In addition to the April 15th tax filing deadline, there is another important deadline: the filing deadline for the Form 5500, Annual Return/Report of Employee Benefit Plan. A Form 5500 is required to be filed for companies that offer pension benefit plans, including defined benefit pension plans, 401(k) plans, 403(b) plans and ESOPs, among others. The Form 5500 must be submitted to the Department of Labor at least seven months after your plan’s year-end. An extension of an additional two and a half months is automatically approved by filing the Form 5558. For example, if your plan year-end is December 31st, the Form 5500 is due by July 31st. With an extension, it’s due by October 15th.
In general, small pension plans have the option of filing a simplified annual Form 5500-SF, while larger plans are required to file the full Form 5500, which requires the attachment of audited financial statements. Plans with fewer than 100 participants (any active, eligible employee or any former employee or beneficiary who is receiving or entitled to receive benefits) at the beginning of the plan year (and who do not fall under certain exceptions) should file the Form 5500-SF. Plans with between 100 and 120 participants may elect to file the Form 5500-SF only if they filed the Form 5500-SF in the previous year; otherwise, they must file the full Form 5500. Plans with greater than 120 participants must file the full Form 5500 with an audited plan financial statement. Failing to comply with the Form 5500 filing deadline may result in the Department of Labor applying penalties in the form of fines or a civil suit.
What can you do to make your employee benefit plan financial statement audit more quick and efficient? First, be ready to provide the documents requested on the auditor’s prepared-by-client list, which typically includes any updated plan documents or amendments, an employee census, copies of correspondence with plan providers and regulatory agencies and an annual auditor package from your third party administrator and/or trustee. Also be ready to provide any documents needed by the audit team for testing. Testing areas include participant eligibility, participant loans, participant rollovers, participant distributions and plan contributions. Lastly, be aware of situations that may indicate a prohibited transaction such as an occurrence of a late remittance of participant contributions to the plan. Following these guidelines will improve audit timeliness and ensure that your Form 5500 is filed on time.