We are a small nonprofit (with 6 employees) and we offer a TDA/403(b) plan and a SEP plan for our employees. Unfortunately, we are just now figuring out that we may have goofed up big time by not filing a Form 5500-SF on time for the TDA/403(b). Our plan years run from January 1 through December 31. So, apparently, we were supposed to file a Form 5500-SF by August 1, which we just realized yesterday. And, we just read yesterday that the penalty for late filing is an incredible $1,100 per day. We also now see that we could have filed a request for an extension of time to file the Form
5500-SF, and that we had to file that before August 1.We have an "exclusive services arrangement" with the company that is our plan sponsor, which means that we pay them a fee and they prepare a Form
5500 every year for us. They used to do this for free, and we think that every year they sent us forms to sign regarding the Form 5500. However, we honestly never understood what any of it meant since it is so complicated, and we just signed the forms whenever they said we needed to do that. Now there is apparently a requirement to do the filings electronically and our understanding is that our plan sponsor set up an internal online system to do that. Unfortunately, we didn't understand whatever the new system is, and it now looks like we missed a deadline for doing that.We did call our plan sponsor yesterday and explained our confusion about all of this and they said they are looking into it and we are waiting for a call back from them. And, to add to the confusion, there is even a question about whether we complied with the 2009 filing requirement. To the best of our recollection at this point, there was some issue about electronic filing last year and then we thought that was postponed due to "the system not being set up yet" -- either with the IRS system or our plan sponsor system -- or something like that.
So, we are just now trying to get this all resolved. We do know that the plan sponsor prepared a Form 5500 for us every year and we have copies of those prepared forms.
After reading as much as we could, and trying to understand what it all means, we have questions along two lines. One is, are we actually required to file a Form 5500 or are we exempt; and the second line of questions is what to do if we are required and if there is any way to avoid an incredible $1,100 per day penalty for late filing.
As far as possibly being exempt, we appear to meet all of the listed exemption criteria that we saw listed with one possible exception. That last exemption criteria says that our 403(b) Annuity Arrangement is exempt if,
"The arrangement offers a selection of two or more 403(b) annuity products (from competing carriers) that provides the employees with a reasonable choice in light of all relevant circumstances."
Our plan is through one company, but our employees have a fairly wide choice of funds (products?) to choose from, including funds that are through another company (Vanguard, which is not our plan sponsor company). So, does that mean we would meet that criteria of the arrangement offering "two or more 403(b) annuity products (from competing carriers)"? If so, that would be great because we think it would mean that we are exempt from even filing a Form 5500 for our 403(b) plan since we meet all of the other criteria (no employer contributions, voluntary for employees, etc.). Does it appear from the above wording about wide choice and "competing products" that we may meet that exemption criteria?
If we are not exempt, and we are therefore late in filing, is there any special approach we should use or try in order to get the penalties waived?