Tax Planning

Everything You Need to Know about Form 5500 If you’d like to get a general idea of what it takes to file a Form 5500 for a 401(k) plan, here are the top five things you need to know. As you can imagine, the Internal Revenue Service (IRS) and the Department of Labor (DOL) like to keep tabs on employee benefit plans to make sure everything is running smoothly and there are no signs of impropriety. One of the ways they do that is with Form 5500. You may be wondering: What is Form 5500? Well, Form 5500—otherwise known as the Annual Return/Report of Employee Benefit Plan—discloses details about the financial condition, investments, and operations of the plan. Not only for retirement plans, Form 5500 must be filed by the employer or plan administrator of any pension or welfare benefit plan covered by ERISA, including 401(k) plans, pension plans, medical plans, dental plans, and life insurance plans, among others. If you’re a Betterment client, you don’t need to worry about many of these Form 5500 details because we do the heavy lifting for you. But if you’d like to get a general idea of what it takes to file a Form 5500 for a 401(k) plan, here are the top five things you need to know. 1. There are three different versions of Form 5500—each with its own unique requirements. Betterment drafts a signature-ready Form 5500 on your behalf. But if you were to do it yourself, you would select from one of the following form types based on your plan type: Form 5500-EZ – If you have a one-participant 401(k) plan —also known as a “solo 401(k) plan”—that only covers you (and your spouse if applicable), you can file this form. Have a solo 401(k) plan with less than $250,000 in plan assets as of the last day of the plan year? No need to file a Form 5500-EZ (or any Form 5500 at all). Lucky you! Form 5500-SF– If you have a small 401(k) plan—which is generally defined as a plan that covers fewer than 100 participants on the first day of the plan year—you can file a simplified version of the Form 5500 if it also meets the following requirements: It satisfies the independent audit waiver requirements established by the DOL. It is 100% invested in eligible plan assets—such as mutual funds and variable annuities—with determinable fair values. It doesn’t hold employer securities. Form 5500– If you have a large 401(k) plan—which is generally defined as a plan that covers more than 100 participants—or a small 401(k) plan that doesn’t meet the Form 5500-EZ or Form 5500-SF filing requirements, you must file a long-form Form 5500. Unlike Form 5500-EZ and Form 5500-SF, Form 5500 is not a single-form return. Instead, you must file the form along with specific schedules and attachments, including: Schedule A -- Insurance information Schedule C -- Service provider information Schedule D -- Participating plan information Schedule G -- Financial transaction schedules Schedule H or I -- Financial information (Schedule I for small plan) Schedule R -- Retirement plan information Independent Audit Report Certain forms or attachments may not be required for your plan. Is your plan on the cusp of being a small (or large) plan? If your plan has between 80 and 120 participants on the first day of the plan year, you can benefit from the 80-120 Rule. The rule states that you can file the Form 5500 in the same category (i.e., small or large plan) as the prior year’s return. That’s good news, because it makes it possible for large retirement plans with between 100 and 120 participants to classify themselves as “small plans” and avoid the time and expense of completing the independent audit report. 2. You must file the Form 5500 by a certain due date (or file for an extension). You must file your plan’s Form 5500 by the last business day of the seventh month following the end of the plan year. For example, if your plan year ends on December 31, you should file your Form 5500 by July 31 of the following year to avoid late fees and penalties. If you’re a Betterment client, you’ll receive your signature-ready Form 5500 with ample time to submit it. Plus, we’ll communicate with you frequently to help you meet the filing deadline. But if you need a little extra time, Betterment can file for an extension on your behalf using Form 5558—but you have to do it by the original deadline for the Form 5500. The extension affords you another two and a half months to file your form. (Using the prior example, that would give you until October 15 to get your form in order.) What if you happen to miss the Form 5500 filing deadline? If you miss the filing deadline, you’ll be subject to penalties from both the IRS and the DOL: The IRS penalty for late filing is $250 per day, up to a maximum of $150,000. The DOL penalty for late filing can run up to $2,259 per day, with no maximum. There are also additional penalties for plan sponsors that willfully decline to file. That said, through the DOL’s Delinquent Filer Voluntary Compliance Program (DFVCP), plan sponsors can avoid higher civil penalty assessments by satisfying the program’s requirements. Under this special program, the maximum penalty for a single late Form 5500 is $750 for small 401(k) plans and $2,000 for large 401(k) plans. The DFVCP also includes a “per plan” cap, which limits the penalty to $1,500 for small plans and $4,000 for large plans regardless of the number of late Form 5500s filed at the same time. 3. The Form 5500 filing process is done electronically in most cases. For your ease and convenience, Form 5500 and Form 5500-SF must be filed electronically using the DOL’s EFAST2  processing system (there are a few exceptions). EFAST2 is accessible through the agency’s website or via vendors that integrate with the system. To ensure you can file your Form 5500 quickly, accurately, and securely, Betterment facilitates the filing for you. Whether you file electronically or via hard copy, remember to keep a signed copy of your Form 5500 and all of its schedules on file. Once you file Form 5500, your work isn’t quite done. You must also provide your employees with a Summary Annual Report (SAR), which describes the value of your plan’s assets, any administrative costs, and other details from your Form 5500 return. The SAR is due to participants within nine months after the end of the plan year. (If you file an extension for your Form 5500, the SAR deadline also extends to December 15.) For example, if your plan year ends on December 31 and you submitted your Form 5500 by July 31, you would need to deliver the SAR to your plan participants by September 30. While you can provide it as a hard copy or digitally, you’ll need participants’ prior consent to send it digitally. In addition, participants may request a copy of the plan’s full Form 5500 return at any time. As a public document, it’s accessible to anyone via the DOL website. 