July 31 Form 5500 Deadline Reminders

July 31 is the deadline for sponsors of calendar-year benefit plans to file Form 5500, Annual Return/Report of Employee Benefit Plan, with the IRS. Plan sponsors can request an extension to Oct. 15 by filing Form 5558, Application for Extension of Time to File Certain Employee Plan Returns.

Form 5500 and related instructions or, for smaller filers generally with fewer than 100 participants, Form 5500-SF (short form) and instructions, are used to report the financial conditions, investments and operations of benefit plans. Annual forms are filed for:

• Retirement and savings plans, such as defined benefit pension plans and 401(k)s or similar defined contribution, profit-sharing and stock bonus plans.
  

• Health and welfare plans, such as medical, dental, life insurance and disability benefits plans.

Typically, the form is due on the last day of the seventh month after the plan year ends—July 31 for calendar-year plans—with an optional two-and-a-half-month extension.

In addition, Form 5500-EZ is the annual information return filed by one-participant retirement plans (covering owners and their spouses), such as a Solo 401(k), with plan assets of more than $250,000 as of Dec. 31 of the prior year.

[Want to learn more about benefits compliance? Join us at the SHRM Annual Conference & Expo 2021, taking place Sept. 9-12 in Las Vegas and virtually.]

Electronic Filing

Electronic versions of Form 5500 and related documents are available on the federal government's EFAST2 website, which is also used to file these forms with the IRS.

Administrators or sponsors of employee benefits plans subject to the Employee Retirement Income Security Act must file information about each benefits plan every year. Some plans with fewer than 100 participants are exempt from filing an annual return or report under certain conditions, as detailed in the exempt from filing sections of the forms' instructions.

[SHRM members-only HR Q&A: What is Form 5500, and where are instructions for completing it?]

Penalties

Overlapping penalties for failing to timely file Form 5500 by July 31 (or, with a Form 5558 extension, by Oct. 15) are imposed by the Department of Labor (DOL) and the IRS, the agencies that use the information related to the annual reports.

For penalties assessed after Jan. 15, 2021:

• The DOL per day penalty for failure to properly file Form 5500 has increased to $2,259 from $2,233, with no maximum.
  

• The IRS can also assess a penalty for late filers up to $250 a day, up to a maximum penalty of $150,000 per plan year.

"Plan sponsors with late 5500s should file through the DOL's Delinquent Filer Voluntary Compliance Program (DFVCP)," advised Ary Rosenbaum of the Rosenbaum Law Firm in Garden City, N.Y.

"The DOL penalties under DFVCP are reduced from $2,259 per day to $10 per day," he noted. In addition:

• Penalties for small plans (generally under 100 participants) are capped at $750 for a single late Form 5500 and $1,500 for multiple years per plan.
  

• Penalties for large plans (generally 100 employees and over) are capped at $2,000 for a single late Form 5500 and $4,000 for multiple years per plan."

Common Errors

"Disconnects between payroll procedures, and the way that your 401(k) plan defines 'compensation' for purposes of salary deferrals and employer contributions, generate a significant number of plan operational failures" for retirement plan Form 5500 filings, blogged Christine P. Roberts, an employee benefits attorney with Mullen & Henzell in Santa Barbara, Calif.

"The best recommendation I can make to avoid compensation-based errors in operating your 401(k) plan is to use Form W-2, Box 1 as your plan's definition of compensation, with no exclusions (other than gift cards or cash rewards, if your company uses them)," she advised. Also, she recommended "to regularly revisit your payroll codes and procedures to make sure that all pay items that appear in Box 1 are counted for purposes of participants' salary deferrals and loan repayments."

Other frequent complications during Form 5500 preparation, Roberts noted, include eligibility errors, as "when plans exclude employees based on schedule or job category, such as part-time employees, temporary employees, and per diem employees," and permitting employees to participate before they have met eligibility criteria.

[update: 7/23/21]