The ERISA consultants at the Learning Center Resource Desk, which is available through Columbia Threadneedle Investments, regularly receive calls from financial advisors on a broad array of technical topics related to IRAs and qualified retirement plans. A recent call with a financial advisor in Louisiana is representative of a common question related to Form 5500 filing requirements. The advisor asked:
“One of my 401(k) plan sponsor clients, who has more than 100 participants in the plan, is filing the Form 5500-SF, Short Form Annual Return/Report of Small Employee Benefit Plan. Shouldn’t he be filing the longer version of Form 5500?”
Highlights of Discussion
- Not necessarily. While generally, plans with more than 100 participants are required to file the long version of Form 5500, Annual Return/Report of Employee Benefit Plan, as a “large plan,” there is an exception, referred to as the “80-120 participant rule,” that allows certain plans which would otherwise be considered large to continue to file as “small plans” following the streamlined Form 5500-SF, Short Form Annual Return/Report of Small Employee Benefit Plan requirements.
- The DOL defines small plans for Form 5500 purposes as plans with fewer than 100 participants at the beginning of the plan year. Small plans file Form 5500-SF and Schedule I Financial Information—Small Plans, (instead of Form 5500 and Schedule H Financial Information), plus certain other applicable schedules. However, small plans, typically, are exempt from the independent audit requirement that applies to large plans.
- Under the 80-120 participant rule, if your client filed as a small plan last year and the number of plan participants is fewer than 121 at the beginning of this plan year, your client may continue to follow the Form 5500-SF requirements for this year.
EXAMPLE: For the 2013 plan year, Blue Inc., had 93 participants, so the plan administrator filed a Form 5500-SF and applicable schedules as a small plan. The number of plan participants at the beginning of the 2014 plan year rose to 112. Under the 80-120 participant rule, Blue Inc., may elect to complete the 2014 Form 5500-SF, instead of the Form 5500 and schedules, in accordance with the instructions for a small plans.
Conclusion
The 80-120 participant rule may allow some plans that would otherwise be required to follow the arduous large plan filing requirements for Form 5500 to, instead, continue to file under the streamlined Form 5500-SF process.
The Learning Center Resource Desk is staffed by the Retirement Learning Center, LLC (RLC), a third-party industry consultant that is not affiliated with Columbia Threadneedle. Any information provided is for informational purposes only. It cannot be used for the purposes of avoiding penalties and taxes. Columbia Threadneedle does not provide tax or legal advice.
Consumers consult with their tax advisor or attorney regarding their specific situation.
Information and opinions provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by Columbia Threadneedle.
Columbia Threadneedle Investments (Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies.
© 2015 Columbia Management Investment Advisers, LLC. Used with permission.
