Penalties hit ERISA plans in spite of CPA audits

Tip for July 2017


The Department of Labor (“DOL”) assesses significant penalties for an improperly filed Form 5500. Mistakes on an ERISA plan’s Form 5500 create a nice target for the Internal Revenue Service’s auditors, too.

While the number of filing deficiencies are frequent among smaller plans
(i. e., plans with fewer than 100 participants), which aren’t required to have an annual CPA’s independent financial audit, the DOL is concerned about the increasing number of deficiencies it sees for plans that receive a CPA’s annual financial audit.

Dozens of Form 5500s were surveyed for this post. Each one was ready for immediate execution by the related plan sponsor for submission to the IRS. Many of the surveyed filing forms were accompanied by CPAs’ audits, but some of those forms also contained deficiencies that would have earned penalties if they had not been caught and corrected before filing. The deficiencies fell into three categories and include:

  • Incorrect payroll calculations;
  • Failure to properly synchronize changes in participants’ deferral rates with the recordkeeper; and
  • Recordkeepers’ vesting errors on distributions.


The Internal Revenue Service explains that entering incorrect information or leaving a blank in a required field increases the likelihood your plan will be selected for a compliance check. Here’s what Roland|Criss’ Risk Practice Group recommends.

  • Read each item and then read the instructions for that line. Don’t assume you know what information is being requested or that your plan’s recordkeeper has entered valid information.
  • Do not copy information from the prior year’s 5500 without first reviewing each item carefully to ensure you didn’t put information in the wrong box, leave an entry blank that should have information, or use an incorrect code.
  • If you rely on a third party to prepare the 5500, carefully review it before submitting it.
  • Consult with an independent administrative fiduciary to institute sufficient risk management procedures to prevent mistakes on the 5500 and other informational returns.

If you are concerned about the accuracy of your plan’s Form 5500 then
ask Roland|Criss for help.

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