The Internal Revenue Service, the Pension Benefit Guaranty Corporation and the U.S. Department of Labor recently released informational versions of 2014's Form 5500 for businesses. While the filings are not due until the seventh month following the end of a benefit plan's year, it's always wise to start this process early. For a plan that follows a calendar year, that date is July 31 and it will be here sooner than human resources personnel might think.
The Form 5500 is the required annual reporting by companies that offer pension and welfare benefit plans to 100 employees or more. It covers details on the plans' financial conditions, investments and operations. Pension plans include any profit sharing or 401(k) plans. The U.S. Department of Labor stated that this form helps Federal agencies and Congress monitor trends in the economy, employee benefits and taxes. It's meant to ensure all parties are protected.
The Form 5500-SF is the short form version of the document, to be used by small plan filers with one to 99 participants enrolled at the start of the plan's year. The IRS states that Form 5500-EZ is the form used by businesses offering retirement plans with one participant, that choose not to use Form 5500-SF. One-participant plans typically refer to a single owner and his or her spouse.
What businesses need to know
Form 5500 must be filed electronically as of 2010. The U.S. Department of Labor's website stated that corporations must go through EFAST2, a digital system designed specifically to improve the filing process. HR professionals must register their corporation for an EFAST2 account and then choose to file either with an EFAST2-approved software service or the IFILE website.
There have also been several changes made to the 2014 filing documents in comparison to the 2013 papers. The Society for Human Resource Management noted that among those important changes were the new requirements that companies report the number of active plan users at the beginning and the end of the year, in addition to any terminated participants over the same period of time. It also asks that companies with underfunded plans in critical status offer a date after which they will no longer be endangered.
Penalties for failing to file
For those completing Form 5500-SF, failure to file results in a fine of $10 per day until the report is filed electronically, up to $750. For those completing Form 5500, the penalty is also $10 per day, though only up to $2,000.
Corporations that have missed their filing date, and have not yet been contacted in writing by the U.S. Department of Labor notifying them of their failure to file, are encouraged to complete their Form 5500, Form 5500-SF or Form 5500-EZ through the Delinquent Filer Voluntary Compliance Program. The DFVCP discounts the penalties charged to late filers as long as they comply with the form requirements and submit their reports for processing.
Plan administrators who file late but do not use the DFVCP are subject to a fine of $50 per day for the time period during which they did not file. There is no limit on this fee. Those that refuse to file altogether may incur fines of up to $300 each day, or $30,000 each year, until they file.
It's imperative that HR professionals prepare their Form 5500s on time and file according to the instructions outlined by the IRS and the Department of Labor. It could be a huge financial loss to the business if its HR and accounting personnel do not send in reports on time. Adopting HR software makes this and all tax filing more accurate, punctual and simple.