What is the Form 5500?
The Form 5500 is an annual report filed with the U.S. Department of Labor that provides financial, investment, and operational details about a 401(k) plan. It satisfies annual reporting requirements under ERISA and the Internal Revenue Code and serves as a tax return for the plan.
When is the Form 5500 due?
The Form 5500 is due by July 31, which is seven months after the end of the plan year. If the deadline is missed, an extension can be filed to extend the deadline until mid-October.
Who is responsible for signing the Form 5500?
Any individual involved in plan administration at the company can sign the Form 5500, including the CEO, CFO, HR Director, or plan administrator. The company decides who signs the form.
Betterment prepares the Form 5500 and sends it to the signer indicated on the compliance questionnaire. The signer can be updated at any time if needed.
How is the Form 5500 signed and submitted?
Betterment uses a third-party platform, FTWilliam, to handle the signing and submission of the Form 5500. Once prepared, the signer will receive instructions to complete the filing process electronically through FTWilliam.
What is the difference between the short form and long form 5500?
- Form 5500-SF (Short Form): Used by plans with fewer than 100 participants at the beginning of the plan year and that meet specific eligibility requirements.
- Form 5500 (Long Form): Required for plans with 100 or more participants, which must also submit additional schedules and may require an audit.
Who is required to have a 401(k) audit?
A plan is required to undergo an independent audit if it has 100 or more participants with account balances at the beginning of the plan year. Participants include:
- Employees actively contributing to the plan
- Employees with an account balance, even if no longer contributing
- Terminated employees who still have assets in the plan
Prior to 2023, the participant count included all eligible employees, regardless of account balance. The updated methodology now counts only those with account balances.
What are the penalties for filing the Form 5500 late?
Both the DOL and IRS impose penalties for late filing:
- DOL Penalty: Up to $2,529 per day with no maximum.
- IRS Penalty: $250 per day, up to $150,000 total.
The plan sponsor (the company) is responsible for ensuring the Form 5500 is filed on time. Betterment assists in the process but cannot file the form on behalf of the company.
Why did we receive an IRS letter about the Form 5500?
The IRS may send a letter regarding the Form 5500 even if it was submitted. The processing time varies, and the submission status can be confirmed through the DOL EFAST Search Tool.
Why does a terminated plan still need the Form 5500?
A Form 5500 must be filed for every year there were assets in the plan, even if the plan has since been terminated. This is required for compliance with ERISA reporting rules.
Who files the Form 5500 if my company moved away from Betterment?
If Betterment held plan assets on December 31 of a given year, Betterment is responsible for preparing the Form 5500 for that year. Future filings will be handled by the new recordkeeper or the plan administrator.
What is the Summary Annual Report (SAR)?
The Summary Annual Report (SAR) is a summary of the Form 5500 that outlines:
- The plan’s asset value
- Administrative costs
- Other key financial details
The SAR must be provided to plan participants within nine months after the end of the plan year.
How do I access the SAR report?
The SAR report can be downloaded within the FTWilliam portal. It is the plan sponsor’s responsibility to distribute the SAR to employees. Betterment at Work cannot distribute it on the company’s behalf.
Who must receive the SAR report?
The SAR report must be distributed to:
- Active employees, whether they contribute to the plan or not.
- Terminated employees who had a balance during the plan year.
Employers must ensure timely distribution of the SAR report to comply with ERISA disclosure requirements.
By understanding the Form 5500, meeting deadlines, and fulfilling reporting responsibilities, employers can help their 401(k) plan remain compliant with IRS and DOL regulations.
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