Each year, plan administrators are responsible for filing a Form 5500 for employee benefit plans covered by the Employee Retirement Income Security Act (“ERISA”). Since the electronic version of the Form 5500 was released for the 2009 Form 5500, the Department of Labor (“DOL”) and the Internal Revenue Service (“IRS”) have identified common errors found in Form 5500 fillings received in the past years.
Common Errors to Avoid
Improperly Selecting theMultiemployer Plan Checkbox
A common mistake found in Form 5500 is when a sponsor incorrectly labels their Plan as a multiemployer plan when the sponsor has a single-employer plan. A single-employer plan includes a Plan that covers a controlled group of businesses under common control. Whereas a multiemployer plan is a type of plan that has more than one employer and is maintained through a collectively bargained agreement between two or more employers in the same or related industry and union. It’s important to identify the correct plan type to determine which schedules or sections of schedules are required to complete.
Failing To Implement Changes to the Form
Starting with the 2022 return, plans filing the Form 5500 should be aware of significant changes released by the IRS:
- Schedule MB requires an attachment to report the total withdrawal liability payments made to the Plan by date with details that show periodic and lumpsum payments separately reported. Schedule MB instructions were also revised for the attachment for the projection of benefits; the attachment was updated to increase the projection period to 50 years for plans with 1,000 or more participants. Also, plans with 1,000 or more participants are required to attach a ten-year projection of employer contributions and withdrawal liability payments.
- For multiemployer defined benefit pension plans, Schedule R requires additional information for employers contributing more than five percent of total plan contributions for the year. Effective for 2022 calendar year, plans are now required to report employers that contributed more than five percent, or their top-ten highest contributing employers based on total contributions for the plan year. For each reportable contributing employer, Schedule R requires the name, employer identification number, dollar amount contributed and the expiration dates and rates from their respective collective bargaining agreements.
- Additional defined contribution plan characteristic codes were added to Form 5500, to identify different types of Multiple Employer Plans (“MEP”), including new codes for association retirement plan, pooled employer plan, professional employer organization (PEO) plans and other MEPs that do not fall under another characteristic code.
- Schedule SB now requires an attachment for projection of expected benefit payments. For 2022, the required attachment must show a 50-year projection of expected benefit payments to participants, including active, terminated vested, retired and beneficiaries currently receiving payments.
Signatures and Validation Errors
- Submitting a Form 5500 without a valid signature is a leading cause of filers receiving an error message. Before submitting, the Form should be reviewed to ensure the signatures and dates are correct and complete. There are several options for applying the signatures. If you need to obtain electronic signature credentials, visit the DOL’s EFAST website to register as a signer.
- Lastly, pre-validate the entire Form 5500 before submitting it to EFAST2. The pre-validation check scans the document for errors, such as inconsistent amounts throughout your Form. If errors are found and not corrected before submission, the Government will be alerted to the errors in your filing.
Conclusion
Filing a Form 5500 is an important requirement for the plan sponsor and plan administrator of employee benefit plans. To ensure the accuracy of your Form 5500, it is important to familiarize yourself with the changes required by the IRS and DOL and conduct a thorough self-review before filing. This will help reduce the likelihood of errors and notices from the governing agencies.
Authors: Monica Baker | [email protected] and Fabricia Reyes, CPA, Principal | [email protected]