Benefits Compliance

Form 5500

Summary

ERISA requires the plan administrator of certain ERISA plans to file an “annual report” with the U.S. Department of Labor (DOL) containing specified plan information. The Form 5500 and its related schedules satisfy that requirement.

Who is required to file the Form 5500?

Every group health and pension plan that is subject to ERISA is required to file a Form 5500, with the following exceptions:

  • Welfare plans with fewer than 100 participants which are unfunded, insured or a combination of unfunded and insured
  • Certain fringe benefit plans, including group legal services, educational assistance programs and adoption assistance plans
  • Church and governmental plans, since they are not subject to ERISA
  • Day care centers
  • Certain apprenticeship and training plans
  • Certain employee organization plans

Note that a Section 125 cafeteria plan is not subject to ERISA; however, the qualified benefits under the cafeteria plan, such as health FSA, medical plan and others, may be subject to ERISA and Form 5500 filing.

ERISA places responsibility for filing Form 5500 on the plan administrator. Contracting with a third party to prepare Form 5500 does not relieve the plan administrator of its responsibilities or applicable liabilities. See “Penalties for Noncompliance” below.

When is the Form 5500 due?

Plans must submit Form 5500 and related schedules by the last day of the seventh month following the end of the plan year. For a calendar-year plan, the deadline would be July 31. A two-and-a-half-month extension may be filed on Form 5558.

An automatic extension is granted to the due date of the employer's federal income tax return if all of the following conditions are satisfied:

  • The plan year and the employer's tax year are the same.
  • The employer's federal income tax return extension was granted to a date that is later than the normal due date for the Form 5500
  • A copy of the application for income tax extension is maintained with the filer's records. This automatic extension cannot be extended further by filing a Form 5558, nor can it be extended beyond nine and a half months after the close of the plan year. For calendar-year plans, this is October 15. The due date for a corporate federal income tax return, however, is the 15th day of the third month following the end of a plan year. For calendar-year corporations, this is March 15. An automatic corporate extension may extend that date for six months. For calendar-year corporations, this is September 15. In most circumstances, this is the maximum extension available.

Form 5500 Electronic Filing

Beginning Jan. 1, 2010, plans must file Form 5500s electronically for all plan years through ERISA Filing Acceptance System, second generation (EFAST2). This includes prior year delinquent or amended Form 5500 annual return/reports. The electronic filing on the current filing year Form 5500, however, must indicate, in the appropriate space at the beginning of the Form 5500, the plan year for which the annual return/report is being filed.

Plan administrators may file their Form 5500s electronically using one of two methods: the DOL's IFILE report preparation and submission application for free or EFAST2 approved third-party software vendors. A list of approved software vendors is available on the DOL website. The DOL's system does not integrate with other systems to automatically populate information. Therefore, some employers choose third-party vendors for filing assistance and ease of integration of data.

The EFAST2 system includes a validation feature, a method of error checking before filing. If a filing is improperly submitted, an amended return using the EFAST2 system will need to be filed.

Contact your advisor with questions about this process.

Single vs. Multiple Plan 5500 Filings

Plan sponsors may combine more than one type of ERISA welfare benefit into a single plan for Form 5500 filings. However, there must be language in the governing documents outlining the desire to combine benefits into a single plan. For example, if an employer offers self-insured medical benefits and dental insurance benefits, the benefits may be provided through two plans (a medical plan and a dental plan) or through one plan (a bundled medical and dental plan). If benefits are provided through two plans then two Form 5500s must be filed. If benefits are provided through a single plan then only one Form 5500 is needed, with a designation on Line 8 of the various kinds of benefits offered.

Controlled Group Plans

Controlled groups are generally considered to be one employer for Form 5500 reporting purposes. However, even for a plan maintained by a controlled group, a separate Form 5500 must be filed by each employer participating in a plan if the funds attributable to each employer are available only to provide benefits for the employees of that employer. If the plan is maintained by several companies in a control group and all funds attributable to any employer are available to provide benefits for all employees then only a single Form 5500 is required. On the other hand, if one company of a control group provides benefits solely to its employees, that employer must file its own Form 5500.

As stated above, a group of related employers that wishes to file a single Form 5500 should state in its plan documents and Summary Plan Description that, for ERISA purposes, there is only one welfare benefit plan and assign only one plan number to the plan. The group should also ensure that communications to employees designate it as one plan.

Recent Developments

On Dec. 14, 2014, the DOL published advance information copies of 2014 Form 5500, including Form 5500-SF and related Form 5500 schedules. There are some notable changes to the 2014 versions of these documents:

  • Form 5500 filers are now required to provide the total number of active participants at the beginning of the plan year and at the end of the plan year on both forms. Previously, only the active participant count at the end of the plan year was required, as well as overall participant counts at the beginning and end of the plan year. In addition, there are new requirements for Form 5500-SF, which are filed by smaller plans that meet certain criteria. Specifically, all filers must provide active participant counts at the beginning and end of the plan year, and pension plan filers must provide the number of participants that terminated during the year who were not fully vested. “Active participants” are defined for purposes of 401(k) plans as all current employees who are eligible to make deferrals, even if they chose not to. There is no specific definition for health plans, but it likely means a current employee covered by the plan.
  • Form 5500 and Form 5500-SF instructions for “Signature and Date” have been updated to caution filers to check filing status. If the status is “Processing Stopped” or “Unprocessable,” the submission may not have a valid electronic signature and may be considered not to have been filed.
  • The 2014 forms incorporate applicable questions about Form M-1 compliance. Previously these questions were addressed in a separate statement.
  • Multiple employer plans must include an attachment identifying participating employers and providing a good-faith estimate of each participating employer’s contributions during the year. Other minor changes were made to several of the related schedules, as noted in a DOL press release (link provided below).

