# 401(k) Plan Red Flags: The Form 5500 Lines That Show Them, and How to Raise Them Fairly

*FiduciarySignal — updated 2026-10-05. Canonical: https://www.fiduciarysignal.com/guides/form-5500-red-flags*

The 401k plan red flags you can verify in public are the compliance answers a plan gives on its own Form 5500: late participant deposits (line 4a of Schedule H or I), nonexempt party-in-interest transactions (line 4d), no fidelity bond or a thin one (line 4e), a loss from fraud (line 4f), corrective distributions (line 2f), and a late return filed under the DOL's delinquent filer program, plus, for defined benefit plans, a low funding percentage on Schedule SB. Each one is a fact reported about the 401(k) or pension plan by its own administrator, which makes it a fair, checkable reason to start a conversation, not proof that anyone did anything wrong.

Sources: [2025 Schedule H](https://www.dol.gov/sites/dolgov/files/ebsa/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500/2025-schedule-h.pdf), [2025 Schedule I](https://www.dol.gov/sites/dolgov/files/ebsa/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500/2025-schedule-i.pdf), [2025 Instructions for Form 5500](https://www.dol.gov/sites/dolgov/files/ebsa/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500/2025-instructions.pdf), and [2025 Instructions for Form 5500-SF](https://www.dol.gov/sites/dolgov/files/ebsa/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500/2025-sf-instructions.pdf) (observed 2026-10-05).

A red flag on a Form 5500 is not gossip and not an inference. It is a box checked on a public return that the plan administrator must sign. That makes it useful to an advisor, because nobody has to argue about whether it was reported, and easy to misuse, because a flag describes one plan year. It does not say why, whether it was fixed, or what the sponsor will do next. Read it that way and it is the most credible opening line you have.

## Where the red flags live on a Form 5500

Large plans answer the compliance questions in Part IV of Schedule H. Small plans that file the full Form 5500 answer nearly the same questions in Part II of Schedule I. Small plans on the short form answer them on line 10 of the Form 5500-SF. The late-filing box sits in Part I of the return itself, and defined benefit funding lives on Schedule SB.

| Red flag | Schedule H (large plans) | Schedule I (small plans) | Form 5500-SF |
|---|---|---|---|
| Participant contributions not deposited on time | Line 4a | Line 4a | Line 10a |
| Nonexempt transaction with a party in interest | Line 4d | Line 4d | Line 10b |
| Fidelity bond: covered or not, and the amount | Line 4e | Line 4e | Line 10c |
| Loss from fraud or dishonesty | Line 4f | Line 4f | Line 10d |
| Benefits not paid when due | Line 4l | Line 4l | Line 10f |
| Corrective distributions | Line 2f | Line 2f | Line 8e (combined with certain deemed distributions of participant loans) |
| Filed under the DFVC late-filer program | Form 5500, Part I, line D | Form 5500, Part I, line D | Form 5500-SF, Part I, line C |
| Defined benefit funding | Schedule SB, lines 14 and 15, and the at-risk box on line 4 | Same (Schedule SB) | Same (Schedule SB) |

Sources: [2025 Schedule SB](https://www.dol.gov/sites/dolgov/files/ebsa/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500/2025-schedule-sb.pdf) and the [2025 Instructions for Form 5500-SF (Part I line C, lines 8e and 10)](https://www.dol.gov/sites/dolgov/files/ebsa/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500/2025-sf-instructions.pdf) (observed 2026-10-05).

## What is Form 5500 Schedule H?

Schedule H is the financial schedule for large plans (and for direct filing entities). Part I is the asset and liability statement at the beginning and end of the year. Part II is the income and expense statement, including corrective distributions on line 2f and administrative expenses by category on line 2i. Part III is the independent accountant's opinion, marked unmodified, qualified, disclaimer, or adverse, with the accountant's name and EIN. Part IV holds the compliance questions. Plans that file Schedule H are generally required to engage an independent qualified public accountant and attach the report.

## Late deposits: what does a "Yes" on line 4a mean?

Money withheld from paychecks becomes a plan asset as of the earliest date it can reasonably be segregated from the employer's general assets, and for pension plans no later than the 15th business day of the following month. Plans with fewer than 100 participants get a safe harbor: a deposit within 7 business days is treated as on time. A Yes on line 4a means some contributions missed that standard, and the plan must keep answering Yes for a prior-year failure until it is fully corrected, which includes making up lost earnings. The DOL's [Voluntary Fiduciary Correction Program](https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/correction-programs/vfcp) has a specific path for delinquent participant contributions.

