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Form 5500: Three Mistakes to Avoid When Filing a Final Form 5500

Form 5500: Final Filing Common Errors

According to the Employee Plans Compliance Unit’s recent study of terminating plans,  90 percent of respondents made at least one error on the final Form 5500 filed on behalf of their plans.  Here are three common mistakes which you can easily avoid:

  • Jumping the gun:  A final Form 5500 may be filed only when all plan assets have been distributed.  If assets remain in the plan at the close of the plan year, you will need to file Form 5500 for the plan year–but it won’t be the final 5500.

 

  • Filing again…and again:  Only one Form 5500 can actually be the final return.  Make sure the 5500 you are filing really is the last one you need to file before marking it as final.

 

  • Ignoring the short plan year rules:  If the plan assets aren’t fully distributed until after the close of the year in which the plan was terminated, then it is likely that the plan will have a short plan year during the year of distribution.  In that case, the final Form 5500 is due by the last day of the seventh month following the close of the short plan year. 

 

 

Qualified Plans: How NOT to Terminate Them to Avoid Mistakes

Qualified Plans Should Be Terminated Properly

More than 75 percent of the plan sponsors who participated in the Employee Plans Compliance Unit (EPCU) Termination Project failed to take all the steps necessary to complete the process of terminating their qualified plans.  Among the mistakes catalogued by the EPCU were the following:

 

  • Distributing all plan assets, but not marking Form 5500 as final.

 

  • Failing to distribute all plan assets as soon as administratively feasible after the plan termination.

 

  • Ignoring the requirements for locating missing participants and beneficiaries.

 

  • Confusing frozen and terminated plans.

 

  • Using the wrong plan number.

 

Although terminating a plan is both time-consuming and complex, plan sponsors can avoid making mistakes by careful and methodical planning.