Top of Mind


Tips for Improving Next Year’s Form 5500 Process

For many ERISA retirement plan sponsors, the first two weeks in October is rough. Why? Because October 15th is the 5500-filing deadline for the majority of calendar year plans. Each year, many plan sponsors scramble to file their 5500s at the absolute last moment. Unfortunately, this rush can increase the potential for errors that may become difficult to resolve in the future.

But it doesn’t have to be this way. Plan sponsors often make the process more difficult than it needs to be, so we’re sharing some tips on how to make the 2021 Form 5500 filing more pleasant.

  • Take control of the audit process — The number one reason that 5500s are delayed is the audit. Plan sponsors should debrief their 2020 audit process now. Explain to the auditor that next year’s goal is to prepare as though the filing is actually due on the non-extended deadline date of July 31st. It’s not impossible!
  • Get a handle on the number of plans — Many employers sponsor just one ERISA retirement plan, but others have two, three, or even five or more plans. Each additional plan can greatly complicate the 5500 process, never mind the fact that it also increases the overall reporting and disclosure burden under ERISA. Worse yet, employers who sponsor multiple plans often do not have a legitimate business reason for doing so. Thus, plan sponsors should work to consolidate plans. Ideally, right now would be the time to do so, in order to minimize the number of 2021 filings necessary in 2022 (2020 is already almost over, so this will not help for 2021). Be sure to keep auditors in the loop as to any plan mergers and effective dates, as they may result in short plan years (which require earlier filings) or other financial statement complexities.
  • Keep the lines of communication with auditors open — If there are significant changes to a plan during the course of the year (e.g., recordkeeper change, trustee change, or a change in anything else that is mentioned in the plan’s audited financials), next October is NOT the time to be informing the plan auditors! Plan auditors should be kept in the loop as changes occur.

Do you have any 5500 horror stories? Feel free to vent to me on LinkedIn, Twitteror at info@cammackretirement.com.

Note: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice. Opinions expressed are those of the author, and do not necessarily represent the opinions of Cammack Retirement Group.

Investment products available through Cammack LaRhette Brokerage, Inc.
Investment advisory services available through Cammack LaRhette Advisors, LLC.
Both located at 100 William Street, Suite 215, Wellesley, MA 02481 | p 781-237-2291