Form 5500

The government’s Form 5500 series includes 3 versions.  Generally, the Form 5500 version a 401(k) plan must file for a year is based on its participant count.  A description of each version - and when it must be used – is below. For more information, see the DOL’s Reporting and Disclosure Guide for Employee Benefit Plans.

• Form 5500-EZ – Only “solo 401(k) plans” – which just cover a business owner and their spouse – can file this return. 
  
  • Solo 401(k) plans with less than $250,000 in plan assets as of the last day of the plan year don’t have to file a Form 5500-EZ (or any Form 5500 at all).
• Form 5500-SF – “Small 401(k) plans” – a plan that covers less than 100 participants on the first day of the plan year – can file a simplified version of the Form 5500 by meeting the following eligibility requirements:
  • The plan satisfies DOL independent audit waiver requirements.
  • The plan is 100% invested in “eligible plan assets” with readily determinable fair value (e.g., mutual funds, variable annuities).
  • The plan holds no employer securities.
• Form 5500 – 401(k) plans that cover more than 100 participants (“Large 401(k) plans”) and small 401(k) plans that don’t meet the Form 5500-EZ or SF filing requirements must file a long-form Form 5500.
  • Unlike the Form 5500 EZ and SF, the Form 5500 is not a single-form return – it must be filed with certain schedules and/or attachments.  Below are the schedule requirements applicable to large and small 401(k) plans.

Large 401(k) plans (and small 401(k) that don’t meet the DOL’s audit waiver requirements) must file an independent audit report - prepared a third-party Certified Public Accountant (CPA) – with their Form 5500.  This report must include an opinion by the CPA regarding the plan’s financial statements - specifically, whether they have been fairly presented in accordance with U.S. Generally Accepted Accounting Principles (GAAP).

A 401(k) plan have a full-scope or limited-scope audit.  Under a limited-scope audit, the CPA does not audit the plan investment information certified “complete and accurate” by an eligible asset trustee or custodian – which generally makes this audit type less expensive.

An audit can add thousands of dollars to the cost of filing a Form 5500, so employers typically try to avoid this requirement by keeping their 401(k) plan’s participant count as low as possible.  A popular way to do that is cashing out small account balances related to terminated plan participants.

The “80-120 Rule" allows a 401(k) plan with between 80 and 120 participants on the first day of the plan year to file the Form 5500 in the same category (i.e., large or small plan) as the prior year return.  

This rule makes it possible for large 401(k) plans with between 100 and 120 participants to avoid the audit requirement.

The Form 5500 and Form 5500-SF must be filed electronically using the DOL’s EFAST2 processing system.  The Form 5500-EZ can only be filed using a paper form.  401(k) plans that must file a Form 5500-EZ can file a Form 5500-SF instead if they want to file an electronic return.

The filing deadline for the Form 5500 is the last day of the seventh month following a 401(k) plan’s year-end (July 31 for calendar-year plans).

Yes.  An employer can apply for an automatic 2 ½ month extension of time to file their Form 5500 by filing a Form 5558 (extending the filing deadline to October 15 for calendar-year plans).  The Form 5558 must be filed before the due date of the Form 5500.

Unfortunately, most employers don’t realize they missed a Form 5500 filing until they receive a letter from the IRS or DOL about it – which can be a year or more after the 5500 was due.  By that time, substantial penalties will have already accrued. Late Form 5500s are subject to the following IRS and DOL penalties:

• The IRS penalty for late filing of a 5500-series return is $25 per day, up to a maximum of $15,000.
• The DOL penalty for late filing can run up to $1,100 per day (as indexed for inflation), with no maximum.

However, employers who have not yet been notified by the DOL about their missing Form 55500 can file a late return using the DOL’s Delinquent Filer Voluntary Compliance Program (DFVCP) to pay a lower, flat penalty amount.

Under the DFVCP, the maximum penalty for a single late Form 5500 is $750 for small 401(k) plans and $2,000 for large plans.  The DFVCP also includes a "per plan" cap. The "per plan" cap limits the penalty to $1,500 for small plans and $4,000 for large plans regardless of the number of late Form 5500s filed at the same time.

Yes.  The public can view electronically-filed Form 5500s using the DOL’s Form 5500/5500-SF Filing Search.

Yes. Participants must receive a Summary Annual Report (SAR).  The SAR is a summary of the Form 5500. It must include the following information:

• Administrative fees paid from plan assets
• Distributions paid to participants and beneficiaries
• The total value of the plan
• Each participant’s right to request a full copy of the Form 5500

The deadline for distributing the SAR to plan participants is the later of: 1) nine months after the end of the plan year or 2) two months after the Form 5500 was due (if an extension has been granted by the IRS).