The lazy days of summer are upon us, but before you head out on that much-deserved vacation, remember to get your Employee Retirement Income Security Act (ERISA) reporting affairs in order. For plan sponsors maintaining any ERISA plan on a calendar year basis, now is the time to ensure that either your Form 5500 will be filed by July 31, 2017, OR an extension will be filed by that date. While these filings are often handled second nature—or outsourced—a few reminders on Form 5500 best practices follow:
Don’t miss the deadline – extend your time. An extension of time to file a Form 5500 is NOT necessarily automatic. While a request for an extension will be automatically granted for a timely filed request, the request for an extension (Form 5558) generally must be filed unless (1) the plan year and the employer’s tax year are the same; and (2) an extension to file the employer’s federal tax return has been granted to a date later than the Form 5500 due date. When in doubt as to whether prongs (1) and (2) have been met, filing a Form 5500 extension (on Form 5558) may be best practice.
Multiple forms may be required. A Form 5558 must be filed for each plan—e.g., if you file multiple Form 5500s, you must file multiple Form 5558s. In the health and welfare arena, have you considered “wrapping” your plans into a single plan to reduce the associated filing burden?
Policy year is not necessary the same as the plan year. Insurance policy years (i.e., the time for a renewal) may be different from ERISA plan years. If your health and welfare plans renew on a fiscal year, your ERISA plan may still be on a calendar year track. The ERISA plan documentation will specify the plan year on which it operates. If you aren’t sure—or don’t know if you have an ERISA plan document—ask!
100 participant threshold is key. Reminder for emerging organizations: you cannot assume that because you did not need to file all or part of a Form 5500 last year, you will not need to do it next year. As a rule of thumb, 100 participants is the “magic number.”
Reaching 100 participants precipitates a filing requirement for unfunded health and welfare plans. If you’re covering non-employee participants (e.g., spouses and dependents), then you need to carefully monitor the number of participants year over year.
Whether a plan has more or less than 100 participants governs whether a Form 5500-SF can be used. Note that for a small “pension” plan (which, when used in this context includes a 401(k) and 403(b) plan), this number will largely drive whether the plan is exempt from the audit/accountant’s report requirement.
Grace period for plan crossing the 100 participant threshold: Remember the grace period rule for plans with between 80 and 120 participants: if the plan falls in that window and a Form 5500 annual return/report was filed for the prior plan year, you may elect to complete the return/report in the same category (‘‘large plan’’ or ‘‘small plan’’) as was filed for the prior year.
ERISA plan status double-check: As a plan administrator, you should be wary of being too cavalier and assuming that your plan is not subject to ERISA (and the corresponding Form 5500 reporting requirement). An audit or a lawsuit is a less than ideal time to first realize that your severance, top hat (with no accompanying notice), employee assistance program, or other arrangement is actually an ERISA plan.
Delinquencies can be fixed. Late filings may be correctable under the Delinquent Filer Voluntary Correction Program if discovered before the plan is under written notice from the Department of Labor concerning its delinquency. Pursuing correction under this amnesty program may yield significant savings compared to those civil penalties assessable under audit.