IRS Form 5500 Due July 31 – 12 Employer Q&A

Written by Joanna Morrow

Joanna Morrow, Principal and Founder of Employer Benefits & Advice, is an employer consultant and advocate who has worked in the employee benefits industry for over two decades. She works diligently to help employers overcome obstacles in their business by sharing her expertise in Human Resources, Benefits & Compensation, Process Mapping, Risk Management and ERISA/DOL/IRS compliance. She is a licensed life and health insurance professional in the State of Arizona and is an active member of the National Association of Health Underwriters (NAHU).

IRS Form 5500 Due July 31 – 12 Employer Q&A

Each year employee benefit plan administrators are required to report on the financial condition, investments and operations of their employee benefit plans. Failure to file the return can result in a maximum penalty of $2,194 per day for each day late.

The Department of Labor (DOL), Internal Revenue Service (IRS) and the Pension Benefit Guaranty Corporation (PBGC) jointly developed the Form 5500 series to consolidate the main annual reporting requirements in order to streamline the process for employers.

For employers whose benefit plans renew January 1, the deadline for filing Form 5500 is quickly approaching. In preparation, the following Q&A should help clarify plan administrator responsibilities and ensure compliance.

1. What is Form 5500?

The Form 5500 series is intended to protect the rights and benefits of plan participants and beneficiaries by ensuring that:

  • Employee benefit plans are operated and managed in accordance with certain prescribed standards
  • Employee benefit plan participants and beneficiaries are provided with or have access to sufficient plan information

2. Who is required to file Form 5500?

Plan administrators (employers) operating health and welfare plans with more than 100 employee participants on the first day of the plan year must file a Form 5500 with the Department of Labor (DOL) each year.

3. Who is not required to file Form 5500?

If a health and welfare plan meets any of the following criteria it is not required to file a Form 5500:

  1. The plan has less than 100 employee participants, regardless if self-funded or fully-insured
  2. The plan is sponsored by a government employer
  3. The plan is sponsored by a church

4. How is a health and welfare plan defined?

In order for a health and welfare benefit to exist there must be a plan, fund or program established or maintained by the employer for the purpose of providing one or more of the following benefits:

  • medical, surgical or hospital care or benefits
  • benefits in the event of sickness, accident, disability, death, or unemployment
  • vacation benefits
  • apprenticeship or other training benefits
  • day-care centers
  • scholarship funds
  • prepaid legal services
  • holiday and severance benefits
  • housing assistance benefits

5. How is plan “participant” defined?

  • Active participants – those currently employed and covered under the plan.
  • Retired or separated participants but receiving benefits – such as former employees receiving COBRA benefits
  • Other participants retired or separated from service and entitled to future benefits – employees who have separated from service and are entitled to benefits in the future.
  • Deceased participants whose beneficiaries are receiving or entitled to receive benefits – beneficiaries of former employees that are receiving or entitled to receive benefit.

6. Who is NOT considered a participant?

Dependents covered under the health and welfare plan, such as spouses and children are not considered participants for the purpose of the 5500 filing.

Unlike retirement plans, when it comes to health and welfare plans the term “participant” refers only to those employees actually enrolled in the plan versus all of those eligible to be covered.

7. Is there a way to reduce the number of 5500s I have to file?

Yes. Instead of filing a form 5500 for each individual plan with more than 100 participants, employers can use a “wrap” document to pull all employee benefits into a single plan in order to reduce the number of Form 5500 filings required.

The wrap document does not take the place of other plan documents (such as the cafeteria plan document), it simply “wraps” all of the other documents into one plan allowing all benefits to be reported within a single Form 5500 filing.

8. What is the deadline for filing Form 5500?

The form 5500 is due seven (7) months after the end of the plan year. For example – if your plan year ends on December 31st, then your 5500 is due July 31st of the following year.

9. How do I file Form 5500?

Beginning January 1st, 2010 the DOL requires all 5500s to be filed electronically using their proprietary EFAST2 system.

10. What if I need more time?

An employer who needs additional time to complete the 5500 can file a Form 5558 for a 2-1/2-month extension. The deadline for Form 5558 is any time before the original Form 5500 is due.

11. Can I hire a company to complete the 5500 filing for me?

Yes. Many benefit broker/consultants work with professional accounting firms to deliver these services to their clients at no charge. If not, here’s the ballpark of what employers can expect to pay:

  • Form 5500 Preparation and Filing – $500 – $1,500.
  • Form 5558 (Extension to File) Preparation and Filing – $75 – $100.
  • WRAP Document – $500 – $1,500 depending on plan complexity.
  • Premium Only Plan (POP) Documents – $350.

12. Where can I learn more about my obligations relative to 5500 filing?

Further guidance and information regarding form 5500 including

  • links to informational copies of current and prior Forms 5500 and 5500-SF, schedules, instructions and links to general reporting and compliance assistance
  • links to FAQs about EFAST2 and EFAST2 User Guides and filing tips
  • fact sheets and FAQs about the Delinquent Filer Voluntary Compliance Program

can be found by visiting:

https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500

For more information on these and other services offered by Employer Benefits and Advice, please contact me at 602-903-4047 or email me at jmorrow@employerbenefitsandadvice.com.