Employee benefit plans must file an annual report, the Form 5500, with the Internal Revenue Service each year. Form 5500 is required to satisfy annual reporting requirements mandated by the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code. The Department of Labor jointly oversees this reporting requirement with the IRS.
Form 5500 is the annual report filed by employee benefit plans. In this annual report, employee benefit plans report the number of participants and beneficiaries as well as plan assets. Plans also disclose relationships and fees paid to service providers and disclose whether there have been any prohibited transactions under ERISA. These reports must be filed electronically.
Form 5500 is due by the last day of the seventh calendar month after the end of the employee benefit plan’s plan year. If there is a plan year that is less than 12 months, the Form 5500 must be filed by the last day of the seventh calendar month after the end of the short plan year. If that day falls on a Saturday, Sunday or federal holiday, the due date will be the next normal business day.
Extensions for filing Form 5500 are available one time only for plans and may extend the due date up to two and a half months. To obtain an extension, the plan must file Form 5558, Application for Extension of Time to File Certain Employee Plan Returns, on or prior to the plan’s due date. An extension will automatically be granted one time upon request provided that the following requirements are met: the plan year and employer’s tax year must be the same, the employer has been granted an extension of time to file its federal income tax return and a copy of the application for extension is maintained with the filer’s records. The latest that a Form 5500 may be filed is nine and a half months after the end of the plan’s plan year.
There are penalties under ERISA and the Internal Revenue Code for failing to timely file an annual report. A penalty of $1,100 a day may be assessed under ERISA for each day that a plan administrator fails to or will not file a complete annual report. The Internal Revenue Code assesses a penalty of up to $25 per day (to a maximum of $15,000) for failure to file an annual report for deferred-compensation plans, trusts, annuities or bond purchase plans by the due date. If a plan is required to file an actuarial statement and fails to do so, the Internal Revenue Code provides for a penalty of $1,000.
If a plan sponsor fails to timely file their annual report, they may seek refuge from the Employee Benefits Security Administration at the Department of Labor through the Delinquent Filer Voluntary Compliance Program. This program allows plan sponsors to pay reduced civil penalties for coming forward voluntarily. The amount of the penalty depends on the number of participants in the plan and the number of delinquent reports. For plans with fewer than 100 participants, the maximum fee is $750 for one delinquent annual report and $1,500 for multiple late reports. For large plans with more than 100 participants, the maximum fee shall not exceed $2,000 for one delinquent annual report and $4,000 for multiple delinquent reports.