Filing filing… Where is that filing?? Correcting missing or late Form 5500s

Continuing our series on common corrections in retirement plans, we dive into the world of missing Form 5500 filings.

Annually, plan administrators are required by the U.S. Department of Labor (DOL) and Internal Revenue Service (IRS) to provide information about the plan via a Form 5500, Annual Return/Report of Employee Benefit Plan. The filing is due seven months following the plan year-end, but can be extended via Form 5558, Extension of Time to File, for an additional two and a half months.

Plans must file beginning with the first year of the plan, regardless of the amount of assets, and must continue through final distribution of assets following termination of the plan. Beginning in 2010, all filings have been required to be submitted electronically through the DOL EFAST2 system.

Plan sponsors generally engage a third-party administrator (TPA) to assist them with the completion and filing of Form 5500. The TPA may sign and submit the filing on behalf of its client upon receipt of proper engagement, filing authorization, and a copy of the signed page 1 of Form 5500. However, ultimately it is the responsibility of the plan sponsor to ensure the filing is completed each year.

Most plan sponsors are made aware of filing errors when they receive a notice from the IRS or DOL. These notices can look very scary as both entities can impose substantial penalties for late or missed filings. The current IRS penalty is $250 per day up to a $150,000 maximum, and the DOL penalty is $2,529 per day past the due date.

But before we talk about how to remedy a missed filing—the first step is to determine whether the notice is warranted. If possible, locate your filing, verify the filing date on www.efast.dol.gov, and obtain your acknowledgment ID provided by the DOL when you electronically filed. If you have these items, respond to the proper agency with the supporting documentation, and usually this will suffice.

However, if it is shown that a filing was missed, don’t despair—there may still be a way to fix it! If a plan has already been contacted by the IRS or DOL about a missing Form 5500, there may be an opportunity to correct via the below method. If you were fortunate to catch the error prior to the government, the below method may also apply.

For any ERISA plans, correction of a missed or late Form 5500 doesn’t occur under the IRS Employee Plans Compliance Resolution System (EPCRS) as the DOL under Title 1 of ERISA is the governing authority for the Form 5500. The plan sponsor will need to correct through the DOL Delinquent Filer Voluntary Correction (DFVC) program.

For non-ERISA plans required to file the Form 5500-EZ with the IRS, there is a relief program as well. Generally, the IRS will waive all penalties if the plan sponsor corrects through the DFVC program.

Step 1: Complete the missing filing, including auditors report if the plan is a large plan filer. Check Part 1 D, showing that the plan is filing under “the DFVC program.”

Step 2: Use the DFVP program to calculate the required payment.

Generally, small plan filers have a maximum of $750 per filing, or $1,500 for multiple filings. Large plan filers have a maximum of $2,000 per filing, or $4,000 for multiple filings.

Step 3: Use www.Pay.gov to pay the proper penalty.

Step 4: Save all proper documentation, respond to the letter received, and retain copies for your records.

Step 5: This step is the most important! Review and set up reliable processes to ensure all necessary future filings are completed by the applicable deadline.

For more information on compliance or correcting missing or late Form 5500s, contact your Milliman relationship manager or a Milliman compliance consultant.

Delinquent Filer Voluntary Compliance Program (DFVCP) Penalty Calculator and Online Payment With Instructions, Examples, and Manual Calculations | U.S. Department of Labor (dol.gov)

401(k) Plan Fix-It Guide — You haven’t filed a Form 5500 this year | Internal Revenue Service (irs.gov)