It’s That Time Again: The Must-knows for the 5500 Filing Season

While one of the key advantages of qualified plans is deferral of taxation, the law requires that these plans file an annual informational tax return on a set of forms generally referred to as Form 5500. Degree of reporting and type of information provided to the Department of Labor (DOL) and the Internal Revenue Service (IRS) vary depending on plan’s complexity, investment arrangement, and size of participant population. Today, we will broadly discuss filing Form 5500 filing requirements, electronic filing mandate, what to do when a filing was missed, how First Allied Retirement Services dramatically reduced time needed to file a return for its clients, and how you can use the wealth of information available with the advent of electronic filing to grow your business.

Who Must File Form 5500?

All retirement plan sponsors with at least one rank-and-file employee must file Form 5500, regardless of the amount of plan assets. IRA-based plans such as SEPs and SIMPLEs are excluded, as are owner-only plans with assets under $250,000. The asset level at which owner-only plans must file a 5500 series form was increased from $100,000 to $250,000 under the Pension Protection Act of 2006.

Simplified Reporting for Small Plans

A new, shorter version of Form 5500, known as Form 5500-SF, was introduced in 2009. Plans must meet certain criteria to file this short form. Specifically, such a plan:

1.       Must have fewer than 100 participants.

2.       Must be a single-employer plan.

3.       Must contain investments that are easy to value such as mutual funds, publicly traded stocks, and cash.

4.       Cannot invest in employer securities.

5.       Must not be subject to outside independent audit requirements.

Plans failing to meet all of the above criteria must file their return on the unabridged version of Form 5500.

When is the 5500 Due?

In general, the return must be filed no later than the last day of the 7th month following plan year-end, e.g. July 31 for calendar-year plans. Plan sponsors may request a 2 ½ month extension by filing Form 5558, delaying the due date to October 15. No additional extensions are granted.

Mandatory Electronic Filing Requirement

The IRS, DOL, and Pension Benefit Guarantee Corporation (PBGC) are the three government agencies that oversee retirement plans and are charged with enforcing compliance with the filing mandate.  In the past, service providers typically provided clients with signature-ready 5500, which clients then reviewed, signed and mailed to the regulators. As of 2009, plan sponsors are required to file 5500 forms electronically.

What Does this Mean for Plan Sponsors?

Under the electronic filing mandate, plan sponsors must first register on the DOL website,, receive a unique personal identification number (PIN), and then submit their annual 5500 over the DOL website, using their unique PIN.

Immediately after registering on the DOL website, plan sponsor should receive an email from the DOL containing their PIN. Those responsible for filing multiple 5500 forms, for example, a business with both a Defined Benefit plan and Defined Contribution plan, can use a single PIN for multiple filings.

How First Allied Retirement Services Makes It Easy

A typical filing on the DOL website takes the client 10-15 minutes. However, if a PIN, used once a year, is misplaced or forgotten, the process of obtaining it on DOL’s website or Hotline may extend it by a considerable amount of time fueling frustration. It also requires sponsors to confirm receipt of the submission and may necessitate additional follow-up at peak filing times when returns may be rejected due to system overload.

Retirement Services recognized this reality and introduced a different paradigm for its clients. Sponsors electronically sign returns on their computers or hand-held devices, and Retirement Plan Consultants file 5500s on their behalf. The eSignature system, powered by DocuSign, elegantly guides the client through the signing ceremony taking the guesswork out of equation. The new approach reduced time plan sponsors need to spend filing the return to 2 minutes on average. Since its implementation in April of 2013, several hundred of 5500s have already been filed using this method. If a client misses an initial invitation to sign the return, a friendly reminder is sent to them automatically until the 5500 singing ceremony is completed. This virtually eliminates the need for traditional time-consuming follow-up efforts for advisors and retirement plan consultants.

What if Plan Sponsor Fails to File a Return?

Failure to comply with the filing requirements exposes plan sponsors to significant penalties ranging from a DOL-imposed penalty of up to $1,000 per day, without a maximum, to imprisonment for up to one year for willful violations. The Internal Revenue Code imposes a separate penalty of $25 per day for noncompliance with the IRS filing requirements, with a maximum of $15,000 per return. If a plan is subject to the filing requirements of both the DOL and the IRS, both penalties can be imposed.

What Should I do if a Plan Sponsor is Out of Compliance?

Call or email Retirement Services. Failure to file Form 5500 is a common mistake, especially with small businesses. Unfortunately, the issue does not go away on its own. Regulators easily uncover this issue when plans process distributions or begin their termination processes. Because the severity of fines increases over time, the best interest of the client is served by addressing the issue as soon as it is discovered.

To encourage compliance, the DOL established a Delinquent Filer Voluntary Compliance Program (DFVCP), which allows small plan late filers to pay a reduced penalty of $10 per day capped at $750 per year. Retirement Services has been successful in helping plan sponsors that failed to file a plan return through the DFVCP process. With the DOL and IRS increasing small plan audit activity over the last few years, the cost for complying with the 5500 filing requirement is small in light of the potential penalties.

How Can this Help You Grow Your Assets Under Management?

If you are prospecting for new retirement plan business, the electronic filing requirement is going to be helpful to you in two ways. First, with the electronic filing system, 5500 forms are searchable and available to the public within a few days of being filed, making prospecting data very current.

Second, the filing includes a detailed description of fees for plans with 100 or more participants. This disclosure appears on form Schedule C. The Schedule C reports fees paid to service providers, both direct and indirect, outlining 12b-1 payments and other forms of revenue sharing in addition to hard dollar amounts paid to service providers. The increased clarity of fees provides you with valuable insights as you work with prospects to compete for their business, resolve issues, develop a value proposition, and establish service expectations.

We Are ready to Help

Retirement Services has made a variety of tools available to you to prospect for new business using Form 5500. Our Retirement Sales Consultants are available to design prospecting lists, help with messaging, and suggest communication approaches so you can approach plan decision makers with a compelling value proposition and successfully compete for their business. We are happy to help. Call us at (888) 926-0600 or send an email to .

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