Our consultants understand the importance of your relationships and will work seamlessly alongside your team. The Form is an information return that is filed, usually with the Department of Labor, each year to provide certain details about the operations and financial status of an employee benefit plan. I know, it sounds about as interesting as watching paint dry, but it is really quite important. There are actually entire books written on the who, what, why, where, and when of the Form Many plan sponsors outsource the preparation of this important form and then simply sign on the bottom line and electronically file it without giving it a second thought.
But, a closer review of the form reveals that it covers areas such as fidelity bonding , timely deposit of employee deferrals , and defaulted participant loans , just to name a few important details. As a result, we highly recommend that you review your Form and work with the preparer to ensure you understand what is reported.
As a general rule, most employee benefits plans are required to file Form each year. If there are employees who have been improperly excluded, then the ERISA exemption is void, and a Form must be filed. If a company has more than one plan, e.
Churches and government entities are generally exempt from ERISA coverage, and it just so happens that both types of entities also frequently sponsor b plans.
Such plans are not required to file Form There is another way a b plan might be exempt. If the employer sponsoring the plan has only limited involvement in its operation and maintenance, that plan is also exempt from ERISA and, therefore, the requirement to file Form A word of caution is in order.
Indeed, it does. Any b plan that does not qualify for the ERISA exemption described in the previous questions is required to file a Form each year. The instructions to the forms indicate that cash, modified cash, and accrual accounting are all acceptable methods to use as long as a plan sponsor is consistent from one year to the next.
Often times, the method used will align with how the plan is recordkept. For example, the records for balance forward plans are often kept on an accrual basis, so the financial statements are typically shown on an accrual basis. Conversely, daily valued plans are typically recordkept on a cash basis, so the Form will show cash basis financial statements.
Large plan filers typically report their financial statements on Form using the accrual method, because the independent auditor's report is typically presented on an accrual basis. If a plan has or more participants on the first day of a plan year, then that plan is a large plan filer for that year. There is an important exception to that trigger point. It says that a plan that is a small plan filer can continue to file as a small plan until the first plan year it has more than participants on the first day of the year.
Plans that are close to the large-plan-filer threshold can often stay below it by being diligent about processing mandatory pay-outs of terminated participants with small account balances so that they are not picked up in the participant count.
Since the fee for such an audit is typically in the high four-figure to low five-figure range, plan sponsors are generally eager to postpone that expense for as long as possible.
In addition to the fees, the plan sponsor can expect to spend additional time working with the auditor; however, working with experienced service providers, e. The Department of Labor has very strict requirements for how the annual audit is to be conducted and what it must report. As a result, working with someone who is not well-versed, not just with audits in general but specifically with employee benefit plan audits, can amount to playing with fire.
The reason is that the DOL will completely reject a Form that includes a deficient audit and fine the plan sponsor for being delinquent. If you are a small business owner and need a retirement plan for yourself and your company, only Ubiquity offers flat-fee plans, plus expert guidance along the way. Setting up a k can be complicated. Only Ubiquity gives small business owners access to retirement experts in addition to industry-leading low flat-fees.
Each sales expert has over a decade of experience assisting business owners in k plan design. Take advantage of this free benefit. About k. State Mandates. Retirement Tools. Contact Us. Looking for a k for your team? How Does a k Work? Who is exempt from filing Form ?
Here is a summary: Small Plan Exemption. An ERISA welfare plan covering fewer than participants at the beginning of the plan year is exempt from the Form requirement if it is unfunded including certain plans deemed unfunded under DOL Technical Release , fully insured, or a combination of the two.
The small plan exemption does not apply to plans subject to the Form M-1 filing requirements generally multiple employer welfare arrangements—MEWAs. Thus, a small welfare plan must file Form only if it is funded, does not satisfy the conditions for the unfunded or insured plan exemptions, or is subject to the Form M-1 requirements.
Large Plans Must File. If an ERISA welfare plan covers or more participants at the beginning of the plan year, Form must be filed for that plan year. Thus, a large plan must file the main body of Form , and may need to include one or more associated schedules. Counting Participants. The Form filing obligation applies on a plan-by-plan basis.
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