Filing the Federal Form 5500 is the last step of the compliance process, and needs to be completed by the employer every year, and the process usually begins immediately following the end of a plan year. For most of LT Trust’s small business 401(k) clients, a 12/31 year-end plan date is common, and there is a significant flurry of compliance activity surrounding the process. Although this year’s deadline has been extended for most plans, due to COVID-19, the 401(k) compliance testing remains the same. Let’s take a deep dive into the processes that the LT Trust team uses to ensure each client’s compliance needs are satisfied.

How Does the LT Trust 401(k) Compliance Process Work?

401(k) Form 5500

When it comes to 401(k) plans, the IRS requires federal filings on the plan level and for that, the Form 5500 is used. The IRS deadline for the Form 5500 to be filed is July 31st (for plans with a 12/31 plan year-

end). Like individuals, an extension can be requested via the Form 5558 which would allow plan sponsors to wait until October 15th to file. It is a fairly common practice for plan sponsors to file for an extension as that will allow business owners additional time to fund profit sharing contributions.

401(k) Contribution Deadlines

While participant deferrals must be funded in a 401(k) plan as quick as administratively feasible per the Department of Labor (DOL), employer contributions do not have to be funded until the Form 5500 is filed. This would include all Safe Harbor contributions, discretionary matches and profit-sharing contributions. While most matching contributions are made throughout the year, profit-sharing contributions are almost always funded as a one-time contribution following the actual year. This allows CPA’s to work with plan sponsors and small businesses to determine the best course of action for tax purposes.

Even though the main rush of compliance season is in the first quarter, preparation is a yearlong process. To maintain our status as a low-cost 401(k) provider, it takes a combination of technology and human capital to ensure all our client’s needs are met. Our consistent communications to our plan sponsors may seem excessive to gather data, but it is a necessary requirement to ensure we are able to meet deadlines on a mass scale. When asked to describe what the role of a 401(k) administrator is, my answer has always been to the point; “to make sure all steps are being done to keep the IRS happy”. That is our job.