Days are getting longer, temperatures are getting warmer, plants are looking greener, schools are letting out, Brood X cicadas are emerging…it can only mean one thing…5500 season is approaching.
However, unlike the cicadas and their 17-year cycle, the Form 5500 filing requirements arise every summer for calendar year-end ERISA covered retirement plans and health and welfare plans that cover at least 100 participants. While it may be easy enough to file an extension and hit the snooze button until October, now is great time for plan sponsors to start thinking about their 5500 obligations.
Plan sponsors should make sure they understand who is responsible for preparing their 5500s and by when the preparer needs any necessary information from the sponsor. TPAs and recordkeepers generally prepare the 5500s for retirement plans, though it’s occasionally done by accountants or plan sponsors themselves. On the health and welfare side, plan sponsors are often the ones preparing these 5500s, with the insurance companies providing the necessary information to complete the Schedule A. Having a good understanding of the process and who is responsible for what, as well as monitoring those items, can help avoid last minute hiccups that lead to delinquent 5500 filings.
Speaking of delinquent filings, 2020 calendar year-end 5500s are due on August 2, 2021 (plan sponsors get two extra days this year because July 31st falls on a Saturday). If an extension is filed (Form 5558), the due date can be pushed to October 15, 2021. While many TPAs and recordkeepers automatically file extensions for the retirement plans they serve, plan sponsors should confirm who is responsible for filing the extensions. Plan sponsors are often the ones responsible for filing any health and welfare 5500 extensions.
Lastly, if a retirement plan (or funded health and welfare plan) has been audited in the past and had 100 or more participants (including eligible employees not participating and separated employees with account balances) as of the first day for the plan year, it will need an audit again for the plan year in question. If a plan has never been audited, then thanks to the 80-120 rule (which I won’t get into here), the audit requirement won’t kick in until the first plan year where there are over 120 participants on the first day of that plan year. Plan sponsors in this latter camp that need an audit for the first time this year need to start looking for a qualified auditor now instead of waiting until the last minute. The audited financial statements and auditor’s reports for plans with audit requirements must be attached to the 5500 filings, and the Department of Labor will consider the filings incomplete without them.
In the end, a successful 5500 filing season (like with many benefit plan matters) often comes down to process. Time has come today… to make sure that process is in place.