How often do you say to your clients, “I have an option that will give you a break and save you thousands of dollars”? In today’s world, this is certainly on the rare side. However, the Department of Labor, with the Form 5500, does have such an option for small groups growing into large groups if a certain criteria is met. The savings can be between $10,000-$30,000+, and stem from the 80-120 rule.
In the Form 5500 world, under 100 enrolled participants is considered to be a small group. If the group is a private corporation or nonprofit and no trust is in place, they are not required to file a Form 5500. However, if there is a trust for the plan, they do need to file. Within the Form 5500 report, they will need to include the Schedule I to report the financial data for the trust.
In contrast, for a large trust (over 100 enrolled participants on the first day of the plan year), the group needs to include quite a bit of financial data within the Form 5500 report on the Schedule H, as well as a financial audit conducted by an independent qualified CPA. The services of the CPA are expensive, ranging between $10,000-$30,000.
For a small group growing into a large group, and suddenly facing the IQPA report requirements, it can certainly be a financial challenge. The DOL with the 80-120 rule may give the group a break. If the small group trust filed a Form 5500 and was under 100 enrolled participants at the beginning of the plan year in year one, but at the beginning of year two did not exceed 120 enrolled participants, they can still file as they did in year one as a small group trust with no IQPA report. Also, if the group does not exceed 120 enrolled participants each year at the beginning of the plan year, or if they missed a filing and had to use the DFVC program (delinquent filer voluntary compliance program), they can continue to file indefinitely as a small group. The DOL will monitor the participant counts listed on page two of the Form 5500 report, so there are no boxes to check.
See the chart below for an example:
|ERISA plan year||Enrollment as of the beginning of the plan year – #5 of the participant counts (January 1st)||File as a small plan trust|
Yes (even though this filing was originally skipped, and they used the DFVC program)
Per the Form 5500 instructions (see page 8):
80-120 Participant Rule: If the number of participants reported on line 5 is between 80 and 120, and a Form 5500 Annual Return/Report was filed for the prior plan year, you may elect to complete the return/report in the same category (‘‘large plan’’ or ‘‘small plan’’) as was filed for the prior return/report. Thus, if a Form 5500-SF or a Form 5500 Annual Return/Report was filed for the 2020 plan year as a small plan, including the Schedule I if applicable, and the number entered on line 5 of the 2021 Form 5500 is 120 or less, you may elect to complete the 2021 Form 5500 and schedules in accordance with the instructions for a small plan.
If you have questions on this or need additional information, please contact Ann McAdam at firstname.lastname@example.org.