Everything You’ve Always Wanted to Know About IRS Form 5500

Almost every organization that sponsors employee benefit plans must file IRS Form 5500. Of course, there are different rules and requirements for 5500s based on the type of plan being reported. In today’s post, we’re going to look at a few of the common questions that we receive about 5500s.

General IRS Form 5500 Questions

  1. Do all employer-sponsored benefit plans have to file 5500s?

With only a few exceptions, most qualified retirement plans – including 401(k)s – must annually file a 5500 return. Additionally, group health and welfare plans subject to the Employee Retirement Income Security Act of 1974 (ERISA) must also file a return.

  1. If my plan isn’t subject to ERISA because we’re either a governmental entity or operating as a church plan, do we still have to file IRS Form 5500?

Generally no. However, some church plans may elect to be covered by the Employee Retirement Income Security Act of 1974 (ERISA). If they do, they must file 5500s. Similarly, even not-for-profit entities that aren’t governmental entities or operating church plans must file 5500s, unless they are exempt from ERISA.

  1. When is the 5500 form due?

All 5500s are due by the end of the 7th month following the completion of the plan’s year end. This is not the employer’s fiscal year, though they may be the same date. However, the plan sponsor can file for an extension of up to two and a half months. For calendar year plans, that means that IRS Form 5500 is due by July 31st of the year following. For example, if the plan year ends on December 31, 2023, the 5500 is due by July 31, 2024. In the example, if the plan sponsor filed for an extension (using IRS Form 5558), the 5500 filing would be due by October 15, 2024.

  1. Can 5500s be filed by hard-copy and snail mail, or must they be filed electronically?

All 5500s and 5500-SF’s (for Short-Forms) must be filed electronically through the IRS’s EFAST2 system. But, see below in the Qualified Retirement Plans section for owner-only retirement plans.

  1. Are there penalties for either not filing a required 5500 or for filing a late 5500?

Definitely. Both the IRS and the DOL have penalties for late or missing 5500s. For 2024, the IRS penalty is $250 per day not to exceed $150,000 per missed or late return. The DOL penalty in 2024 is even worse, at $2,670 per day per missed or late filing.

  1. Yikes! Is there a way to significantly reduce those penalties?

Yes. There is a program known as the Delinquent Filer Voluntary Compliance Program (DFVCP) through the DOL. It allows employers who have not yet been notified of an audit to come forward and file late or missing 5500s and pay a much smaller penalty of $750 per filing up to $1,500 for small plans (under 100 participants on the first day of the plan year) or $2,000 per filing up to $4,000 for large plans. If 5500s for multiple years haven’t been filed or have been filed late, they must all be submitted together through DFVCP, but with those as the maximum penalties. Note that for certain not-for-profit late or missing small filers the maximum penalty is $750.

Qualified Retirement Plans

  1. Do all qualified retirement plans have to file an IRS Form 5500?

Generally, yes. A qualified retirement plan such as a 401(k), profit sharing plan, money purchase pension plan, and defined benefit plans must all file 5500s. Smaller qualified plans typically file the 5500-SF, which has a more limited set of questions than a full 5500.

  1. Do I have to have the plan independently audited each year and submit the audit report with my 5500?

For plans with fewer than 100 participants with account balances as of the first day of the plan year, the answer is no. If the plan has 100 or more participants with account balances (including former employees with account balances) on the first day of the plan year, however, an audit by an independent entity must also be completed and filed along with the IRS Form 5500.

  1. Is there a rule that for the year my plan first goes over 100 participants but not more than 120 with account balances, my plan gets a bit of a grace period?

Yes. You don’t need to file a full 5500 – and can continue to file the 5500-SF without an audit – until the plan has 120 participants with account balances on the first day of the reported plan year if the plan previously filed an IRS Form 5500. On the other end of the spectrum, that same “80-to-120” DOL rule states that if the plan has previously filed as a large plan (100+ participants with account balances) and falls below 100 participants, then it must continue to file as a large plan (with an audit) until it falls below 80 participants with account balances.

This is one reason that firms like Kushner & Company assist in reviewing the number of participants with low account balances to see if the plan allows for forced distributions to lower the participant count.

  1. If I have more than one qualified retirement plan, such as a combo plan (a 401(k) and a cash balance plan) do I have to file separate 5500s?

No, but you would have to file all applicable schedules to the 5500 for both plans.

  1. If the plan is an owner-only plan (such as a solo 401k) do I have to file a 5500?

Owner-only (including a spouse) qualified retirement plans with plan assets of $250,000 or more must file a 5500-EZ form, and may optionally file it via EFAST2 or by mail.

Health and Welfare Plans

Health and welfare plans include group medical, dental, vision, prescription, life insurance, and disability plans.

  1. Do all health and welfare plans have to file a 5500?

No. Unlike qualified retirement plans, only health and welfare plans with 100 or more participants on the first day of the plan year must file an IRS Form 5500 for that plan.

  1. Can I combine my qualified retirement plan and health and welfare plan 5500 filings together?

No. They must be filed separately.

  1. My organization has lots of group medical, dental, vision  and prescription plans, life insurance plans, and others. Is there a way to file just one 5500 instead of one for each type of health and welfare plan?

Yes, but your organization would need to adopt what’s called a “wrap plan.” A wrap plan is like an umbrella, with all of the applicable health and welfare plans underneath it. The wrap plan (which requires a written plan document and Summary Plan Description just like any other plan) files one 5500 for all of the covered health and welfare plans, with schedules for each underlying plan.

For more information on health and welfare 5500s, be sure to visit our previous blog.