It’s a new year, and that means by now your new benefits have kicked-in for your employees! It also means that it is time for HR and Payroll administrators to make sure they are up-to-date on the latest changes and filing dates for benefits administration and implementation. Do you offer retirement plans and/or profit-sharing as a benefit to your workforce? If you’re a plan sponsor, keep reading for important details, filing deadlines, and more:
2023 401(k) Match Limits
In 2023 your employees’ contribution limits for their 401(k) has increased to $22,500. The total annual contribution (employee + employer) increased from $61,000 to $66,000. As of January 2023, the nationwide average employer 401(k) match reached an all time high at 4.7%. There is no percentage limit to the amount an employer can contribute as long as the annual cap isn’t reached.
Prepare to File Form 5500
First off – what is Form 5500? It is a form developed collectively by the IRS, Department of Labor (DOL), and Pension Benefit Guaranty Corporation (PBGC) to satisfy annual reporting requirements regarding employee retirement and profit-sharing plans. This annual report provides information about the employer’s financial health, operations, and compliance with regulatory requirements. In general, all employers who adopt and sponsor a retirement plan must file this form annually with the DOL. There are a few versions of this form; Form 5500, Form 5500-SF, and Form 5500-EZ. Which version you complete depends on the size of your business and structure of your plan(s).
One of the critical functions of Form 5500 is to help calculate profit sharing for employees when applicable. This information is used to determine how much money each employee will receive from the profit-sharing plan based on the company’s profits. Accurate and timely completion of the Form 5500 is essential to ensure that employees receive the correct amount of profit sharing.
Completing Form 5500 can be a complicated and time-consuming process, and mistakes can be costly. It is important to have a thorough understanding of the requirements and regulations, as well as the financial and operational aspects of the plan. Failing to file the form or filing it incorrectly can result in fines, penalties, or even legal action.
The DOL requires an electronic filing process using its EFAST2 program. As you are completing your filings, remember the importance of accuracy and completeness in Form 5500. If you know ahead of time that you will not be able to file by the deadline (the last day of the seventh month after the plan year ends), you can file an extension for your company’s form(s). If the extension is filed in a timely and complete manner, your Form 5500 and Form 8955-SSA will be due 2.5 months after the original due date.
If this filing process seems daunting to you – HumCap’s team of HR professionals can help you in preparing your questionnaire or census for 5500 filing. Don’t fret! We are here to help enable your key personnel to shift focus from an administrative role to a proactive one that will help contribute to your company’s success.
Important Filing Dates
As tax-season is upon us – here are a few key dates to be aware of:
- January 23: IRS officially began the 2023 tax season by starting to accept and process individual 2022 tax returns
- April 18: National due date to file a 2022 tax return or request an extension and pay tax owed
- July 31: National due date to file Form 5500 with the DOL for your Employee Retirement Income Security Act (ERISA)-covered benefit plans
At HumCap, our HR team has the expertise and experience to help companies file the correct form(s) accurately and on time. Our team can assist with all aspects of the filing process, from gathering the necessary data and information to preparing the report and submitting it to the appropriate authorities.
In conclusion, filing the 5500 form properly is essential for companies with a retirement plan and/or profit-sharing benefits. It helps ensure the financial health of the plan and compliance with legal requirements while also providing critical information to help calculate profit sharing for employees. For companies needing assistance with this important task, HumCap HR is here to help.