Posted by Maria T. Hurd, CPA
Most people are familiar with the significance of April 15th as the day we all pay our fair share to Uncle Sam on Form 1040. July 31st is the equivalent of Tax Day for retirement plans with a calendar year end. The Internal Revenue Service (IRS), the Department of Labor (DOL), and the Pension Benefit Guaranty Corporation (PBGC) developed the Form 5500 for benefit plans. The deadline for filing Form 5500, the Annual Return/Report of Employee Benefit Plans is the last day of the seventh month after the plan’s year end. Failure to prepare and file Form 5500 by the deadline can result in a DOL penalty of up to $1,100/day.
However, there is a lifeline available. Plans can get a one-time extension for two and a half months by filing Form 5558-Application for Extension of Time to File Certain Employee Plan Returns. For a calendar year plan, Form 5558 is the lifeline that extends the due date to October 15th. Alternatively, plans can rely on the extension for the business tax return if the plan and the business have the same year end. However, relying on the business extension will only extend the deadline for the Form 5500 through September 15th, an entire month less than the extension granted by filing Form 5558.
Our practice focuses on audits of large retirement plans, which need to attach audited financial statements to their Form 5500 filings. Plans with complex designs and hard-to-value assets often need an extension of time to gather the information necessary to file a complete and accurate Form 5500. Small plans are eligible to file other forms, subject to the same extension rules, as follows:
Form 5500-EZ – “One-participant plans” can use Form 5500-EZ to satisfy their annual reporting and filing obligations if the plan’s assets exceed $250,000. A one-participant plan is generally a business owner (or an owner and spouse, if they are the only participants) or a plan for a business partnership for which the partners and/or their spouses are the only participants.
Form 5500-SF – Most small business retirement plans with fewer than 100 participants may complete and file Form 5500-SF electronically. However, only one-participant plan administrators may choose to complete the paper Form 5500-EZ.
The definition of small plan and large plan was discussed in more detail in our previous blog I Don’t Want to Grow Up, I Want to be a Small Plan! Complete filing instructions for the Form 5500 series can be found here on the IRS website.
The IRS Form 5558 can also be used to automatically extend the filing of Form 8955-SSA-Annual Registration Statement Identifying Separated Participants With Deferred Vested Benefits. The specifics of the Form 8955-SSA Filing were discussed in our previous blog Schedule SSA Becomes Form 8955-SSA – Confused Yet? Subsequent to our blog post, on June 21, 2012, the IRS eliminated the requirement for a signature on the form 5558 for purposes of extending the Form 8955-SSA filing.
Lastly, a Summary Annual Report (SAR) must be sent to each plan participant within nine months of the end of the plan year. If the plan obtains an extension of the deadline for filing Form 5500, the deadline for distributing the SAR is automatically extended to two months after the new deadline for filing Form 5500. Once again, Form 5558 is the lifeline that comes to the rescue for complex plans and procrastinating plan sponsors.
Whether the reason is procrastination or diligently completing the accounting for plans with brokerage accounts throughout the whole nation, the month of August tends to be a welcome breather after the crunch to complete audited financial statements for the more straightforward plan platforms. Needless to say, the toughest audits of the season must be completed by the final extended due date, October 15th: the deadline with no possible lifeline. Until next month, we get to plan for the overtime to come, blog, and enjoy the calm before the storm.