Employee Benefit Plans: The 411

Valuable Information on 401ks, Pensions, ESOPs, Form 5500 Preparation + More

What Does it Mean if Your Form 5500 is Late?

As the October 15th deadline looms closer, many of our clients are asking the question; “What does it mean if our Form 5500 is late?”  If you haven’t looked into this question before, you will be surprised at the substantial penalties that can be assessed.  The DOL takes failure to file return/reports very seriously.  Below are the various penalties that can be assessed under ERISA or the Code as described in the Form 5500 filing instructions:

1 – A penalty of up to $1,100 a day for each day a plan administrator fails or refuses to file a complete report.  See ERISA section 502(c)(2) and 29 CFR 2560.502c-2.

2 – A penalty of $25 a day (up to $15,000) for not filing returns for certain plans of deferred compensation, trusts and annuities, and bond purchase plans by the due date(s).  See Code section 6652(e).

3 – A penalty of $1,000 for not filing an actuarial statement (Schedule MB (Form 5500) or Schedule SB (Form 5500)) required by the applicable instructions.  See Code section 6692.

In addition to the above penalties associated with failure to file are fines that can also include imprisonment for willful violations and making false statements.

For certain large plans, a complete return (mentioned in item 1 above) includes an accountant’s audit report of the plans financial statements.  Since Form 5500’s are required to be efiled this year (see related blog on September 14th), the DOL will be able to immediately reject as incomplete returns that fail to have required accountants’ audit report attached.  There will be no “grace” period to complete the audit while the plan administrator waits for the DOL to process the deficiency letter, as occurred in the past.  Additionally, since third party administrators will be involved in filing the electronic forms, they are requesting that plan sponsor submitted their completed audits several weeks earlier than the October 15th filing . 

So now that you know the answer to the question “What does it mean if your Form 5500 is late?, you know that that is not an option.

Kim Lubbers, CPA