Along with other employers that offer benefit plans covered by the Employee Retirement Income Security Act of 1974 (ERISA), companies that sponsor employee stock ownership plans (ESOPs) are required to file Form 5500, Annual Return/Report of Employee Benefit Plan.
The Internal Revenue Service (IRS) stipulates a due date of the last day of the seventh month after the plan year ends. So if your plan year is a calendar year, that means Form 5500 is due July 31 of the following year.
IRS Form 8955-SSA, Annual Registration Statement Identifying Separated Participants with Deferred Vested Benefits, shares a due date with Form 5500.
Plan sponsors can request a one-time extension for up to two and a half months by filing Form 5558, providing you meet the required conditions.
Here’s what you need to know to file this request for an extension of time to submit IRS Form 5500 and/or IRS Form 8955-SSA. This filing extension is typically required when an extension is needed for the employer’s annual federal income tax return.
18 U.S.C. 1027: Filing Incorrect Forms Can Be a Crime
U.S. law makes it clear that anyone filing any ERISA-required document or record, or who provides records or documents for an administrator of an ERISA-regulated plan, who “makes any false statement or representation of fact, knowing it to be false, or knowingly conceals, covers up, or fails to disclose any fact the disclosure of which is required by such title or is necessary to verify, explain, clarify or check for accuracy and completeness any report required by such title to be published or any information required by such title to be certified, shall be fined under this title, or imprisoned not more than five years, or both.”
In short, correct and timely filings are not simply important. They’re a matter of law.
It’s important to understand that certain aspects of an ESOP, such as annual valuations, are legitimate reasons that may necessitate a filing extension.
Why Is It Important to File Form 5558 On Time?
Section 403 of the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) increased penalties for failure to file Form 5500 to $250 per day, not to exceed $150,000.
The SECURE Act also increased the penalty for failure to file Form 8955-SSA to $10 per unreported separated participant, multiplied by the number of days of failed reporting (not to exceed $50,000 in a plan year).
IRS Form 5558 is a relatively simple, one-page form. Considering the penalties for failure to file, it’s more than worth the time and effort when an extension is needed.
What Conditions Are Required to Receive an Extension?
Form 5558 instructions state that employers that file are automatically granted an extension for these forms until the extended due date of their federal income tax return if they meet both of these conditions:
- The plan year and the employer’s tax year are the same
- They received an extension to file the federal income tax return to a date later than the normal due date for filing these forms
The normal due date of Form 5558 is the date that Form 5500 would normally have been due, if no extension were needed.
8 Tips to Keep in Mind When Filing IRS Form 5558
Form 5558 is relatively simple and straightforward, but it’s hard to overstate the importance of proper filing to maintain regulatory compliance and continue to qualify for an ESOP’s considerable tax advantages. With that in mind, here are a few important considerations:
- As of this writing, digital filing is not available. Form 5558 should be filed by mail with the Department of Treasury, Internal Revenue Service Center, Ogden, UT 84201-0045. The IRS also provides information and instructions for those using a private delivery service.
- A separate Form 5558 must be used for each plan for which an extension is needed — so if you maintain both a pension plan and an ESOP, for example, a form is required for each of those plans.
- Do not attach lists of other plans to a Form 5558.
- If you’re requesting an extension for both Form 5500 and 8955-SSA for the same plan, only one Form 5558 is needed.
- If you’re filing Form 5558 to request an extension for Form 5500 and/or 8955-SSA, a signature is not required.
- If you meet requirements described above and file on time, your extension is automatically approved until “the date that is no later than the 15th day of the 3rd month after the return/report’s normal due date.”
- If the filing deadline falls on a Saturday, Sunday, or legal holiday, you may file on the next day that is not a Saturday, Sunday, or legal holiday.
- Approved copies of Form 5558 will not be returned to the filer from the IRS.
- A copy of the completed request for extension must be retained with the filer’s records.
Form 5558 Can Also Be Used to Ask For an Extension on Form 5330
The same form can be used to request an extension of time to file Form 5330, Return of Excise Taxes Related to Employee Benefit Plans. A request for extension to file Form 5330 requires a signature and explanation for why the extension is needed.
The IRS no longer returns stamped copies of the form; filers instead receive a computer-generated notice informing them if the extension is approved or denied. For this reason, the IRS requests that filers attach a copy of the notice to Form 5330 when filed.
In the case of Form 5330, the filing extension is not an extension for payment. An estimated excise tax payment is due without extension and should be included with the extension request form. If an extension is granted, interest accrues on any unpaid balance.
Administrative Planning for ESOPs
The list of filing deadlines, extension requests, recordkeeping requirements, and more can be a daunting aspect of administering an ESOP. Not only are there important milestones throughout the year, but keeping up with them is a matter of regulatory compliance, fiduciary responsibility, and the health of your ESOP.
But it doesn’t have to be stressful when you download our guide, Developing & Updating Your ESOP Administration Timeline. Stay on top of requirements and make your work easier. Just click below to download your free personal copy.