Form 5500 and the Automatic Filing Extension

ERISA consultants at the Retirement Learning Center (RLC) Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare.  We bring Case of the Week to you to highlight the most relevant topics affecting your business.  

A recent call with a financial advisor from Pennsylvania is representative of a common inquiry related to filing IRS Form 5500. The advisor asked:  “My client failed to file his Form 5500 for his company’s 401(k) plan by the deadline of July 31, 2020. Is there any way to get a filing extension?” 

Highlights of the Discussion

Your client would have had to have filed a Form 5558, Application for Extension of Time To File Certain Employee Plan Returns by the company’s regular due date (i.e., July 31, 2020, in this case) to request a one-time extension (for 2 ½ months) to file its Form 5500 for the year. However, if your client has filed for an extensionto submit his company’s business tax return for 2019, he still may be in luck with respect to filing his plan’s Form 5500 for the year.

The IRS will grant an automatic extension of time to file the Form 5500 Annual Return/Report of Employee Benefit Plan for a year—until the business’s due date for filing its federal income tax return—if  all of the following conditions are met: 

1. The plan year and the employer’s tax year are the same;  

2. The employer has been granted an extension of time to file its federal income tax return to a date later than the normal due date for filing the Form 5500; and  

3. A copy of the application for extension of time to file the federal income tax return is maintained with the filer’s records.  

An extension granted by using this automatic extension procedure cannot be extended further by filing a Form 5558, nor can it be extended beyond a total of 9½ months beyond the close of the plan year. (See the Instructions to Form 5500, page 4.) 

Unfortunately, if your client did not file Form 5558 for the one-time extension, and does not qualify for the automatic extension to file by the tax return deadline, he could face late filing penalties. Those penalties could be reduced by participating in the Delinquent Filer Voluntary Correction Program.   

Conclusion

Business owners who have been granted an extension to file their business tax returns automatically receive an extension of the deadline to file Forms 5500 Return/Report for their retirement plans, if they satisfy certain conditions.