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Form 5500: Are you administering your plan correctly?

April 14, 2015

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Form 5500 isn’t just another document on plan sponsors’ desks. It is the primary source of information on retirement assets and employee benefit plan features for the U.S. Department of Labor, the Internal Revenue Service and the Pension Benefit Guaranty Corporation, not to mention plan participants, the public and other interested parties.

Form 5500 is a crucial component of a well-administered benefit plan. To better understand this form, learn why it is required and the benefits it can provide for your business.

Form 5500 provides transparency
In filing Form 5500 each year; you will disclose the details of your employee benefit plan (or plans) as well as the standard employer information, like company ID, business code and number of plan participants. However, this form requests more valuable information than just that. You will share the financial details of your plan, like total plan assets. You will also outline the benefits offered via your plan, and any vendor relationships that exist in support of the plan.

Filing this form results in increased transparency. This snapshot of your benefits confirms that everything is in compliance with the IRS.

Form 5500 can reveal competitive advantages
A properly filed Form 5500 is necessary to ensure that your benefit plan stays in compliance with DOL and IRS requirements. But another benefit is the potential competitive advantage that the form’s information could uncover for your business.

The DOL makes most Form 5500 data available to the public immediately when filed, so you can scope out your competitors’ benefits to see how your own business stacks up. You could have a leg up on your competitor in terms of recruitment, if, for example, you know they offered less desirable benefits during the 2014 fiscal year.

Form 5500 comes with changes
The DOL has implemented a few changes, so your 2014 Form 5500 will be different than last year’s. The DOL outlined these changes in its updated Form 5500 instructions.

One change is the new requirement for multiple employer plans. If you have more than one employer in the plan, you now have to identify which employers are enrolled in the plan and provide an estimate of each employer’s percentage of total contributions.

What can you do to ensure compliance?
Take the proper steps to ensure that you meet the Form 5500 requirements:

  1. Keep records – Retain copies of plan documents at your office for future review.
  2. File on time – Don’t risk being penalized because of late filing. Start your tax preparations as soon as possible.
  3. Be accurate – As you file, take the time to double-check your numbers. Don’t assume one line is correct – ask around to make sure you are reporting the facts.
  4. Review carefully – Go over each box and compare the information with your data. This will help you catch any errors and avoid penalties.
  5. Know your plan – Are you categorized as a small plan or a large plan? If you have fewer than 100 employees, you can file the shorter Form 5500-SF. Additional requirements are outlined by the DOL.

Clark Schafer Hackett advisors are up to date on all Form 5500 updates and requirements and can assist you with filing. Our advisors can also keep your tax preparations on track. Our experts will help you use Form 5500 as an effective planning tool to benchmark and improve your business.

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a Clark Schaefer Hackett professional. Clark Schaefer Hackett will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.

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