On the same date, the DOL also published the 2014 version of Form M-1, which relates to multiple employer welfare arrangements (MEWAs) — arrangements providing benefits to employees of two or more non-related employers. MEWAs must use Form M-1 to report annually on their compliance obligations under several different group health plan mandates. The 2014 form and instructions include minor clarifications but no substantive changes from the 2013 form. Form M-1 Instructions include the latest version of the self-compliance tool, which was recently updated in conjunction with final mental health parity rules. The tool is meant to assist filers with assessing and complying with Form M-1 reporting obligations.

Although many employers outsource the preparation and filing of these important forms, employers should familiarize themselves with the new requirements and work closely with outside vendors to gather the appropriate information.

Employer Action Required

Plan administrators must prepare and file a Form 5500 electronically for each ERISA plan with the DOL and deliver a summary of it, a Summary Annual Report (SAR), to each participant, unless they meet an exception. Even if you already terminated your plan, remember that you may still have a Form 5500 filing obligation if the plan held any assets during the applicable plan year. If you sponsor more than one health or welfare plan, you may want to consider combining them into a “wrap plan,” which includes ERISA language and requirements that are often missing from insurance certificates of coverage and allows you to file a single Form 5500 for all coverages included within the wrap plan. This single Form 5500 filing can result in a considerable cost savings for companies that offer numerous health and welfare coverages.

If you failed to file a Form 5500 or filed a Form 5500 after the date it was due, you as a plan administrator may be subject to significant penalties if identified by the DOL. In these situations, consider taking advantage of the DOL's Delinquent Filer Voluntary Compliance (DFVC) Program (more information below), which provides for a flat penalty fee less than the statutory penalties, to correct failures to file in prior years.

Penalties for Noncompliance

Under ERISA, penalties can be imposed by the DOL for any refusal or failure to file a required Form 5500. Keep in mind that a Form 5500 that has been rejected by the DOL for failure to provide material information will be treated as not having been filed. The penalties for noncompliance can be heavy: Under ERISA Section 502, the DOL may assess a civil penalty against a plan administrator of up to $1,100 per day starting from the date of the administrator's failure or refusal to file the Form 5500. The Form 5500 penalty can be assessed only by the DOL; that is, there is no private cause of action available for a participant or beneficiary.

The DOL maintains two programs that reduce the penalty to an amount less than the full statutory amount of $1,100 per day: the Late-Filer Enforcement Program and the Non-Filer Enforcement Program. Under the Late-Filer Enforcement Program, plan administrators may be assessed $50 per day for each day a Form 5500 is filed after its required due date. Under the Non-Filer Enforcement Program, plan administrators may be assessed $300 per day, up to a maximum of $30,000 per year, for each plan year filing. These two programs apply when the DOL identifies a late or unfiled Form 5500. The programs are distinguished from the DFVC Program under which late and unfiled Form 5500s may be voluntarily corrected by payment of a much lower, specified penalty.

Criminal penalties are also possible. Under ERISA Section 501, any person who willfully violates any provision of Part 1 of Title I of ERISA, which includes Form 5500 reporting rules, or any regulation or order issued under such provision, will be subject to a fine of not more than $100,000, imprisonment for not more than 10 years or both. In the case of a violation by an entity that is not an individual, e.g., a corporation, the fine will not exceed $500,000. “Willfully” requires only a finding of general intent — that is, that the person acted knowingly and voluntarily. There is no requirement that the person acted with the specific intent to violate the law.

Frequently Asked Questions

Q1. What if a plan is required to file a Form 5500 and has not done so in several years?
A.
Failure to submit a Form 5500 could result in the plan administrator being assessed a fine up to $1,100 per day for each day the filing is late. Additionally, a willful failure to comply could result in a criminal penalty of $100,000, 10 years in prison or both. However, relief is available under the DOL's DFVC Program for plans that voluntarily comply before being notified of the deficiency by the DOL.

Under the DFVC Program, the penalties are reduced to $10 per day with a maximum limit of $750 for a small plan and $2,000 for a large plan. If the plan is delinquent on multiple years' filings, the small plan limit is $1,500 and the large plan limit is $4,000.

To comply, the plan must submit a completed Form 5500 with appropriate schedules to the Employee Benefits Security Administration. Additionally, a copy of the Form 5500 (without the schedules) and payment of the penalty must be submitted to the DFVC Program. Additional information on the DFVC Program is available on the DOL website.

Q2. I am a plan administrator who needs to electronically sign a Form 5500. Can I tell my preparer or my advisor what my PIN is so they can sign and submit it for me?
A.
As the plan administrator, you must examine the Form 5500 that will be sent to EFAST2 before it is submitted. Your signature attests that you have done so and that, to the best of your knowledge and belief, it is true, correct and complete. Since the EFAST2 PIN is the plan administrator or plan sponsor's electronic signature for purposes of the filing, PINs must be protected and not shared.

Additional Resources

The DOL has dedicated a portion of their website to assistance with Form 5500 Electronic Filing questions and resources.

Citations

  • ERISA § 101, 103, 104, 501, 502
  • DOL Reg. § 2520.103 and 2520.104

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