Amending the ERISA Plan year on a Form 5500 can appear as a simple step, but it can sometimes open Pandora’s box.
Amending a Plan year often comes after discovering that the Wrap Plan Document does not match the Form 5500. Sometimes this mistake may have been in place for years. Clients may first consider amending the Plan Document retroactively rather than the Form 5500. However, this is only encouraged if there is a proven administrative error. The DOL has informed Wrangle that if they were to audit and suspect that the change to the Plan Document was made to avoid a delinquent filing, significant penalties could be imposed. Amending the Form 5500 may then be considered as the means to correct the situation. Below are three options on how to handle the amended filings. Wrangle follows the conservative path and supports option 1 to be used, as options 2 and 3 hold risk. Overall, we would encourage the group’s legal team to weigh in on how to best handle it.
Option 1
To line up the Plan years to match the ERISA Plan Document, consider if the first year could be filed as a short Plan year. Since this was not previously filed, it will need to be handled as a late filing using the DFVCP. This will be at a $2,000 penalty. Nevertheless, future filings will typically line up correctly and will not have a late filing.
Example: ABC company had always filed as a 1/1 Plan year dating back to 2017, but should have been an 8/1 Plan year:
- One-year DFVC for 2017 to be a short – Short 1/1/2017 – 7/31/2017; Filed: 9/20/2023: $2,000.
- Amend the 2017 to report 8/1/2017 – 7/31/2018; due date would have been 2/28/19; was filed on 7/30/18 = not late; no penalty
- Amend the 2018 to report 8/1/2018 – 7/31/2019; due date would have been 2/28/20; was filed on 5/10/2019 = not late; no penalty
- Amend the 2019 to report 8/1/2019 – 7/31/2020; due date would have been 2/28/21; was filed on 7/30/2020 = not late; no penaltyÂ
Option 2
Some choose to just amend each past 5500 filing to match the Wrap Plan Document and skip the DFVC part of the equation. The amended ERISA Plan year will result in a different deadline that may not have been met based on when the 5500 was originally filed with the original ERISA Plan year.
Please be aware: if the DOL audits your 5500 reports, such as during the time when the DFVC program was used, and sees that each of the amended filings have different deadlines, and if those deadlines were not met, then each will be deemed as a late filing. The late filing penalty could be $4,000 per Plan for multiple years late.
Example:
ABC company has always filed as a 1/1 Plan year but should have been an 8/1 Plan year.
- Amend 2017 to report to be 1/1/2017-7/31/2017; due date would have been 2/28/2018 was originally filed 7/30/2018 = Late
- Amend 2018 to be 8/1/17-7/30/18; due date would have been 2/28/19; was originally filed 5/10/2019 = late
Option 3
Some choose to leave the past 5500 filings and Wrap Plan Documents as is and correct them going forward. Be careful to watch for any gaps in reporting between the past 5500 filings and the new 5500 filing. The risk is if the DOL ever audits, and the 5500 and the Wrap Plan Document do not match, they may impose penalties at that time for inconsistencies between the Plan Document and the 5500 filings.
If there is any uncertainty, the best approach is to ask for an ERISA attorney to review and advise.
Special Note on Amending 5500s Prepared by Wrangle
If a Form 5500 does need to be amended and Wrangle prepared the original version, we do not charge our preparing fee. We will prepare the amended filing and e-file it on behalf of the Plan Sponsor at no charge.
We are here to help. For any questions, feel free to reach out to Ann McAdam at amcadam@wrangle5500.com.