The U.S. Department of Labor has released the annual update to Form 5500 and 5500-SF (the short form), making adjustments that reflect regulatory changes. Retirement plan sponsors are reminded that oversight of the annual submission of Form 5500 is one of their major responsibilities as fiduciaries.
Disclosing Plan Finances and Operations
In essence, the annual submission of Form 5500 is how retirement plan sponsors provide the DOL and IRS with information on how the plan is doing. Here are links to the DOL’s instructions for 2022’s Form 5500 and Form 5500 Short Form. As Plan Adviser explains:
The DOL updates Form 5500 annually to keep it up-to-date with various regulatory changes. Every defined contribution and pension plan sponsor is required to file a 5500 to the IRS and DOL annually. The form discloses information about a plan’s finances and operation. 5500s are required under Title I and IV of the Employee Retirement Income Security Act of 1974 and are used both to ensure compliance by and to gather data on pension plans. Form 5500 received changes in five areas: multiple employer plans, administrative penalties, Schedule MB, Schedule R and Schedule SB.
Retirement plan sponsors have “two masters,” the Department of Labor (DOL) and the Internal Revenue Service (IRS), and both can issue fines related to Form 5500. While the Department of Labor oversees compliance with ERISA, the IRS polices the tax code. Both rely on Form 5500 as a means of identifying potential compliance issues—and both agencies have increased the penalties for delays and oversights related to Form 5500. When filing Form 5500, it’s important to make sure the required ERISA Fidelity Bond is current and adequately covers the plan. Failure to have an up to date ERISA bond is a common compliance trigger for plan sponsors: when caught by the IRS, it can cause a DOL investigation. Keep in mind, the ERISA Fidelity Bond protects the assets of the retirement plan from theft and can only be obtained from a surety listed by the US Department of Treasury. That’s why plan sponsors across the country trust leading national ERISA bond provider, Colonial Surety. Uniquely, Colonial includes retroactive ERISA fidelity bond coverage for years when the plan was not adequately covered. Additionally, plan sponsors can opt for cost-saving multi-year coverage, ensuring the ERISA bond is Department of Labor compliant for the life of its term.
Good To Know: Timing?
As the Internal Revenue Service (IRS) explains, Form 5500 is due on the last day of the seventh month after the plan year ends. For example, plans on a calendar year would file Form 5500 by July 31. Although there is an optional two-and-a-half-month extension (October 15 for plans on a calendar year), experts encourage plan sponsors to avoid being late by asking auditors to work toward the actual due date. This practice can prevent scrambling around for the audit report needed to file Form 5500. Plan sponsors for smaller 401k plans can save time by filing the short form, 5500-SF.
Though an ERISA bond is required, it leaves the personal assets of fiduciaries, like plan sponsors, exposed in the face of allegations of breaches. That’s why a best practice for plan sponsors is Fiduciary Liability Insurance. With fiduciary liability protection from Colonial Surety, if you face claims of alleged or actual breaches of duty in connection with the employee retirement plan, you’ll be covered for defense costs and penalty limits up to $1,000,000. Uniquely, Colonial even includes Cyber Liability Insurance, locks in multi-year rates and offers installation payments. Conveniently, our Fiduciary with Cyber Package is now available with a one year commitment—and the annual fee is less then the cost of one hour of expert legal defense if a lawsuit or regulatory challenge catches you by unprepared.
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