4. It’s easy to make mistakes on the Form 5500 (but we aim to help you avoid them). As with any bureaucratic form, mistakes are common and may cause issues for your plan or your organization. Mistakes may include: Errors of omission such as forgetting to indicate the number of plan participants Errors of timing such as indicating a plan has been terminated because a resolution has been filed, yet there are still assets in the plan Errors of accuracy involving plan characteristic codes and reconciling financial information Errors of misinterpretation or lack of information such as whether there have been any accidental excess contributions above the federal limits or failure to report any missed contributions or late deposits Want to avoid making errors on your Form 5500? Betterment prepares the form on your behalf, so all you need to do is review, sign, and submit—it’s as simple as that. 5. Betterment drafts a signature-ready Form 5500 for you, including related schedules When it comes to Form 5500, Betterment does nearly all the work for you. Specifically, we: Prepare a signature-ready Form 5500 that has all the necessary information and related schedules Remind you of the submission deadline so you file it on time Guide you on how to file the Form 5500 (it only takes a few clicks) and make sure it’s accepted by the DOL Provide you with an SAR that’s ready for you to distribute to your participants Ready to learn more about how Betterment can help you with your Form 5500 (and so much more)? Let’s talk.

What is a 401(k) Plan Restatement? Every six years, the IRS requires that all qualified retirement plans be “restated.” Find out what this means for your plan. Every six years, the IRS requires all qualified retirement plans to update their plan documents to reflect recent legislative and regulatory changes - that’s every six years as counted by the IRS, regardless of how long your plan has been active. Some updates are made during the normal course of business through plan amendments, but others require more substantial rewriting of plan documents through a formal process known as a “plan restatement.” This process began on August 1, 2020 and closed on July 31, 2022. Plan restatements are required by the IRS and not optional. Those who do not comply may be subject to significant IRS penalties. If you work with a third party administrator (TPA), they are the ones who handle the plan restatement, and we will coordinate with them when the next cycle begins. What is a plan restatement? A restatement is a complete re-writing of the plan document. It includes voluntary amendments that have been adopted since the last time the document was re-written, along with mandatory amendments to reflect additional legislative and regulatory changes. The latest mandatory restatement period for defined contribution plans is referred to as “Cycle 3” because it was the third required restatement that follows this six-year cycle. Is plan restatement mandatory or voluntary? This plan restatement is mandatory, even if your plan was amended for various reasons in the recent past. Plans that did not meet the July 31, 2022 restatement deadline are subject to penalties, up to and including revocation of tax-favored status. This means contributions might not be deductible and would be immediately included as income to employees. Why do plans have to be restated? Retirement plans are governed by ever-changing laws and regulations imposed by Congress, the IRS, and the Department of Labor (DOL). To remain in compliance and current with those laws and regulations, plan documents must be updated from time to time. Some of these changes may be reflected through plan amendments, but it is impractical for plans to amend their documents for every new law or regulation. What has changed since the last restatement? The deadline for the last mandatory restatement was July 31, 2022. Before that the previous deadline was April 30, 2016, and was based on documents approved by the IRS two years prior and only reflected legislative and regulatory updates through 2010. Since then, there have been a number of regulatory and legislative changes impacting retirement plans such as availability of plan forfeitures to offset certain additional types of company contributions and good faith amendments like the SECURE and CARES Acts. Haven’t we amended our plan to address these changes? Yes. Recognizing that plans would have to continuously update their plans to address changing regulations, the IRS allows for so-called “snap-on” amendments (also known as good faith amendments). However, it is more difficult to interpret a plan document (and therefore operate a plan consistent with the plan document) when there are so many amendments. A restatement cycle requires a full rewrite to incorporate “snap-on” amendments into the body of the document, often in greater detail. How will Betterment help with the plan restatement process? Betterment will draft and deliver the restated plan document to you for review and approval. Once you approve the restated plan document, we will see to it that plan provisions are accurately reflected in our recordkeeping system and provide you with the necessary disclosures for you to deliver to your participants. What does the plan restatement package include? The plan document restatement packages include the following, as applicable, based on your plan’s provisions: Adoption agreement Basic plan document that includes the detailed legal language describing each of the provisions Summary Plan Description (SPD) for distribution to plan participants Administrative policies for participant loans and qualified domestic relations orders (QDROs) Good faith amendments (currently, for the SECURE and CARES Acts) Will this restatement process take a lot of my time? Betterment will ensure that your plan document is properly drafted and delivered to you for execution. However, you have several important roles: Inform Betterment about any organizational changes that may impact your 401(k) plan. Review your restated plan document once you receive it, especially the plan highlight and plan provision (such as eligibility requirements) sections, to be sure they accurately reflect your plan. Distribute the Summary Plan Description (SPD), to be provided to you after you execute the restated plan document, to your plan participants. Is there a fee for this plan restatement? A standard plan restatement will be provided as part of our included compliance services to you. Any additional changes will trigger amendment fees.

