Form 5500 Filing (And How It Impacts Your Benefit Plan Audit)
Many employee benefit plans, including pension, 401(k) or profit-sharing plans, are subject to the guidelines laid out by ERISA, which include conducting an annual audit and having the financial statements evaluated by an independent auditor.
For plans that require an employee benefit plan audit, the auditor’s report must accompany the filing of Form 5500. But Form 5500 filing can be a complex process.
To fully understand, let’s examine some of the most common questions our team of benefit plan auditors and advisors hear from organizations about Form 5500 filing.
What’s the Difference between the Form 5500 and 5500-SF?
For plans that have fewer than 100 plan participants, Form 5500-SF is used. This version of Form 5500 places fewer responsibilities for employers in filing reports.
Conversely, Form 5500 is used for an employee benefit plan containing at least 100 active participants. Employers that fall into this category are required to submit specific attachments and schedules in their annual Form 5500 filing.
How Does the Form 5500 Filing Impact Employee Benefit Plan Audits?
Plan sponsors are required to produce a completed or substantially complete draft of their Form 5500 before an employee benefit plan audit begins.
Your Form 5500 filing allows auditors to examine all plan documents for any material misstatements of fact, as well as material inconsistencies, during the audit process. These duties are performed ahead of when the auditor dates the report.
Which Companies Need Employee Benefit Plan Audits?
Previously, plans with 100 participants or more were required to have an employee benefit plan audit. This number included all eligible employees—even those who opted out, were terminated or had retired with plan balances.
Starting January 1, 2023, only plans that have 100 or more participants with account balances at the beginning of the plan year will be required to have an employee benefit plan audit.
The change is effective for 2023 filings.
How Is a Limited Scope Audit Different?
Not only has the name of this audit changed to an ERISA Section 103(a)(3)(C) audit, but plan administrators now need to identify their responsibilities pertaining to investment certifications and certifying institutions prior to the commencement of the audit.
This is accomplished through an engagement letter that details the certification process, specifies the qualifications of all certifying institutions, and declares that plan administrators have verified that certifications are valid.
It’s important to note that the ERISA Section 103(a)(3)(C) audit will not contain a disclaimer of opinion concerning certified investment information. Instead, the auditor will provide an opinion regarding the presentation of information covered by the certification, as well as the interaction between financial statements and certified investment information.
Who Is Responsible for Form 5500 Filing?
Form 5500 filing must be done by the administrators of an employee benefit plan.
In general, the company’s operations, HR or finance department, or a combination of these departments, prepare and file a company’s Form 5500. In some cases, the company’s Form 5500 may be filed by a third-party administrator.
When Is Form 5500 Filed?
An employee benefit plan must file Form 5500 before the end of seven months following the plan year-end. So, in other words, for a plan that follows the calendar year (ending December 31), Form 5500 filing must be done by July 31.
How Does Form 5500 Filing Work?
At the start of the Form 5500 filing process, you first need to identify which type of form you need to submit. You may be required to submit Form 5500 or Form 5500-SF; or you may submit Form 5500-EZ if your plan is maintained outside the U.S. or if you have an owner-only plan.
After selecting the appropriate type of Form 5500, you’ll want to familiarize yourself with the ERISA Filing Acceptance System (EFAST2) program, which is the system where Form 5500 filing takes place.
Then, you’ll be able to complete and file your Form 5500.
It’s crucial to complete your Form 5500 filing by the deadline and include all relevant schedules to avoid processing delays or potential penalties.
What Information Is Included in Form 5500?
Form 5500 is three pages long and requires details such as the number of active participants in your plan, the starting date of your plan, information concerning the benefits and funding of the plan, details about the plan administrator and the necessary schedules.
Be aware that the schedules you will be responsible for depend on the specific characteristics of your employee benefit plan.
Learn More About Form 5500 Filing and Your Employee Benefit Plan Audit
Learn more about our Employee Benefit Plan Audit Services or call us today for more information about Form 5500 filing.
Warren Averett has a specialized team of benefit consultants who can help you complete and file your Form 5500.
This article was originally published on March 18, 2012, and most recently updated on September 1, 2023.
