HCW Benefits Blog

Contributor:
Zach Nichols, Triad Regional Manager
Hill, Chesson & Woody

Are you tired and ready for the holidays?  Almost 65% of you have recently completed your benefit renewals and hope to move forward in 2012 with a few less gray hairs.  Once things get going in the first quarter, who’s in charge of filing your Form 5500s?  “Form 5500 what?” you might ask.  “I heard you say something about 5500. Is that a new Holiday bonus I’m getting this year?”

Well, for those of you who are compliant, this isn’t a big deal. You already know what it is and who is responsible for filing it.  Shockingly, according to the Department of Labor, almost 47% of employers in the United States are non-compliant when it comes to filing their 5500s.  Since almost half of employers have never heard of Form 5500 or don’t understand its importance, here’s a quick rundown of what it is and how it pertains to your organization.

Plan sponsors who maintain qualified employee benefit programs such as pension plans, 401k plans or Health & Welfare plans generally must file an annual report with the Employee Benefits Security Administration/Department of Labor. This annual report, known as a Form 5500, is due within seven (7) months after the end of a plan year. 

The Form 5500 Series is part of ERISA's overall reporting and disclosure framework, which is intended to assure that employee benefit plans are operated and managed in accordance with set standards. It also assures that participants and beneficiaries, as well as regulators, are provided or have access to sufficient information to protect the rights and benefits of participants and beneficiaries under employee benefit plans.

“Okay, you got me. I need to be filing this but my broker never told me!  How do I become compliant?”

The Department of Labor has eased the penalties for late or missing Forms 5500 substantially by implementing the Delinquent Filer Voluntary Compliance Program (DFVCP). Under this program, sponsors will face a penalty of $10 per day up to a maximum of $750 for small plans and $2,000 for large plans (if a plan’s 5500 filing has been missed for multiple years the penalty cap is $1,500 for small plans and $4,000 for large plans regardless of the number of late filings submitted.) Given the statutory ability of the DOL to assess up to $1,100 per day in civil penalties, this provides a significant incentive to correct past failures to file. If the DOL determines that the Form 5500 reporting requirement was willfully avoided, fines can reach $100,000 per plan, so the DFVCP is a no brainer!

So, no, the 5500 you heard about isn’t that new Holiday bonus you were hoping for. But, it’ll ensure the DOL isn’t getting an extra holiday bonus courtesy of your organization.