The Form 5500 EZ is one of the three variations of the Form 5500 that is required by the IRS to be filed for a pension plan each year.
The Form 5500 EZ was developed by the IRS for single person pension plan that is typically set up by a self employed individual. The Form 5500 EZ can be filed by paper or electronically.
The Form 5500 SF is used by plans with less than 100 participants. It is typically filed by the administrator of the pension plans and is filed using specialized electronic software.
Advantages of Form 5500 SF over Form 5500 EZ
- Experienced Professionals: The Form 5500 SF is prepared by an experienced pension administrator. The Form 5500 EZ has to be prepared by the self employed person themselves. Though this can be done, it is safe to assume this is a professional exercise and better handled by a professional.
- Electronic Filing: The Form 5500 SF is filed electronically with the IRS using specialized software that is available to pension administrators.
- Immediate Electronic Confirmation: When the Form 5500 SF is filed electronically, you will receive an electronic confirmation of the filing. IF you mail the Form 5500 EZ to the IRS, you do not get any confirmation of its receipt. If there are any errors you may receive a response after a couple of months or even years
- Filing Fees VS. Free Filing: The pension administrators may charge you a small fee to prepare and file the Form 5500 SF while the Form 5500 EZ may be filed for free. But these fees have to be weighed against the benefits of electronic filing and professional help
Who needs to file the Form 5500 EZ?
The Form 5500 EZ is required to be filed by a one participant plan or a foreign plan that does not file the Form 5500 SF and the plan sponsor has more than $250,000 in their qualified retirement plan.
For example, if you maintain a defined benefit plan and a 401(k) plan. The assets as of Dec 31st in the defined benefit plan are $175,000 and the assets in the 401(k) plan are $125,000. In this case, a Form 5500 is required for each plan individually as the total retirement assets are above $250,000. This is a common error that individual plan sponsor makes when they assumed they need to have more than $250,000 in each plan.
Can you file the Form 5500 EZ for a single life defined benefit plan?
The answer to this question is a little complicated. Yes, you can file the form yourself, but a defined benefit plan requires an actuary to certify the plan’s funding status so make sure you have that on record. Most actuarial consulting firms like ours will give you a package deal to prepare all actuarial certifications and file the Form 5500 electronically. Reach out to us at info@pensiondeductions.com if you have a defined benefit plan as you will most likely need our help.
What is a one-participant plan?
A one participant plan covers only:
- Only the business owner
- Both the business owner and the spouse
- Only the business partners
- Only the business partners and their spouses
What information is required on the Form 5500 EZ?
Part I indicates if the return is the first or the last return for the plan and if the plan year is a short plan year or if an amended return is being filed.
In Part II you indicate the name of the plan and the plan number. The plan number should be unique and should be three digits beginning with 001. If you previously had another plan and used 001, you need to use the 002 even if the previous plan was terminated.
You need to indicate the effective date of the plan. Please make sure you are maintaining a copy of the updated plan document for the plan.
Indicate the exact name of the plan as documented in the plan document along with the official employer address and the EIN. The plan sponsor’s phone number and business code need to be mentioned on the Form 5500 EZ. The business code can be obtained from the following link on the IRS website (refer to the last three pages): https://www.irs.gov/pub/irs-pdf/i5500ez.pdf
Indicate the name of the plan administrator which will be the same as the plan sponsor in most cases.
If the plan name or the employer’s name has changed since the last return was filed, you need to indicate the new name on point 1a or 2a and indicate the old name on point 4. For example, if the name of the company changed from XYZ LLC to XYZ Inc. In 2019, you will indicate XYZ Inc. In point 2a. And XYZ LLC on 4c. You should also check if you need to change the plan name because of the change in the company name.
Indicate the number of participants and active participants at the beginning of the year and the end of the year in point 5.
Part III and point 6 are the most important information on the Form 5500 EZ. This is where you indicate the plan assets as of the beginning of the year and the end of the year. If you have a loan in the plan, please make sure to include the outstanding balance of the loan and add it to the plan assets.
The contribution made by employers is indicated at 7a. This amount should match the total deduction taken on the company tax returns. The contribution made by the employees (like 401(k)) contribution should be indicated on 7b. This amount should match on the W-2 box 5 if the business is a corporation. Please make sure the 401(k) contributions are deposited within a reasonable time after being withheld from the paycheck.
Enter the codes for the plan characteristics in point 8.
Complete the compliance questions in Part V.
Sign and date the form to complete the filing.
The Form 5500 EZ needs to be mailed to the IRS at the address mentioned in the instructions: https://www.irs.gov/pub/irs-pdf/i5500ez.pdf
Though filing the Form 5500 EZ seems easy, it may always make sense to get a professional help with this. Feel free to contact us and we will be happy to assist you with that.
