Certified Plan Sponsor Professional (CPSP) Practice Exam

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Which annual form must a medium-sized marketing firm with 110 employees file with the IRS if 99 of them are plan participants in a 401(k) profit-sharing plan?

  1. Form 5500-SF

  2. Form 990

  3. Form 5500

  4. Form 1099-R

The correct answer is: Form 5500-SF

A medium-sized marketing firm with 110 employees that has 99 plan participants in a 401(k) profit-sharing plan must file Form 5500-SF. This form is specifically designed for the annual return/report filed by retirement plans, but it is specifically applicable to "small plans," which are those having fewer than 100 participants at the beginning of the plan year. However, for plans with 100 or more participants, Form 5500 is typically required. In this scenario, since the firm has 110 employees and 99 of them are participants, it's critical to note that Form 5500-SF can be used due to its simplified filing requirements, assuming all conditions to qualify as a small plan are met, particularly because the number of active plan participants and the rating framework generally applies to the manner in which participants are defined. The other options serve different reporting purposes. Form 990 is meant for tax-exempt organizations and public charities, Form 5500 is for larger plans, and Form 1099-R is for reporting distributions from retirement plans, each of which doesn't apply specifically to this firm's situation. Thus, Form 5500-SF is the most appropriate choice given the context.