What is Form 5500? Everything you should know

U.S. employers who provide retirement or employee benefit plans, such as 401(k)s or health insurance, face strict reporting rules under federal law. These rules include documenting plan details, financial conditions, and participant information through specific filings. One of the most important of these filings is Form 5500, which the government uses to monitor compliance and enforce tax regulations. 

In this article, we’ll explain Form 5500, the steps to complete the process, and the common mistakes to avoid. By the end, you’ll know exactly how to approach this requirement and keep your organization aligned with federal regulations. 

What is Form 5500?

Form 5500 is the annual report that most U.S. employers who sponsor retirement and welfare benefit plans must file with the government. Regulators use it to review a plan’s financial condition, investments, and participants. It also captures important plan features, such as vesting schedules and employer contributions.

The following federal agencies all rely on this 5500 reporting to ensure plans comply with the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code:

• Department of Labor (DOL), specifically its Employee Benefits Security Administration (EBSA)
• Internal Revenue Service (IRS)
• Pension Benefit Guaranty Corporation (PBGC).

The 5500 filing serves two purposes: It enforces compliance with federal rules, and it protects employees by ensuring plan sponsors responsibly manage their contributions and benefits. When filed correctly, it confirms your organization is meeting ERISA standards and that employee benefit plan assets are handled properly. 

Who files Form 5500? 

Employers that sponsor ERISA plans must file Form 5500 each year. That includes retirement plans and welfare benefit plans with eligible participants. Government and church plans are exempt, and some foreign plans for non-U.S. employees are also excluded. 

You must complete a filing for every year that a plan holds assets, even if it’s frozen or inactive. Plans commonly subject to Form 5500 filings include: 

• 401(k) and profit-sharing plans
• Defined benefit pension plans
• Stock bonus plans
• Health, dental, and vision insurance
• Life and disability coverage
• Severance pay plans
• Unfunded or fully insured welfare benefits
• Deferred compensation arrangements

Plan participants include more than current employees actively contributing to a plan. Eligible employees, former employees with account balances, and even beneficiaries may all count toward a company's participant total. This count determines which version of the form you must file.

Which type of Form 5500 to file

The correct version of Form 5500 to file depends on your plan’s size and structure. There are three main options:

• Form 5500 (standard form): This is required for plans with 100 or more participants. Employers with large retirement or welfare benefit plans use it to provide detailed reporting on financials, investments, and plan operations.
• Form 5500-SF (short form): This version applies to plans with fewer than 100 participants. For small employers with lean employee benefit plans, it reduces the amount of information you need to submit. 
• Form 5500-EZ: This is for one-participant plans, such as a retirement plan for a business owner (and in some cases their spouse). If plan assets exceed $250,000, filing is mandatory. Below that threshold, filing may not be required.

How to file Form 5500

Filing Form 5500 is an electronic process. Here are the steps you must take to stay compliant:

• Confirm the right form: Organizations must first decide which form to file. Participant counts drive this choice and include former employees and beneficiaries. 
• Set up your EFAST2 account: You must submit Form 5500 electronically through the Department of Labor’s EFAST2 system. Registering gives you a secure ID and password to access the portal. But only the authorized plan signer should create the account; otherwise, the system may reject the filing. 
• Gather plan details: Prepare sponsor and administrator information, plan year dates, and financial data. Depending on the plan, you may also need additional reporting, such as an independent audit or actuarial statements.
• Complete the form online: Log in to EFAST2 and enter all required plan details. Use the correct plan codes and ensure names and ID numbers match your records to avoid the system rejecting your filing or IRS penalties. 
• Attach required schedules: Add the schedules that apply to your plan, such as Schedule A for insurance, Schedule C for service providers, or Schedule H/I for financials. Large ERISA plans often require more documentation.
• Review everything carefully and file: Use the IFILE system within EFAST2 to preview your submission as a PDF before filing. A final review prevents costly corrections down the road. The DOL and IRS may impose fines for inaccurate or incomplete information, and penalties can be higher if mistakes appear willful. 

File before the Form 5500 due date 

The deadline to file Form 5500 is the last day of the seventh month after your plan year ends. For calendar-year plans, that’s July 31. If that date falls on a weekend or holiday, the deadline moves to the next business day. 

If you can't meet the deadline, request an extension using IRS Form 5558. This grants you an extra two and a half months. 

Missing the deadline can result in steep IRS penalties and fines from the DOL, sometimes thousands of dollars per day. If you are late filing, use the Delinquent Filer Voluntary Compliance Program (DFVCP). This allows plan administrators to get back on track with reduced penalties instead of facing the full fine. 

After filing, you must distribute a summary annual report (SAR) to plan participants. This needs to be shared within nine months after the plan year ends or two months after the deadline. That’s September 30th for calendar-year plans, or December 15th if you filed for an extension. 

Common mistakes to avoid when filing Form 5500

Even small errors on 5500s can trigger audits or penalties. Watch out for these common mistakes: 

• Reporting zero plan participants: Participants include anyone eligible for the plan, including former employees with balances and beneficiaries. Listing “zero” participants when assets still remain in the plan misrepresents plan status. 
• Failing to file after plan termination: Ending a plan doesn’t end the filing obligation. You must continue filing until all assets are distributed and the plan is officially terminated. 
• Misreporting fraud or dishonesty: Form 5500 asks if the plan suffered losses due to fraud. Answer accurately, as incorrect reporting can raise red flags. 
• Confusing frozen and terminated plans: A frozen plan is inactive but still exists. A terminated plan is permanently closed. Using the wrong code can create compliance issues. 
• Late or inaccurate reporting: Salary deferrals and loan repayments must be deposited into participant accounts promptly. Missing or delaying those deposits is a red flag for regulators. 

Ensure stress-free compliance with Oyster

Form 5500 filings are just one part of a broader compliance strategy. Oyster helps employers manage employment contracts, payroll, and benefits in 180+ countries. You can stay confident that your compensation and benefits packages meet local laws while remaining competitive in each market. 

Take the complexity out of managing global rewards. Explore Oyster’s Total Rewards to see how you can design country-specific salary, equity, and benefits packages that keep your team supported and your business compliant. 

About Oyster

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