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What’s a Form 5500? Here’s Everything You Need to Know.

By Mike Morrison

If your business is looking to start a 401(k) plan or you just recently started one, you might see some references to Form 5500 and wonder, what the heck is that? Here’s the deal. The 5500 is a form that collects and provides info regarding the qualification of the plan, its financial condition, investments and the operations of the plan. A good 401(k) provider will provide you a signature-ready form for your review that you’ll need to file each year.

Why the need for the Form 5500?
The IRS, DOL, and Pension Benefit Guaranty Corporation jointly developed the Form 5500-series of returns for employee benefit plans to create a clear means to satisfy the Internal Revenue Code needs, as well as satisfy the rules within the Employee Retirement Income Security Act (ERISA). The 5500 your firm files is based on number of employees, and for self-employed 401(k) users (more details below), you may or may not need to file based on the amount of money in your plan.

If I sponsor a 401(k) plan, do I have to file Form 5500?
It’s required for most plan sponsors; however, if your plan has fewer than 100 participants, you’ll likely be able to file a simplified, short-form version (Form 5500-SF). Plans with over 100 employees will file the standard 5500. Both are pretty easy to submit and are typically done electronically on the DOL’s site via the EFAST2 filing.

Additionally, owner-only businesses with Individual 401k plans (aka Solo 401k plans) only need to file Form 5550-EZ if their plan assets are equal to or greater than $250,000. These are mailed in, but Solo 401k plan users can choose to file electronically with the Form 5500-SF.

When does the form have to be filed?
The form must be filed on or before the last day of the seventh month after the plan year ends (July 31st for a calendar-year plan); however, a 2 ½ month extension may be requested via Form 5558.

What if I forget to file?
The price for missing the filing deadline can be pretty pricey. The IRS can assess a late-filing penalty of $25 per day, up to a maximum of $15,000. Additionally, the DOL may assess a penalty up to $1,100 per day, with no maximum limit.

Will my 401(k) provider assist me with Form 5500?
As mentioned above, some 401(k) providers will prepare a signature-ready document for the plan sponsor (if not, be prepared to spend potentially hundreds of dollars each year for an accountant to help you do it). If you’re comparing providers for a company with employees, it’s definitely something to think about. For Solo 401k buyers, many offerings don’t include any support for filing a Form 5500, and while you may not need to file a 5500 for a few years, it’s still something to factor in to your decision.

FYI, ShareBuilder 401k plans offer signature-ready 5500s.


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