Every year, most 401(k) plan sponsors get a Form 5500 from their TPA or other provider with instructions to electronically sign and file it.
And I’m convinced plenty of plan sponsors spend more time deciding what they want for lunch than reviewing the Form 5500 before signing it.
That’s a mistake.
Your Form 5500 isn’t the terms and conditions for an iPhone software update. When you sign it, you’re signing a government filing containing information about your retirement plan. You should have some idea what it says.
I’m not suggesting that every plan sponsor needs to become a Form 5500 expert. That’s why you hire professionals. But you should review the basic information. Does the number of participants look right? Do the plan assets make sense? Are contributions reasonable? Is the employer information correct? If an audit is required, is it attached?
Most importantly, if something doesn’t look right, ask.
I’ve been practicing ERISA law long enough to know that mistakes happen. Good TPAs make mistakes. Good recordkeepers make mistakes. Sometimes incorrect information was supplied by the plan sponsor in the first place.
The problem is that once an incorrect Form 5500 is filed, the government doesn’t really care that you didn’t prepare it.
You signed it.
A Form 5500 can also be a great annual checkup for your plan. Comparing this year’s filing with last year’s can uncover changes or inconsistencies that deserve an explanation.
Your providers should prepare the filing and help you understand it, but the plan sponsor still has responsibility.
So when that Form 5500 arrives in your inbox, don’t blindly click through the electronic signature process.
Take ten minutes and look at it.
Ten minutes today might save you a much longer conversation with the IRS or Department of Labor tomorrow.