Don’t Forget about Form 5500 Final Reports

So much has been emphasized on remembering to file a Form 5500 once the reporting threshold has been met. Just as important is to be sure to remember to file a final report when the Plan has terminated. We often see cases where final reports were never filed — either brought to light by the DOL or uncovered during an acquisition when the acquiring company realizes compliance steps were missed. If not addressed promptly, this can lead to penalties from the DOL.

What is a final report?

A final report represents a Plan that has been terminated, and the Plan number is to be retired (never used again). There is a box on page one of the Form 5500 that needs to be checked to indicate the final status.

These reports often come into play when:

1. There is a merger and acquisition, with one of the companies’ benefits being terminated
2. A company closes*
3. A group joins a PEO and becomes a participating employer of the PEO’s plan
4. A group may have had many benefits, each as their standalone plans and filed 5500s accordingly. They decided to bundle all the benefits into one Plan under a new Wrap Plan Document that would be kept active going forward. All of the other 5500s would need final reports.

*If a group closed or filed for bankruptcy and a final was not e-filed, the DOL can go after the signor of the previously filed Form 5500. The individual who was deemed the signer could be held personally responsible.

Side note: You can have a first and final Form 5500 report.

What happens if a final report is not e-filed?

A non-filed Form 5500 will most likely generate penalties. If the group missed the filing, then the DOL’s DFVC Program is best used. If the DOL finds a missed filing, they will send a letter of inquiry. If it is ignored or if the response is late, the DOL can charge $135 per day late with no cap.

What is needed to create a final report?

The enrollment for the end of the Plan year is to be at 0. Schedule As may still have enrollment listed, although. If there is a trust, the assets for the end of the Plan year also need to be $0, and the Schedule H or I has questions to be answered on how the funds were handled. The IQPA report for a large group needs to address the termination resolution.

Is an SAR still required to be distributed?

Yes. The SAR must be distributed to any participant who was enrolled in any benefit during the final ERISA Plan Year.

What is needed for self-insured benefits with a final report?

Self-insured benefits need to be carefully considered: If run-out claims are still active, another plan filing is required, often as a short plan year filing.

• The other benefits of the plan would not need to be included in the filing if they had already terminated
• Common to have just a three-page Form 5500 report as a self-insured benefit does not require a Schedule A

Reminder: the Plan number of a final report needs to be retired. It can no longer be used again. Often, groups mistakenly use it down the road, which can create confusion for the DOL with letters of inquiry being issued. Amended filings are then needed.

For questions on this subject, feel free to reach out to Ann McAdam at amcadam@wrangle5500.com.