As your group’s Plan Administrator, you’re on the front lines of ensuring compliance. That includes gathering the right data, filing Form 5500 accurately, and meeting critical deadlines.

At Watkins Ross, we expertly prepare Form 5500 for our clients. This is an incredibly valuable service, especially as Employee Retirement Income Security Act (ERISA) and Internal Revenue Service (IRS) requirements continue to evolve. Because it’s up to Plan Administrators to review and sign the completed form, it’s important that you understand what you’re signing. 

This quick guide will help you better understand Form 5500 for a defined contribution plan and offer clear, practical guidance on how to file successfully.

What Is Form 5500?

If you’re new to Form 5500, the first step is understanding what it is and who needs it. Form 5500 is a filing requirement for employee benefit plans, including defined contribution plans (such as 401(k) plans), under the ERISA and the Internal Revenue Code (IRC). It provides the U.S. Department of Labor (DOL) and IRS with important information about the operation, financial condition, and compliance of these plans.

The purpose of Form 5500 is to ensure that plan sponsors meet reporting and disclosure requirements, provide transparency, and allow the agencies to monitor whether the plans are adhering to regulatory standards.

Why Is Form 5500 Important?

As the person responsible for plan compliance, it’s critical to understand why this form matters – not just to regulators, but to your organization and plan participants. Mistakes can lead to serious consequences, and timely, accurate filing is your first line of defense.

Form 5500 Compliance

It helps ensure that plan sponsors are meeting the regulatory requirements under ERISA, the IRC, and other applicable laws.

Transparency

The filing provides employees, beneficiaries, and regulators with important information about the plan’s financial health, performance, and operations.

Audit Trigger

An improperly filed or incomplete Form 5500 could trigger an IRS audit of the plan or the sponsor’s tax filings.

Data for Policymakers

The information collected from these filings is also used by the federal government to make policy decisions about retirement savings and pension plans.

Who Must File Form 5500?

Knowing whether your plan is required to file – and which version to use – is one of the areas where we at Watkins Ross offer expert guidance. Here’s what you need to know to determine your filing obligation:

Form 5500 General Requirement

If your defined contribution plan (e.g., 401(k), 403(b)) has 100 or more participants at the beginning of the plan year, you are required to file Form 5500 annually.

Small Plans

Small Plans (fewer than 100 participants): These plans may be eligible for a simpler filing option, called the Form 5500-SF (Short Form), if they meet specific criteria.

Exemptions

Certain plans (such as some governmental or church plans) may be exempt from filing.

When to File Form 5500?

Form 5500 is due seven months after the end of the plan year. For example, if your plan’s year ends on December 31st, the form is due by July 31st of the following year. If you need a little more time, you can file for a two-month extension by submitting Form 5558 before the due date.

What Information Is Included in Form 5500?

Pulling together accurate and complete information can be a logistical headache. Here’s a breakdown of what’s included so you can plan accordingly:

Form 5500 Plan Information

Basic details such as the plan name, sponsor, and plan year.

Form 5500 Financial Information

The plan’s financial statements, including balance sheets, income statements, and details about plan assets and liabilities. For large plans (those with 100+ participants), an audited financial statement is required, prepared by an independent accountant.

Participant Information

Number of participants, whether the plan provides benefits to employees, and whether the plan includes both active and retired participants.

Investments

Details about the types of investments held by the plan, such as mutual funds, stocks, or bonds.

Plan Operations and Compliance

Information on the plan’s compliance with regulations, such as whether it has made required contributions, if it has met fiduciary responsibility standards, and if there are any issues regarding loans, distributions, or other plan activities.

Fees and Expenses

The plan must disclose administrative and investment-related fees, as well as any changes in fee structures.

Schedule A (if applicable)

For plans that engage with service providers (e.g., third-party administrators or insurance companies), Schedule A reports the compensation paid to those providers.

Schedule C (if applicable)

For plans that engage with any parties in a relationship that could cause conflicts of interest, this schedule is required to disclose additional compensation and transaction details.

Form 5500 vs. Form 5500-SF (Short Form)

If you’re administering a smaller plan, understanding whether you qualify for the simplified short form can save you time, money, and stress. Here’s how the two compare:

Form 5500-SF is a simplified version of Form 5500 used for smaller plans (fewer than 100 participants) that meet certain criteria. This could include having no employer securities in the plan or being eligible for the audit exemption. If your plan is small and meets the requirements for the short form, this is preferred. It’s generally easier to complete and less costly to file.

Consequences of Non-Compliance

Failure to complete Form 5550 correctly and file it on time can result in significant penalties. For example, the IRS can impose a fine of up to $250 per day (up to $150,000 per year). The DOL may also impose fines, and your plan could lose its qualified status – affecting tax advantages for both employers and employees.

Key Schedules and Attachments for Defined Contribution Plans

One of the most confusing aspects of Form 5500 is figuring out which schedules apply to your plan. Use this cheat sheet to navigate those decisions more confidently:

• Schedule H (for large plans): Required for plans with 100 or more participants, and provides detailed financial statements, including audited financials.

• Schedule I (for small plans): For plans with fewer than 100 participants, this schedule summarizes the plan’s financials and investments.

• Schedule A: If the plan purchases insurance or annuity contracts, this schedule provides details about the insurance companies and amounts paid.

• Schedule C: Used if there are specific service providers involved, disclosing compensation and relationships with plan service providers.

• Schedule D: If the plan is involved in specific transactions (such as non-exempt prohibited transactions), this schedule is required.

Where to File?

You must file Form 5500 electronically via the EBSA’s EFAST2 system (Employee Benefits Security Administration). Paper filings are not accepted.

Need Help Navigating Form 5500?

Form 5500 is essential for maintaining compliance and transparency in your group’s retirement plan. As a plan administrator, managing its complexity, deadlines, and reporting requirements can be overwhelming. Let Watkins Ross take the stress out of Form 5500. Schedule a consultation with our experts today, or give us a call if you have any questions.