Any administrator or sponsor of an employee benefit plan subject to ERISA must file information about each benefit plan every year via the Form 5500. The Form 5500 is an annual report that is a part of the Employee Retirement Income Security’s Act (ERISA) that helps the Department of Labor (DOL) and IRS determine whether the employee benefit plans are operated and managed according to government standards.
The Form 5500 needs to be filed electronically before July 31 every year. This date is for Calendar Year plans that run from 1/1-12/31. For non-calendar years, the filing date is due 7 months after their plan end date. With the deadline occurring one time per year, it can be difficult for administrators or sponsors to avoid making mistakes, especially if they are overwhelmed by the process.
The BASE® 5500 Solver can help employers effectively prepare and file the Form 5500. This comprehensive compliance solution generates custom compliant 5500 documents that allows an employer to easily prepare and file the 5500 form electronically each year.
According to the IRS, an employer who enters in the wrong information, or accidentally leaves a field blank when filling out the Form 5500, could face an employee plan compliance check by the DOL.
Here are some of the most common errors when filling out and filing the Form 5500:
Noting “zero” plan participants.
All eligible employees and employees with balances in the plan are considered participants.
This error means that plan sponsors have allowed contributions to exceed the annual limit a participant is allowed to contribute.
Even if a plan has been terminated, the Form 5500 is still required until all assets are distributed from the plan. Documenting terminated plans is a part of the annual reporting.
If the Form 5500 asks if a plan has a loss caused by fraud or dishonesty. This field should be left blank.
Employers have been known to accidentally use Code 1/ for active accounts when that code is for plans that are frozen or non-active.
A few additional errors are incorrectly entering the EIN and plan number when filing, providing too much information such as returning over 12 months, or not using EFAST software or approved vendors.
Because the Form 5500 requires such a significant amount of information, it is easy to enter in wrong codes or mistakenly leave sections blank. However, when using a third-party administrator for your health and benefit needs, this provides some additional checks and balances to help employers effectively prepare to file this form, minimizing the plan-related workload and risk, and curtailing the common errors that could trigger a DOL audit.