With the July 31st reporting deadline for employee benefit plans Form 5500 quickly approaching, it is a good time to review the compliance rules.
Staying compliant with retirement plan rules is a must if you offer this sort of benefits package to your employees. Under the Employee Retirement Income Security Act of 1974 (ERISA), certain plans must be audited by an independent qualified accountant on an annual basis. To ensure that the Form 5500 is accepted when you submit it by the July 31st deadline, make sure that you are in compliance with auditing rules.
The first step in determining whether or not your Plan needs an audit is to calculate the number of participants as of the first day of the Plan year (i.e., January 1st). Plans with 100 or more eligible participants at the beginning of a Plan year are considered “large plans” and must be audited.
Who are eligible participants?
The rule states that an employee is eligible to be a Plan participant as soon as they have satisfied the Plan’s specific eligibility requirements (i.e., age, service hours, etc.) whether or not they have elected to participate in the Plan. Participant counts also include active employees and all eligible employees, along with terminated participants who have separated but still have account balances.
What is the purpose of an audit?
Audits are performed on large plans to ensure that the Plan sponsors are fulfilling their fiduciary responsibilities. These audits ensure that all employees have the same opportunity to participate and that all the assets of the Plan are fairly valued. The audit will also ensure that contributions are made in a timely manner and that benefit payments are made according to the terms laid out in the Plan.
Can I get an extension?
Form 5500 must be filed electronically by July 31st each year. However, if needed, an extension can be filed, extending the deadline to October 15th. There are no additional extensions permitted.
Are there any exceptions to audits?
Under a rule known as the 80-120 Rule, a Plan that has between 80 and 120 participants as of the first day of the Plan year can file Form 5500 in the same category they did the year before. If they were considered a small plan and did not need an audit, they will not need one this year. A Plan that required an audit the year before, however, will continue to be categorized as a large plan.
All retirement benefit plans must adhere to a number of rules to ensure that they are working in the best interests of all eligible employees. To make sure that your Plan remains compliant, it’s a good idea to plan ahead. Talk to an accounting advisor or your Plan administrator to determine whether you need an audit so that you can get it finished in time for Form 5500 deadlines.
If you have any questions, contact us today!
ABOUT THE AUTHOR
Robyn is a Senior Manager with BSSF and has more than 23 years of public accounting experience. She assists a wide variety of clients, with a large concentration in the industries of engineering services, retail/wholesale, and construction. Robyn has served on the BSSF Employee Benefit Plan audit committee and has experience performing employee benefit plan audits.