The Form 5500 is an ERISA requirement for retirement plans to report and disclose operating procedures.
Advisors use this to confirm that plans are managed according to ERISA standards. The form also allows
individuals access to information, protecting the rights and benefits of the plan
participants and
beneficiaries covered under the plan.
Make sure you are compliant. Be aware of red flags that the IRS and DOL look for on Form 5500 filings:
- Not making participant deferral remittances “as soon as administratively possible” is
considered a fiduciary breach and can make the plan subject to penalties and potentially
disqualification. Delinquent remittances are considered to be loans of plan assets to the
sponsoring company.
- An ERISA fidelity bond (not to be confused with fiduciary insurance) is a requirement. This bond
protects participant assets from being mishandled, and every person who may handle plan assets or
deferrals must be covered.
- Loans in default for participants not continuing loan repayments, or loans that are 90 days in arrears,
are a fiduciary breach that can make the plan subject to penalties and disqualification.
- Corrective distributions, return of excess deferrals and excess contributions, along with any
gains attributed must be distributed in a timely manner (typically two and a half months after the
plan year ends). In some cases these fiduciary breaches can be self-corrected if done within the
same plan year in which they occurred, and may be considered additional breaches if they extend
beyond the current plan year.
This is a partial, non-exhaustive list of common Form 5500 red flags. If you’re concerned about
ERISA compliance, contact your advisor sooner, rather than later.