Sources: [29 CFR 2510.3-102](https://www.law.cornell.edu/cfr/text/29/2510.3-102) and the [2025 Instructions for Form 5500, Schedule H line 4a](https://www.dol.gov/sites/dolgov/files/ebsa/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500/2025-instructions.pdf) (observed 2026-10-05).

## Fidelity bond: how do you spot a shortfall?

ERISA section 412 requires each plan official who handles plan funds to be bonded for at least 10% of the funds handled in the preceding year, with a minimum of $1,000; the DOL cannot require more than $500,000 per plan official, or $1,000,000 for plans that hold employer securities. The filing asks whether the plan was covered by a fidelity bond and, if so, the aggregate amount. Two answers count as a flag: a No, or a reported amount well below 10% of plan assets. Treat the second as an estimate rather than a verdict, because the legal test is based on funds handled, not the balance sheet. Fiduciary liability insurance is not a fidelity bond and cannot be reported as one.

Sources: [DOL Field Assistance Bulletin 2008-04](https://www.dol.gov/agencies/ebsa/employers-and-advisers/guidance/field-assistance-bulletins/2008-04) and the [2025 Instructions for Form 5500-SF, line 10c](https://www.dol.gov/sites/dolgov/files/ebsa/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500/2025-sf-instructions.pdf) (observed 2026-10-05).

## Prohibited transactions: what counts on line 4d?

Line 4d asks whether there were any nonexempt transactions with a party in interest. Late deposits are left off because they are reported on line 4a, and transactions that are statutorily or administratively exempt are excluded. A large plan that answers Yes must attach Schedule G, Part III, describing the transaction, which makes this one of the few flags where the filing itself explains what happened. Read that attachment before you say a word about it.

## Corrective distributions: what does line 2f tell you?

Line 2f reports distributions of excess deferrals under Code section 402(g), excess contributions under section 401(k)(8), and excess aggregate contributions under section 401(m)(6), plus allocable income. In plain terms, money returned to employees because deferrals ran over the annual limit, or because the plan failed its nondiscrimination tests: the IRS lists distributing excess contributions to highly compensated employees as one way to [correct a failed 401(k) nondiscrimination test](https://www.irs.gov/retirement-plans/401k-plan-fix-it-guide-the-plan-failed-the-401k-adp-and-acp-nondiscrimination-tests). The refund is the correction, not the violation, so this is a plan-design conversation rather than a compliance accusation. On the Form 5500-SF, line 8e combines corrective distributions with certain deemed distributions of participant loans, so a short-form amount may reflect loan defaults instead.

## Late filing: what does the DFVC box mean?

A check in the DFVC box means the return is being filed under the Delinquent Filer Voluntary Compliance Program, which, in the DOL's words, "allows plan administrators to voluntarily submit overdue annual reports while paying lower civil penalties." The penalty it reduces is not small: the DOL can assess up to $2,739 a day against an administrator who fails or refuses to file a complete and accurate report. A DFVC filing tells you a past return was late. It also tells you the plan took the voluntary route to fix it.

Sources: [DOL DFVC Program page](https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/correction-programs/dfvcp) and the [2025 Instructions for Form 5500 (Administrative Penalties; Part I line D)](https://www.dol.gov/sites/dolgov/files/ebsa/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500/2025-instructions.pdf) (observed 2026-10-05).

## Underfunded defined benefit plans: which Schedule SB lines?

For single-employer defined benefit plans, Schedule SB carries the actuary's funding numbers. Line 14 is the funding target attainment percentage (FTAP). Line 15 is the adjusted funding target attainment percentage (AFTAP), the figure the instructions tie to the Code section 436 benefit-restriction rules. Line 4 has a box for a plan in at-risk status. A low FTAP is a fair reason to ask about funding policy; only the AFTAP drives section 436 restrictions, so don't use one number to imply the other.

## How to raise a red flag without overreaching

- **Quote the line, not a conclusion.** "Your 2024 Schedule H answers Yes on line 4a" is checkable. "Your plan is out of compliance" is an accusation.
- **Ask whether it has been corrected.** Late deposits keep showing Yes until fully fixed, and a refund on line 2f is itself a correction.
- **Expect an innocent answer sometimes.** A one-time payroll error or a single year of testing trouble can produce a flag.
- **Steer toward process.** Who reviews deposits, who checks the bond, who runs the testing. That is a fiduciary conversation, and one the sponsor can verify in its own paperwork.

