Sales tactics based on fear are my most hated approach. Shamefully, they work. And the biggest one we see is the fear of Compliance used by some brokers to earn the coveted Broker of Record. But the fear is real. And so are the penalties and pitfalls of not taking the necessary steps. Just look at the Form 5500. Avoid the Form 5500 penalties by following the steps below.
The Form 5500 is one of those informational returns that is regulated by multiple departments of government. It is all facilitated by the IRS. But don’t make the IRS out to be the bad guy here. They have smaller penalties ($25 per day up to $15,000). And they know you’re likely to miss a deadline. So much so, they have the well-established Delinquent Filer Voluntary Correction Program “DFVCP.” The DOL is the one to be feared here. They carry a much bigger ($2,097 per day) penalty they can slap on you. And their penalties aren’t capped. Ouch! Then, there’s the Pension Benefit Guaranty Corporation. They also track your data. Inevitably, you’ll be on somebody’s radar. Make sure you do your due diligence to not cost your company thousands of dollars for missing one form.
Some companies get a free pass; others don’t. There are two typical criteria that will trigger the need to file a Form 5500:
Thank is a pretty simplistic view, to truly dig deeper, you can go here: DOL GUIDE to Form 5500 and Form 5500-SF
File your form within 7 months after the start date of your plan. Commonly, this is deadline is often referred to as July 31st. This is because a high number of plans start on January 1st. If your plan started any other day, count 7 months from that start date. And, don’t wait too late to start on your paperwork. An automatic 2.5-month extension is available by filing IRS Form 5558. It extends the deadline to October 15th for calendar-year plans.
Our team has expertise and many years of practice with these forms. We already collect many of the ‘schedules’ from the insurance vendors for our clients. Reaching out to one of us is a great first step. And, we can even discuss if you are safer bundling the rest of your ERISA compliance documents into a “wrap” document for the other stuff that’ll get you in trouble for, too, like your COBRA notices, SPDs, and other commonly required disclosures.