How to Handle Incomplete Form 5500s

How to Handle Incomplete Form 5500s

In just a few days, the October 15th final deadline for the January 1 Plan year 5500s will descend. This can create concern for those brokers and clients if their 5500 has not yet been completed. If they are late even one day after October 15th the penalty will start and increase each day following until efiled. What can be done now? Is the late filing penalty to be automatically expected? Read on to find out…

The top four reasons for delayed or potentially late filing are:

1. The Carrier has not provided a Schedule A.

Good News! There is a work-around for this fairly common situation to prevent the filing from being late. Wrangle will insert a placeholder to allow the Form 5500 to move along and be e-filed.

The Placeholder is a Schedule A that is almost blank. It will report the carrier name, policy number and the type of benefits. Premium and commissions are left blank.

At the bottom of the fourth page of the Schedule A Placeholder, questions 11 and 12 will indicate the carrier did not provide the Schedule A. This is not a negative reflection on the Plan Sponsor.

If the Carrier does send the Schedule A after submission of the Form 5500, the 5500 can be re-efiled as an amended filing, again with no negative connotations or penalties.

2. The plan administrator signer is not available.

Since the DOL will not accept an excuse that the 5500 was not efiled on time due to the fact that the Plan Administrator was not available to sign, Wrangle suggests to find an alternate who meets the following criteria:

  • Is an officer of the company or has authority over the Plan.
  • Has fiduciary liability insurance.

One side note: there maybe those who are not available due to the business being located within a natural disaster, as we have seen this year and last due to the hurricanes. If the president declared the area as a federal disaster, there is a likely chance that the IRS and DOL proclaimed that a special extension will be granted. In the case of Hurricane Florence, many counties within North and South Carolina have been granted the special deadline until January 31, 2019.

3. The filing is under a trust, and the IQPA report is not available.

Unfortunately there is not a clear and distinct way to prevent from being late.

The IQPA report is the Independent Qualified Public Account report. It is required to be attached to a 5500 health and welfare plan filing that is funded through a trust (i.e. funding via plan assets) that are deemed large – the enrolled participant count is 100 or more on the first day of the ERISA plan year.

This report is of particular interest to the Department of Labor and the Internal Revenue Service because they pay closer attention to plans that hold assets to pay for benefits because of the potential for mismanagement of the funds.

The reason is that there is a bit of a Catch 22 on which decision to make.

  • If the trust is not filed because the IQPA report/ audit by the CPA is not ready, there is the late filing penalty.
  • If the trust is filed with an incomplete IQPA report, the DOL could consider the filing incomplete, reject it and a penalty fee could be assessed.

Wrangle has seen those who file with the incomplete report and then amend. This could buy the client some time; however you need to be ready to handle the following: there is the chance that the DOL will intercept before the amended filing is submitted and reject it. The letter from the DOL notifying you of the discovery, will give you up to 45 days to insert the audit report. If the timing is not met, the penalty is imposed. The penalty is $150 per day the filing was late, up to $50,000.


Under these set of circumstances, the best advice that Wrangle can give is to encourage the client to seek legal advice from an ERISA attorney. The attorney may know how to interpret the law and find the means to go through this scenario unscathed. [When Wrangle called the DOL on the matter, there was no leniency, the report had to be included with the eFiling].

Another reason to consult with an attorney quickly: we are not too far away from November. This is significant because around October/November, Wrangle has witnessed the Department of Labor run various reports to see who is out of compliance. For instance back in November, 2015 the DOL reviewed filings for 2014 that were under trusts to see who had the audit report attached. The DOL issued 1,200 letters for those who did not include audits instructing to file the audit within 45 days or have the penalties imposed.

4. The Form M1 confirmation code for successful efiling is not available.

As found in number three above, this too creates a sticky Catch 22 situation. This code must be included in the Form 5500 if Multiple Employer is checked and the Form M1 is confirmed to apply; the efiling process will come to a standstill without the code.

Some ask to check off that the Form M1 does not apply and then amend. They will be rolling the dice on this one. Form M1s have additional and strict compliance requirements to follow. The Form 5500 is used to monitor the requirements from a different angle. Wrangle strongly encourages for an ERISA attorney to review and advise.

The Form M1 is used to register the Multiple Employer Welfare Arrangement (MEWA) with the DOL. The Form M1 generally-speaking is to be efiled every March 1st and a confirmation code is generated after the successful e-filing takes place. (Not all MEWAs need to file a Form M1; there is a list of exemptions, see pages 2-3 of the Form M1 instructions: link: )

There are some ways to handle an incomplete Form 5500 such as when a Schedule A is missing. As for other instances, there is a bit of gamble in place. An ERISA attorney is your best guide. And when the Form 5500 just needs to be filed late to ensure the proper steps were taken, the DOL does have available the Delinquent Filer Voluntary Compliance (DFVC) Program to use. The penalty for being late if the DFVC program is implemented is $10 per day for up to 199 days, then there are caps at the one year mark at $2,000 and for multiple year late the cap is at $4,000 (if the DFVC program is not used, the penalty fee from the EBSA is $50 per day with no cap or the DOL can choose to impose up to $2,140 per day (this is rare to see imposed; never the less the option is always available to the DOL).

For more information on Incomplete Form 5500s or to receive this Blog in the form of a PDF copy, feel free to reach out to Ann McAdam, Wrangle’s Technical Consultant at [email protected].

2018-10-08T09:31:44+00:00 By |Categories: Uncategorized|