5500s: Your questions answered

Valerie Siegmann, Senior Client Service Associate

Your ESOP plan year administration is complete—what a relief!  Before you move to the celebrations, that ominous Form 5500 is waiting. Are you ready?

First things first—are you a small or large plan filer?

This determines if your ESOP requires an audit or not. Audits are required on all large ESOP filing plans. The determination of this is based on the plan year’s beginning participant count, with the threshold being 100 participants. However, there is a range of 80-120 participant counts that allows plans that have gone above or below the 100 participant threshold to continue to file the current plan year in the same fashion as filed in the prior plan year. For a plan that has been filing as a small plan, if the beginning participant count first exceeds 100, but is less than 120, the plan can choose to continue to file as a small plan filer until that number exceeds 120. For large filers, if the beginning participant count falls below 100, but is at least 80, the plan could choose to file as a large filer. The purpose is to reduce or limit any interference of the plan’s operation.

Is your plan’s Form 5500 ready to be prepared? If yes ‘Plan Sponsor’ action is required.

Once your ESOP plan year allocation report has been completed and finalized, you need to take action before your 5500 can be produced. The 5500 Data Collection process (all ESOP plan sponsors need to complete this) and ESOP Investment Disclosure process (for large plan filers only) needs to be completed online. This gives Principal the necessary information to prepare your ESOP 5500. For instructions or assistance with these two processes, please contact your ESOP Client Service Associate at Principal.

When will you file the Form 5500? Before the deadline or will the 5500 be extended?

The 5500 deadline is 7 months after the end of the ESOP plan year. When will your ESOP valuation be completed? If you are a large filer, when will your audit be completed? Has the company filed an extension on the corporate tax filing? These are all factors to consider. A corporate extension automatically extends the ESOP 5500 by 1 ½ months. The 5500 extension, Form 5558, extends the 5500 by 2 ½ months. The 5558 extension form needs to be post-marked and mailed to the IRS no later than the 5500 original filing deadline. Do you need assistance with the preparation of Form 5558? No worries, Principal can help. Simply reach out to your Client Service Associate and we would be happy to prepare and provide you this form to mail into the DOL.

What is Form 8955?

Form 8955 is in conjunction with the 5500 and should be filed at the same time the 5500 is filed. It is a filing with the IRS to notify of plan participants that have separated from the plan with a vested balance and/or those participants who had previously separated and have since taken a full withdrawal of their vested balance from the plan.

Your 5500 and 8955 forms are prepared, how do you file?

The employer website on Principal.com allows both the 5500 and 8955 forms to be filed electronically. You will need your DOL ID and PIN number in order to complete the 5500 filing, so make sure to have these available prior to attempting to file the 5500 online.

If you are a small plan filer, simply review the forms to ensure details are reflected as intended, and file the forms online.

If you are a large plan filer, once your auditor has reviewed the 5500, you will need to attach the Accountant’s Opinion Letter along with any necessary schedules your 5500 reflects. The most common schedules include Schedule of Assets (Held at End of Year) and 5% Reportable Transactions. If there are additional schedules to your 5500, you will need to add each schedule as a separate attachment in order for your electronic filing to be transmitted to the DOL. Please ensure any attachments that are added have been saved in grayscale format, otherwise the DOL’s website will not accept the transmission.

You have filed! Done—well, almost.

Once you have e-filed your 5500 online, a best practice is to visit the employer website on Principal.com the following business day to confirm the DOL’s acknowledgement of the 5500 filing and print/e-print a copy of the acknowledgement for your records.

Congratulations on another plan year completion!

The subject matter in this communication is educational only and provided with the understanding that Principal® is not rendering legal, accounting, investment advice or tax advice. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, investment or accounting obligations and requirements.

Insurance products and plan administrative services provided through Principal Life Insurance Co., a member of the Principal Financial Group®, Des Moines, IA 50392.