## What a red flag can't tell you

A red flag describes one finished plan year. A return is due the last day of the seventh calendar month after the year ends, plus up to two and a half months on extension, so the problem may have been fixed long before you read about it. It says nothing about how the sponsor feels about its advisor or providers, either. Bottom line: a red flag earns you a fair question. It does not hand you the answer.

## Red flags on the 401(k) Report Card

Full disclosure, this part is paid. FiduciarySignal's 401(k) Report Card prints these red flags from a plan's own Form 5500 in plain English: late participant deposits, a missing or short fidelity bond, prohibited transactions, corrective distributions, a filing under the DFVC program, and, for defined benefit plans, a low funding target attainment percentage or at-risk status on Schedule SB. They sit next to the plan's fees against comparable peers, participation, and provider roster, so the first call starts from the sponsor's own filing. FiduciarySignal is $90 per month after a seven-day free trial, or $900 per year. It is built on public DOL EFAST2 data and is not affiliated with the Department of Labor. If you want words for that initial call, our [401(k) prospecting scripts](https://www.fiduciarysignal.com/guides/401k-prospecting-scripts) include one built around a printed red flag.

## Related guides

- [Form 5500 Prospecting: What a Plan's Filing Tells You — and What It Can't](https://www.fiduciarysignal.com/guides/form-5500-prospecting)
- [Form 5500 Schedule C, Explained for Advisors: Service Codes, Indirect Compensation, and Who Has to File](https://www.fiduciarysignal.com/guides/form-5500-schedule-c)
- [401(k) Prospecting Scripts That Start With a Reason to Call](https://www.fiduciarysignal.com/guides/401k-prospecting-scripts)

## Frequently asked questions

### What red flags can you find on a 401(k) plan's Form 5500?

Late participant deposits, nonexempt party-in-interest transactions, a missing or low fidelity bond, a loss from fraud, benefits not paid when due, corrective distributions, and a return filed under the DOL delinquent filer program. Defined benefit plans add Schedule SB funding measures, and large plans attach an accountant's opinion that can be qualified, disclaimed, or adverse.

### Where are the compliance questions on Form 5500?

In Part IV of Schedule H for large plans, Part II of Schedule I for small plans that file the full Form 5500, and line 10 of the Form 5500-SF for small plans on the short form. The questions are nearly identical across the three.

### How much fidelity bond does a 401(k) plan need?

Under ERISA section 412, each plan official who handles plan funds must be bonded for at least 10% of the funds handled in the preceding year, with a $1,000 minimum. The required amount tops out at $500,000 per plan official, or $1,000,000 for plans that hold employer securities.

Source: [DOL Field Assistance Bulletin 2008-04](https://www.dol.gov/agencies/ebsa/employers-and-advisers/guidance/field-assistance-bulletins/2008-04) (observed 2026-10-05).

### When are 401(k) contributions considered late?

Participant contributions become plan assets as of the earliest date they can reasonably be segregated from the employer's general assets, and for pension plans no later than the 15th business day of the following month (counted from when the employer received the money or would have paid it to the employee in cash). Plans with fewer than 100 participants have a safe harbor for deposits made within 7 business days.

Source: [29 CFR 2510.3-102](https://www.law.cornell.edu/cfr/text/29/2510.3-102) (observed 2026-10-05).

### What does it mean if a plan filed under the DFVC program?

That a required annual report was filed late and the administrator used the Delinquent Filer Voluntary Compliance Program, which lets administrators submit overdue reports and pay lower civil penalties than the up to $2,739 a day the DOL can otherwise assess.

Sources: [DOL DFVC Program page](https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/correction-programs/dfvcp) and [2025 Instructions for Form 5500, Administrative Penalties](https://www.dol.gov/sites/dolgov/files/ebsa/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500/2025-instructions.pdf) (observed 2026-10-05).

### Does a red flag mean the plan broke the law?

Not necessarily. Some flags are themselves corrections, such as a corrective distribution, and a late-deposit Yes can reflect a prior-year problem that is still being reported until fully fixed. Treat a red flag as a documented reason to ask a question, and let the sponsor explain it.

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