Should employee benefit plans file information returns and extension requests electronically or submit paper forms in 2025? This is an important question that requires prompt, informed decision-making, especially since plan sponsors must request extensions before deadlines have passed.
Electronic filing offers the advantage of immediate confirmation. The downside is a lack of clarity in some aspects of the current process, which could create uncertainty for plan sponsors. In this article, we examine the reasons behind this ambiguous situation, offering insight to help plan sponsors ease their way into compliance with current IRS and DOL regulations.
The IRS Electronic Filing Mandate
On February 23, 2023, the IRS issued a final regulation that expanded mandatory electronic filing requirements for certain information returns. This regulation, titled Electronic-Filing Requirements for Specified Returns and Other Documents, applies to taxpayers filing 10 or more returns on or after January 1, 2024. A previously published BDO article summarizes the new electronic filing mandate.
While this expansion applies to a number of forms, we will focus on three that relate to ERISA benefit plans.
Form 5558, Application for Extension of Time to File Certain Employee Plan Returns
As of January 1, 2025, employee benefit plans were able to file Form 5558 electronically using EFAST2.
Plan sponsors requesting more time to file their Form 5500 (due by the last day of the seventh month following the end of the plan year, such as July 31 for calendar year plans) must determine whether electronic filing of their Form 5558 is mandatory under the updated IRS mandatory electronic filing rules. If so, are they prepared to comply?
Form 5330 and Form 8868
The question of whether electronic filing is mandatory or voluntary also arises when filing two other forms: Form 5330 and Form 8868.
Form 5330, Return of Excise Taxes Related to Employee Benefit Plans
To fix a late deposit , plans must file Form 5330 and pay any excise tax that is due. The IRS requires that taxpayers who meet the 10-return threshold file Form 5330 electronically for tax years ending on or after December 31, 2023. In fact, the IRS has stated it will disregard paper returns submitted by filers who are required to file electronically; the plan will be treated as if it had failed to submit any return.
However, due to an initial lack of approved electronic filing vendors, the IRS granted a reprieve for the 2024 tax year returns. At this time, the IRS has not announced whether the grace period has been extended to cover 2025 filings.
Form 8868, Application for Extension of Time to File an Exempt Organization Return or Excise Taxes Related to Employee Benefit Plans
For filings related to the 2024 tax year, plan sponsors must use Form 8868 — not Form 5558 — to request an extension to file Form 5330. Remember that extension requests must be submitted before the filing deadline, and the plan must pay any taxes due simultaneously with the request.
Electronic filing offers a more efficient way to file required forms, especially for plans required to file multiple returns. But because it is a new process for many plan sponsors, preparation is key.
Best Practices for Electronic Filing of Benefit Plan Forms
How can plan sponsors achieve and maintain compliance with electronic filing requirements?
- Determine whether the mandatory filing regulations apply to their employee benefit plan. Currently, taxpayers who file more than 10 returns of any type during the tax year are required to file electronically.
- Review and update all internal policies and procedures related to preparation and filing of all tax returns, not just employee benefit plan tax returns. Tax and benefit teams should be ready to commence electronic filing.
- Make sure vendors and service providers have the necessary systems to comply with IRS mandatory electronic filing regulations.
- Read notices from the IRS or DOL immediately and respond in a timely manner.
The top-of-mind issue is this: Requests for extension must be submitted before the filing deadline, whether they are filed electronically or on paper.
Mandatory Electronic Filing Is Here to Stay
Deciphering and complying with complex tax and ERISA retirement plan regulations is challenging. Our skilled professionals guide clients through tax filings, benefit plan compliance, and benefit plan audits. Please contact us to learn how we can assist.