The Form 5500 is an annual report that is filed with both the IRS and the DOL. It has information that relates to the operation and compliance of a retirement plan, such as a 401(k) plan. If your company has a retirement plan, it will likely need to file this form every year. Typically, this is July 31st (, but can be different depending on the plan year end of the 401(k) plan. There is one extension allows for 2 months and 15 days, which ends up on October 15th.
Generally, these retirement plans have a third-party administrator that is going to prepare this form as part of its responsibilities. However, as the plan sponsor, the company who created the retirement plan, it is ultimately your responsibility to understand, review, and approve this form prior to filing.
Here are a Few Tips to Help You Review Your Form 5500
- Review all the information regarding page 1 as it concerns your name, the name of the plan, the type of plan it is, and other important business information. You would likely check this in the first year of filing, and in subsequent years, you would just review briefly to ensure it is still correct, like addresses, etc.
- On page 2…
- There are lots of numbers of participants. You will need to ask the preparer for their reports that have these numbers, and you can review the lists to ensure all employees that should have been recorded here are recorded.
- There is one very important number, Line 5. If the amount of this line exceeds 99, then you will need to request a proposal for audit services on your retirement plan.
- Review line 10 a and b to determine which schedules you will need to review later in the return.
- Schedule A – This section describes any company or person who benefited from commissions related to the operation of the plan. Typically, in this section, you will see financial advisors, investment companies, insurance companies, etc. All of these people would have sent a tax document that shows their commissions. To review, you would need to ask for the forms in order to verify the amounts recorded.
- On page 3, you might see a breakdown of any annuities that are a part of the plan. Typically, this is where insurance contracts are reported (Line 4) and Pooled Separate Accounts (Line 5).
- If there is an annuity with unallocated funds in a general account, you will see a schedule starting at 7b for the prior year ending amount, all the various activity, and the ending amount on 7f. 7f should tie to the amount on Line 4. You can pull your investment statement for the year, and look at the annuity to determine if the proper amounts were recorded.
- Schedule C – This section describes any company or person who benefited from fees related to the operation of the plan. Typically, in this section, you will see third-party administrators, auditors, investment companies, etc. All of these people would have sent a tax document that shows their fees. To review, you would need to ask for the forms in order to verify the amounts recorded. Note: if the company providing the plan pays for the audit or the TPA fees, those fees do not show up here; fees only paid by the plan show up here.
- Schedule D – This is a list of all the MTIA, CCT, PSA, and 103-12 IEs that are involved with the plan. If information is here, you need to get your investment statement for the year, and match up the items from that list to the items in this Schedule. This form basically shows the value of each investment vehicle that is related to the items that are included here.
- Schedule G is usually required if something went wrong during the plan year. Any information included on this Schedule needs to be reviewed with your third-party administrator, so they can explain the transactions reported. The most likely is going to include nonexempt transactions that you are going to be well aware of prior to the filing of this form. Make sure you understand all of the transactions listed.
- Schedule H and Schedule I – The difference between these forms are determined by the size of the plan, but they do report the same information, which is the activity and balances of the plan. Compare the balances and activity listed on the schedule H and I to the investment statement for the year. There should be no differences.
- Schedule MB and SB – In a defined benefit plan, you are going to have a valuation based on an actuarial report. Those balances and other operating aspects of the plan (number of participants, liabilities, contributions) and assumptions of the actuarial report get reported during this Schedule. This only pertains to defined benefit plans and will not be typical of a 401(k)-like retirement plan.
- Schedule R – This form is going to have information about distributions that were not cash, information about funding minimum amounts into a plan, like an ESOP, and other information regarding defined benefit plans and ESOPs. Make sure to talk with your third-party administrator to understand any information presented in this form. It is unlikely to be used, unless something significant happens.
Want More Help? Talk to the Professionals at Marshall Jones!
If you have followed the above advice, you will have a much greater understanding of your retirement plan, the form 5500, and have the confidence to complete reviews of the Form 5500 and all of its schedules. If you have questions or want further assistance, contact Marshall Jones today!