Employee benefit plans that are covered by the Employee Retirement Income Security Act of 1974 (ERISA) are required to file Form 5500, Annual Return/Report of Employee Benefit Plan, each year. The Internal Revenue Service (IRS), the Department of Labor (DOL) and the Pension Benefit Guaranty Corporation (PBGC) jointly oversee these reports.
What is Form 5500?
The annual Form 5500 is an electronically filed, informational filing that details the information relating to a benefit plan, such as the number of plan participants, the total plan assets and its liabilities. This form also accounts for how plan assets are spent throughout the year with respect to service providers and benefits paid through the plan. Form 5500 also contains disclosures regarding a plan’s compliance with certain ERISA fiduciary standards.
Who Must File Form 5500?
Annual reports must be filed on behalf of ERISA-covered pension benefit plans, welfare benefit plans and direct filing entities (DFEs). There are certain exceptions within each of these categories. Additionally, if a plan has less than 100 participants, it is considered a small plan and may be eligible for streamlined filing.
What is a Flexible Spending Account?
A flexible spending account (FSA) is an employee benefit plan that allows participants to designate pre-tax contributions and employers to make contributions on behalf of employees for certain tax-preferred reasons. There are health-care FSAs as well as dependent-care FSAs. Qualified withdrawals are not taxable. Whether a withdrawal is qualified depends on the type of FSA, as only certain medical and dependent-care expenses are allowed under the Internal Revenue Code.
Are Forms 5500 Required for Flexible Spending Accounts?
Forms 5500 are required to be filed on behalf of flexible spending accounts, because they fall within the ERISA-covered welfare benefit plan category. However, there is an exemption for welfare benefit plans that are unfunded and have fewer than 100 participants.
Kay Lee began freelance writing for Answerbag and eHow in 2010. She is an attorney in Washington, DC, practicing since 2006. Lee specializes in employee benefits and executive compensation. She holds a Juris Doctor from the Columbus School of Law and a Master of Laws from Georgetown University Law Center.