Key 2023 Deadlines for 401(k) Plan Sponsors Birthdays, wedding anniversaries … and 401(k) plan compliance deadlines. Some dates are worth saving more than others. Offering a 401(k) plan has many benefits for both your company and your employees, but keeping your calendar clear of important dates isn’t one of them. Plan sponsors have several responsibilities throughout the year to keep their plan operating in compliance with federal regulations. We’ve summarized a few biggies for 2023—along with the remaining weeks of 2022—below to make your life a little easier. If a deadline falls on a weekend, it’s safest to submit the previous business day unless otherwise noted. Please also keep in mind there may be additional state regulations applicable to your plan not listed here. January February March April May June July August September October November December Remaining of 2022 January Friday, Jan. 13 Betterment at Work loads the prior year census template and compliance questionnaire to plan sponsors’ Compliance Hubs. Plan sponsors have until Tuesday, Jan. 31 to complete and submit both documents. Tuesday, Jan. 31 Betterment at Work makes IRS Forms 1099-R available to participants Send Form W-2 to your employees. Submit Form W-2 to the Social Security Administration. Submit the prior year census data and compliance questionnaire to Betterment at Work. Submit Annual Return of Withheld Federal Income Tax (Form 945) to the IRS. If you’ve made all your deposits on time and in full, then the due date is Friday, Feb. 10. February Wednesday, Feb. 1 Send Form 1099-NEC to both the IRS and your employees. Post the prior year’s OSHA Summary of Illness and Injuries in your workplace between February 1 and March 2. Tuesday, Feb. 28 For Applicable Large Employers (ALE) Submit paper Forms 1094-C and 1095-C to the IRS. If you intend to e-file your forms, then the deadline is Friday, March 31. For self-insured, non-ALE companies Submit paper Forms 1094-B and 1095-B to the IRS. If you intend to e-file your forms, then the deadline is Friday, March 31. Note: Form 1095-B must be filed electronically if the reporting entity is required to file 250 or more returns. March Wednesday, March 15 Make refunds to participants for failed ADP/ACP tests(s), if applicable. As the plan sponsor, you must approve corrective action by your 401(k) provider by this date. Failure to meet this deadline could result in a 10% tax penalty for plan sponsors. For S-Corps and LLCs taxed as Partnerships Employer contributions (e.g., profit sharing, match, Safe Harbor) are due for deductibility. For S-Corps and Partnerships Deadline to establish a traditional (non-Safe Harbor) plan for the prior tax year, unless the tax deadline has been extended. Thursday, March 30 For companies in Connecticut with 5+ employees Deadline to comply with Connecticut’s retirement plan mandate. Friday, March 31 File Form 1099s electronically with the IRS. For companies with 100+ employees Submit your EEO-1 report. April Saturday, April 1 Confirm initial Required Minimum Distributions (RMDs) were taken by participants who turned 72 before previous year-end, are retired/terminated, and have a balance. For companies in Maine with 25+ employees Deadline to comply with Maine’s retirement plan mandate. Tuesday, April 18 Tax Day For C-Corps, LLCs taxed as C-Corps, or sole proprietorships Employer contributions (e.g., profit sharing, match, Safe Harbor) are due for deductibility. For C-Corps and Sole Props Deadline to establish a traditional (non-Safe Harbor) plan for the prior tax year, unless the tax deadline has been extended. May Monday, May 1 File Form 941 (Employer’s Quarterly Federal Tax Return) with the IRS. Monday, May 15 For non-profit companies Tax returns due June N/A July Saturday, July 1 For companies in Virginia with 25+ employees Deadline to comply with Virginia’s retirement plan mandate. Monday, July 10 Mid-Year Benefits Review: Remind employees to take advantage of any eligible voluntary benefits. Saturday, July 29 If your plan was amended, this is the deadline to distribute Summary of Material Modifications (SMM) to participants. Sunday, July 30 For self-insured companies Submit the PCORI fee to the IRS. Monday, July 31 File Form 941 (Employer’s Quarterly Federal Tax Return) with the IRS. Electronically submit Form 5500 (and third-party audit, if applicable) OR request an extension (Form 5558). Betterment at Work prepares these forms on our plan sponsors’ behalf, with plan