need to file Form 5500 and Form 8955-SSA. Fortunately, the DOL and IRS recognize that mistakes happen, and there are penalty relief programs available for delinquent filers to help minimize penalties associated with late submissions of Form 5500 and Form 8955-SSA.

Delinquent sponsors of Form 5500-EZ (“one-participant” plan) may be eligible for penalty relief under IRS Revenue Procedure 2015-32, while delinquent sponsors of Form 5500 or 5500-SF may request relief using the DOL's Delinquent Filer Voluntary Compliance Program (DFVCP). There is no delinquent filer program when only the Form 8955-SSA is delinquent. However, there is relief available when both Form 5500/5500-SF and Form 8955-SSA are delinquent under the DOL’s Delinquent Filer Voluntary Compliance Program.

DFVCP: The 5500 Delinquent Filing Program

Delinquent filings of Form 5500 can rack up penalties quickly, but the Delinquent Filer Voluntary Compliance Program can help your penalties from spiraling out of control. To be eligible for penalty forgiveness through the DFVCP, you must be a plan administrator with filing obligations under Title 1 of ERISA and provide proper notice to the DOL that your Form 5500 has not yet been filed.

Your plan obligations likely fall under Title 1 of ERISA if you manage a private sector employee benefits plan that was established and maintained by the private employer or a private employee organization.

How Much are 5550 Late Filing Penalties?

Late filers of Form 5500 can be penalized twice — both from the IRS and the DOL. The IRS penalties for a late filing without notice or a qualified extension are $250 per day, up to a maximum of $150,000. If that weren't enough, the DOL civil penalties are up to $2,586 per day with no maximum.

The DFVCP offers late filers a cap on penalties to encourage reporting compliance and help plan administrators who have failed to file an annual report for a plan for multiple years to get back on track. Filings for multiple years must be included in a singular submission for a plan. Penalties are capped at $1,500 per submission for “small plans” and $4,000 for “large plans”.

How much are Form 8955-SSA late filing penalties? 

The IRS penalty for failure to file a Form 8955-SSA is $10 for each participant with respect to whom there is a failure to file multiplied by the number of days the failure occurred, not to exceed $50,000 with respect to any plan year. 

How Do You File a Delinquent Form 5500?

To file a delinquent Form 5500, you would file through the same process as any on-time reports. All filings are submitted through the DOL's certified electronic system, EFAST2. To file a delinquent Form 5500, you would log in to EFAST2 using your DOL credentials and submit the form and any supporting documentation electronically.

Summary Annual Report

A summary annual report (SAR) is a document required under the Employee Retirement Income Security Act (ERISA) that summarizes the information reported on Form 5500 and schedules. The SAR must be distributed to each plan participant and their beneficiaries receiving benefits under the plan no later than two months following the Form 5500 filing deadline, which is normally Sept. 15. If the client filed for a filing extension, they have until Dec. 15.

The SAR provides participants with a summary of the plan's financial status as reported on Form 5500. Participants are also informed of their right to receive a copy of Form 5500 if requested from the employer.

Is a Fidelity Bond Required for Retirement Plans?

ERISA requires every plan fiduciary and anyone else who handles or has the authority to handle plan assets to be covered by a bond. A fidelity bond is an insurance policy that names the plan as the insured party and covers anyone who handles or has the authority to handle plan assets. The fidelity bond protects the plan against loss due to acts of fraud or dishonesty on the part of persons required to be bonded.

The required amount of bond coverage is the lesser of 10% of plan assets at the beginning of the plan year, or $500,000.

How to File Form 5500: The Filing Process

The DOL requires that all Form 5500 annual returns be filed electronically using its EFAST2 program. The agency no longer accepts paper filings, except for filers submitting Form 5500-EZ.

To start the filing process, you must log in to the EFAST2 processing system and begin completing the correct version of Form 5500. EFAST2 is similar to other online tax systems — you will input identifying information, answer questions about your business and retirement plan details, and add any required supporting documentation. At the end of the process, you will be asked to sign the form electronically and submit the Form to the DOL through the portal.

As you are completing your electronic filings, remember that accuracy and completeness are important. While you may incur penalties or fines for failing to submit on time, both the DOL and IRS may also impose fines or penalties for inaccuracies in your submission. Penalties may apply for anything the IRS deems as willful violations or making false statements, and they may also reject the submission of your Form 5500 if you provide insufficient information, including unanswered questions, which can lead to late fees.

5500 Filing Requirements and Credentials

If you don't already have DOL electronic signing credentials, you can obtain them at www.efast.dol.gov. DOL credentials are the secured username and password that allow you to log in to the EFAST2 portal and electronically sign and submit your completed forms. Beginning in 2023, EFAST users will be redirected to Login.gov to create credentials. To obtain DOL credentials, you must be authorized to complete Form 5500 on behalf of your organization, and you must complete a registration process that typically takes about 15 minutes.

To generate your DOL credentials:

1. Click "Sign In/Up" on the EFAST2 website welcome screen, then read and accept the privacy statement.
2. Provide your personal information and identify your user type.
3. Set your security questions and answers (in case you forget your password in the future).
4. Complete the registration process by clicking the link in the verification email you receive from EFAST2.
5. Accept the PIN agreement and signature agreement if required, then create your password.

Common Form 5500 Errors

According to the IRS, entering incorrect information, or accidentally leaving a field blank when filling out Form 5500, may result in an employee plan compliance check by the DOL.

If you prepare this form for your business, be on the lookout for some of the most common errors, as noted by the IRS:

1. Noting "zero" plan participants

All eligible employees and employees with balances in the plan are considered plan participants on Form 5500. Often, companies mistakenly answer that there are zero plan participants. This error is especially prevalent with new programs.

2. Excess deferral

This error means that plan sponsors have allowed contributions to exceed the annual limit a participant can contribute. The IRS has also found that some 403(b) or 457 contributions were coded as 401(k) deferrals.

3. Plan termination

When a plan is terminated, Form 5500 is still required until all assets are distributed from the plan. Documenting terminated plans is a part of compliance during annual reporting. Common errors include:

1. Not filing the form.
2. Accidentally marking a plan terminated when it wasn't.
3. Mistaking a frozen plan for a terminated one.
4. Using the same plan number for more than one plan.
5. Not marking the form as a final return.

4. Fraud

Form 5500 asks if a plan had a loss caused by fraud or dishonesty. The IRS has found that employers often answer this section incorrectly. Most often, this area should be left blank (assuming a company did not endure fraud).

5. Frozen plans

Code 1l means that a plan is frozen or non-active. Organizations have been known to accidentally use code 1l for active accounts.

6. Additional pitfalls

For added security, here are a few additional common mistakes to avoid when completing Form 5500:

1. Incorrectly entering the EIN and plan number when filing.
2. Providing too much information, such as returns dated over 12 months.
3. Not using EFAST software or approved vendors for filing your form.

Form 5500 requires a significant amount of information. It's easy to enter wrong codes or mistake figures. To avoid these mistakes, double-check your work. Go back through the form to ensure you have:

1. Reread the questions to ensure you've answered correctly.
2. Double-checked that answers are in the correct boxes.
3. Re-checked the codes to ensure you've recorded everything properly.
4. Avoided copying your answers from a previous year's form.
5. Consulted with professionals to ensure you're answering each question correctly.

Using a third-party administrator for your 401(k) and retirement services can help you effectively prepare to file this form, and minimize your plan-related workload and risk. Many plan providers prepare a signature-ready Form 5500 as part of their administration services, allowing you to simply review for accuracy, sign, and file the form. More questions about Form 5500 filing requirements and credentials? We have the answers.