Form 5500 and Plan Census Reconciliation
Form 5500 is the annual return for employee benefit plans, filed electronically. Whether you also need an independent audit depends on a participant count - and the counting rule changed for plan years beginning on or after January 1, 2023 in a way that removed many plans from the audit requirement.
The filing is the easy part. The hard part is the census: the participant-level data the auditor tests, which comes out of payroll and almost never reconciles on the first pass.
When is it due?
The last day of the 7th calendar month after the plan year ends. For a calendar-year plan, July 31.
Form 5558 provides a one-time extension of up to 2½ months - to October 15 for a calendar-year plan. It must be filed on or before the normal due date. Since January 1, 2025, Form 5558 can be filed electronically through the same system as the 5500, or still on paper.
Which form?
| Form | For |
|---|---|
| Form 5500 | Large plans and most others |
| Form 5500-SF | Small plans meeting the eligibility conditions |
| Form 5500-EZ | One-participant plans (owners and spouses only) and certain foreign plans |
Form 5500-EZ has a filing floor: no filing is required if the total assets of all one-participant plans of the employer do not exceed $250,000 at year end - except in the final plan year, when a filing is always required.
The participant count that determines audit
Baseline: fewer than 100 participants at the beginning of the plan year is a small plan; 100 or more is a large plan. Large plans generally require an independent audit.
The 80/120 rule. If the count is between 80 and 120 and a Form 5500 was filed for the prior plan year, you may complete the return in the same category - large or small - as the prior year's filing. A plan that filed small last year and now sits at 110 may continue filing small.
What changed in 2023, and it matters a lot. For defined contribution plans, the count is now based on participants with account balances, rather than everyone eligible to participate. Effective for plan years beginning on or after January 1, 2023.
So an employee who is eligible, has never enrolled, and has a zero balance no longer counts. For a plan with automatic eligibility and low take-up, that can move the number substantially.
Two scope limits worth stating plainly: the change applies to defined contribution plans, not defined benefit or welfare plans. And the count is taken as of the beginning of the plan year, not the end.
Combined with the 80/120 rule, a plan can have 100 to 120 balance-holders and still file as a small plan.
The small plan audit waiver has its own conditions, separate from the count: at least 95% of plan assets must be qualifying plan assets, or any person handling non-qualifying assets must be bonded for 100% of their value. The plan must also give participants enhanced disclosure naming the institutions holding qualifying assets, with notice of the right to request statements and bond evidence free of charge.
What the audit actually tests
An audit determines, among other things, whether:
- contributions were properly calculated and timely received
- benefit payments were made in accordance with plan terms
- employees were properly included in or excluded from participation
- participant accounts are accurate
- plan obligations are properly stated
- any prohibited transactions were properly reported
Notice how much of that is payroll data rather than investment data. Eligibility, compensation, deferral amounts and contribution timing all originate in payroll.
The plan administrator is legally responsible for maintaining complete and accurate plan records - including making arrangements for third-party recordkeepers to make records available to the auditor.
Contribution timing is a standard test
Participant contributions must be transmitted as soon as they can be segregated from the employer's general assets, and in no case later than the 15th business day of the month following the month of withholding.
For plans with fewer than 100 participants, there is a 7-business-day safe harbor.
The "15th business day" is widely misread as a deadline. It is an outer limit, not a target - the operative standard is as soon as they can reasonably be segregated, and if you routinely remit in three days, three days is your standard.
Penalties
| Amount | |
|---|---|
| Department of Labor | $2,739 per day, no maximum |
| IRS | $250 per day, up to $150,000 per plan year |
A note on the DOL figure: $2,739 has been the amount since January 2025, and there was no 2026 inflation adjustment - the required inflation data wasn't published. The 2025 amount remains in effect through 2026.
The delinquent filer program
For plans that missed a filing and have not been notified in writing of the failure:
| Amount | |
|---|---|
| Basic penalty | $10 per day |
| Per-filing cap | $750 small plan · $2,000 large plan |
| Per-plan cap | $1,500 small plan · $4,000 large plan |
A special $750 per-plan cap applies to small plans sponsored by certain tax-exempt organisations, unless the plan was ever a large plan in the relevant years.
Against a penalty with no maximum, this is a very large discount for self-correcting.
On the census file itself
Frequently asked questions
When is Form 5500 due?
The last day of the 7th month after plan year end - July 31 for calendar-year plans. Form 5558 extends it 2½ months.
Do we need an audit?
Generally if you have 100 or more participants at the start of the plan year, subject to the 80/120 rule.
What changed in 2023?
For defined contribution plans, the count is now participants with account balances, not everyone eligible.
Does an eligible employee who never enrolled count?
For a defined contribution plan, in plan years beginning 2023 or later, no.
What's the 80/120 rule?
Between 80 and 120 participants, with a prior-year filing, you may file in the same category as last year.
How fast must deferrals be remitted?
As soon as they can be segregated, and no later than the 15th business day of the following month. Under 100 participants, there's a 7-business-day safe harbor.
What if we missed a filing?
The delinquent filer program caps the penalty at $750-$4,000 per plan, provided you haven't been notified of the failure.
This guide is general information about reporting requirements, not legal advice. Verify current deadlines, thresholds and penalty amounts against the issuing agency before you file.