sponsors being responsible for filing them electronically. August Tuesday, Aug. 1 For *new* Betterment 401(k) plans Deadline to sign a services agreement with Betterment at Work in order to establish a new Safe Harbor 401(k) plan for 2024. Deferrals must be started by Sunday, Oct. 1. September Friday, Sept. 15 For S-Corps and Partnerships Deadline to establish a traditional (non-Safe Harbor) plan for the prior tax year if the tax deadline has been extended. Saturday, Sept. 30 Distribute Summary Annual Report (SAR) to your participants and beneficiaries. If a Form 5500 extension is filed, then the deadline to distribute is Friday, Dec. 15. October Sunday, Oct. 1 Deadline to establish a new Safe Harbor 401(k) plan. The plan must have deferrals for at least 3 months to be Safe Harbor for this plan year. For companies in Maine with 15-24 employees Deadline to comply with Maine’s retirement plan mandate. Sunday, Oct. 15 For C-Corps and Sole Props Deadline to establish a traditional (non-Safe Harbor) plan for the prior tax year if the tax deadline has been extended. For companies that offer prescription drug coverage to Medicare-eligible employees Notify Medicare-eligible enrollees of creditable coverage for prescription drugs. Monday, Oct. 16 Electronically submit Form 5500 (and third-party audit if applicable) if granted a Form 5558 extension. Betterment at Work prepares these forms on our plan sponsors’ behalf, with plan sponsors being responsible for filing them electronically. Tuesday, Oct. 31 File Form 941 (Employer’s Quarterly Federal Tax Return) with the IRS. November Wednesday, Nov. 1 For companies in Illinois with 5+ employees Deadline to comply with Illinois’ retirement plan mandate. Thursday, Nov. 2 If you’re adopting a new 401(k) plan for 2024, this is the deadline to notify SIMPLE IRA participants (if applicable) that their plan will terminate January 1. A company cannot sponsor a SIMPLE IRA and a 401(k) plan at the same time. December Friday, Dec. 1 Betterment at Work prepares 2024 Annual Notices (listed below) and sends relevant notices to our plan sponsors for distributing to participants. Plan sponsors to disseminate paper copies if required. Deadline for plan sponsors to distribute notices (if applicable) to participants for 2024 plan year: Safe Harbor notice Qualified Default Investment Alternative (QDIA) notice Automatic Enrollment notice Deadline to execute amendment to make a traditional plan a 3% Safe Harbor nonelective plan for the 2023 plan year. Deadline to execute amendment to make a traditional plan a Safe Harbor match plan for the 2024 plan year. Friday, Dec. 15 Distribute Summary Annual Report (SAR) to participants, if granted a Form 5558 extension. Sunday, Dec. 31 Post required workplace notices in conspicuous locations. Deadline to execute amendment to make a traditional plan a 4% Safe Harbor nonelective plan for the 2022 plan year. Deadline to make Safe Harbor and other employer contributions for 2022 plan year. Deadline for annual Required Minimum Distributions (RMDs). For companies that failed ADP/ACP compliance testing Deadline to distribute ADP/ACP refunds for the prior year; a 10% excise will apply. Deadline to fund a QNEC for plans that failed ADP/ACP compliance testing. Remaining 2022 Deadlines Thursday, Dec. 1, 2022 Betterment at Work prepares 2023 Annual Notices (listed below) and sends relevant notices to our plan sponsors for distributing to participants. Plan sponsors to disseminate paper copies if required. Deadline for plan sponsors to distribute notices (if applicable) to participants for 2024 plan year: Safe Harbor notice Qualified Default Investment Alternative (QDIA) notice Automatic Enrollment notice Deadline to execute amendment to make traditional plan a 3% safe harbor nonelective plan for the 2022 plan year. Deadline to execute amendment to make a traditional plan a safe harbor match plan for the 2023 plan year. Thursday, Dec. 15, 2022 Deadline to distribute Summary Annual Report (SAR) to participants, if granted a Form 5558 extension. Saturday, Dec. 31, 2022 Deadline to distribute ADP/ACP refunds for the prior year; a 10% excise will apply Deadline to fund a QNEC for plans that failed ADP/ACP compliance testing. Deadline to execute amendment to make traditional plan a 4% safe harbor nonelective plan for the 2021 plan year. Deadline to make safe harbor and other employer contributions for 2021 plan year. Deadline for Annual Required Minimum Distributions (RMDs).