Advance copies of Form 5500 information returns, used to report on plan year 2021 benefits during 2022, reflect an increase in maximum civil penalties under the Employee Retirement Income Security Act (ERISA) and address reporting for pooled employer plans, among other updates and adjustments.
On Dec. 28, the U.S. Department of Labor's (DOL's) Employee Benefits Security Administration (EBSA), along with the IRS and the Pension Benefit Guaranty Corp. (PBGC), released advance copies of the 2021 Form 5500 and related instructions. For smaller filers, advance copies of the 2021 Form 5500-SF (short form) and related instructions also were made available, along with supplemental materials that include schedules and attachments.
Form 5500 annual return or report filing is due on the last day of the seventh month after the plan year ends, with an optional two-and-a-half-month extension. For plans that follow a calendar year, Form 5500 for the prior year is due July 31, or Oct. 15 with the extension.
Annual Reporting Requirements
Form 5500 and its required schedules and attachments are used to report the financial conditions, investments and operations of employee benefits plans, including:
- Retirement and savings plans, such as 401(k)s and similar defined contribution, profit sharing and stock bonus plans, and defined benefit pension plans.
- Health and welfare plans, such as medical, dental, life insurance and disability benefits plans.
Advance copies of the 2021 Form 5500 are for informational purposes only. Official electronic versions will be available on the federal government's EFAST2 website shortly. Filers should monitor the website in January for the release of the official electronic forms, the agencies advised.
Administrators or sponsors of employee benefits plans subject to ERISA must file information about each benefit plan every year. A small plan (generally one with fewer than 100 participants at the beginning of the plan year) may be eligible to file Form 5500-SF instead of Form 5500. Moreover, some plans with fewer than 100 participants are exempt from filing an annual return or report under certain conditions, as detailed in the Plans Exempt from Filing section of the forms' instructions.
[SHRM members-only HR Q&A: What is the ERISA Form 5500?]
Federal agencies annually index civil penalties for inflation. The updated instructions reflect the increased maximum DOL penalty of $2,400 per day for late filings, assessable under ERISA, up from $2,259 for plan year 2021 reporting and $2,233 for 2020 reporting.
A separate IRS penalty for a late Form 5500 filing is unchanged at $250 per day, with a maximum of $150,000 per plan for each plan year missed.
If these forms are filed past the deadline, plan sponsors should use the DOL's Delinquent Filer Voluntary Compliance Program (DFVCP) as soon as possible, benefits advisors recommend. By using the DFVCP, the DOL penalties are reduced and capped.
"Each year, many plan sponsors scramble to file their 5500s at the absolute last moment" before the extended Oct. 15 deadline for calendar-year plans, said Mike Webb, senior financial adviser at Captrust in New York City. He advised plan sponsors to instruct their plan auditors "to prepare as though the filing is actually due on the nonextended deadline date of July 31."
Causes for late filings also include delays in the preparation of the independent audit report, which must be attached to the Form 5500, lack of accurate or timely data provided by the employer to the preparer of the forms, or failure to monitor participants, according to benefits advisors.
The Changes to Note sections of the 2021 instructions for the updated 5500 forms highlight annual reporting changes related to the 2019 Setting Every Community Up for Retirement Enhancement (SECURE) Act.
For instance, while employers in the same industry had previously been allowed to form defined contribution multiple-employer plans (MEPs), the SECURE Act permitted unaffiliated employers, as of January 2021, to join together in a single 401(k) pooled employer plan (PEP).
"A PEP has a single plan document, a single Form 5500 filing and a single independent plan audit," noted Craig P. Hoffman, an attorney with San Francisco-based Trucker Huss, when the SECURE Act became law. A pooled plan provider, whether it is a financial services firm, insurance company, third-party administrator or similar entity, "must serve as the ERISA section 3(16) plan administrator, as well as the named fiduciary for the plan," he explained.
The Form 5500 instructions have now been amended to make it clear that a PEP can file a single Form 5500 on behalf of all participating employers.
Multiple-Employer Health Plans
The updates to Form 5500 clarify that multiple employer welfare arrangements (MEWAs), such as association health plans, are still required to report participating employer information.
"Some commenters had argued that the DOL could no longer require participating employer information from MEWAs because the SECURE Act had eliminated that requirement regarding welfare benefit plans," reported Thomson Reuters Practical Law. While the DOL acknowledged that the SECURE Act technically removed the disclosure requirement for MEWAs, "the agency concluded that it was still authorized to collect this information."
The Form 5500 revisions were included in a Sept. 15, 2021, proposed rule and adopted in a final rule published on Dec 29, 2021.
The September 2021 proposal included a broader range of changes beyond those that were ultimately included in the revised Form 5500 and instructions. For example, the proposals included a consolidated Form 5500 filing option for another type of multiple-employer defined contribution plan permitted by the SECURE Act, called simply a group of plans (GoP).
Under a GoP, employers—whether unrelated or related—can collectively negotiate better pricing for retirement plan record-keeping, administration, investment management and other services, sharing a common plan year but (unlike MEPs and PEPs) keeping their own separate stand-alone plans. Organizers of the bundled deals typically negotiate the contracts with plan service providers on behalf of the plan sponsors.
Changes related to consolidated Form 5500 filing for GoPs "are not included in the 2021 instructions and will be the subject of one or more separate and later final notices," the agencies said.