The Form 5500 series concentrates on your employee benefit plans. Returning the annual report with the Depart of Labor is mandatory through the Employee Retirement Income Security Act of 1974. Preparing your form is based on many contributing factors.
Who is required to File Form 5500?
Knowing if you are required to file is the first step in reporting the benefit plan. If you aren’t sure, contact your tax professional. Carefully review your current employee benefits package. Keeping up-to-date records is crucial for accurate reporting. Some of the reporting requirements depend on the type of benefit plan you offer to your employees. Does any of the following match your organization’s benefits?
- Profit sharing or stock options
- 401(k) or other retirement plans
- Medical, dental or life insurance policies
- Severance pay
- Church pension plans
Under most circumstances, your organization will be required to electronically file the annual report.
Preparing to File Form 5500
The Form 5500 series has three different filing categories. The forms may also include attachments and schedules depending on the size of your business and the number of participants in the plan.
- Form 5500: If you provide welfare benefits and pension plans to over a hundred participants, Form 5500 is required for filing.
- Form 5500-SF: If you have less than 100 employees participating in your benefit plan, you will use the short form.
- Form 5500-EZ: When your plan is for one eligible participant, you will use the EZ form. A business with no employees will use this form. The plan may cover the participant’s spouse.
Required Information for the Form 5500 Series
Preparing to report you Form 5500 requires specific information from your benefit plan. Keeping accurate records throughout the year is the best way to ensure you have the right data for filing. The data includes:
- Outline of the Plan: Gather all financial information related to the plan including statistical calculations related to your employee benefits. Preparing an asset and liability report is part of filing the Form 5500.
- Insurance Plan Details: Details of your insurance policy including your current contract with the insurance company and service provider.
- Retirement or Pension Data: Gather the information regarding the number of distributions, matched funds, and any other related details.
If your business is large with numerous employees participating in your benefit plan package, the Form 5500 requires a separate auditor’s report. The independent report must be part of the filing.
Failure to file your report by the required deadline may result in costly fines. In order to avoid delinquency, keep your benefit plan’s data current. If you are unable to meet the deadline for filing your Form 5500, request the one-time extension. The extension provides two and half extra months to prepare your report.
Form 5500 is mandatory for organizations participating in benefit plans for employees. Offering benefits packages help retain employees for long-term employment within your company. Keeping the information from the welfare and pension plans is vital to avoid consequences surrounding the plans. Mishandling plans or failing to report may result in losing valuable employees, delinquent fees, and damaged reputation.
The CPAs at Ernst Wintter & Associates have over 25 years of experience in helping businesses with their accounting needs and ensuring they are in compliance with current tax requirements. If your business needs help completing Form 5500 or any other documents to file its taxes, contact us today.