The Department of Labor, the Internal Revenue Service, and the Pension Benefit Guaranty Corporation (PBGC) (collectively “Agencies”) proposed revisions to the Form 5500 Annual Return on September 14, 2021, to implement provisions in the SECURE Act of 2019 and update existing reporting requirements.
The proposed revisions would affect employee pension and welfare benefit plans, plan sponsors, administrators, and service providers to plans subject to annual reporting requirements under ERISA and the Internal Revenue Code.
The following is an overview of the proposed changes.
– Establish a new type of direct filing entity called a Defined Contribution Group (DCG) and add a new Schedule DCG (Individual Plan Information) that such reporting groups must file. All plans participating in the DCG must be defined contribution pension plans and have the same plan administrator, fiduciaries, trustees, trust holding the assets, plan year, and investment options. In addition, the plans must not hold employer securities, be 100% invested in easy to value assets, be audited by an independent qualified public accountant, and not be a multiemployer plan or a multiple-employer plan (MEP). The plan administrator common to all the participating plans must file the consolidated DCG Form 5500 covering all the participating plans.
– Modify Form 5500 to reflect pooled employer plans (PEP) as a type of MEP. All MEPs would be required to file a new Schedule MEP (Multiple-Employer Retirement Plan Information), regardless of size. The Schedule MEP would identify the type of MEP and participating employer information and confirm for PEPs that the sponsoring pooled plan provider has filed the Form PR (Pooled Plan Provider Information).
– Update the Form 5500 Schedule H to standardize the electronic filing format for the schedules of assets, add disclosures to the schedules of assets regarding the characteristics of investments, and include more detail for direct expenses reported.
– Change the participant count methodology for defined contribution pension plans only to include the number of participants with account balances rather than those eligible to participate. This would allow more defined contribution pension plans to file as “small plans” for simplified reporting.
– Add reporting for PBGC covered defined benefit pension plans as follows:
- Modify Schedule MB (multiemployer plans) to:
- Require further detail on total withdrawal liability amounts.
- Report the interest rate used to determine the present value of vested benefits for withdrawal liability determinations.
- Modify questions related to expense loads.
- Plans with 500 or more total participants need to include more demographics, benefits, and contributions.
- Modify Schedule SB (single-employer plans) to:
- Make reporting requirements about demographics and benefits similar to multiemployer plans and to provide information about the elective funding relief under the American Rescue Plan Act of 2021.
- Add tax qualification compliance questions regarding employers aggregating nondiscrimination and coverage tests plans and if the plan uses design-based safe harbor rules.
– If adopted, the proposed changes would be effective for plan years beginning on or after January 1, 2022. The Form 5500 filing is due 7 months after the plan year’s end, with a 2.5 month extension available.
–Finally, the Agencies seek comments on the proposed changes by November 1, 2021.
We will keep you updated regarding the proposed revisions to Form 5500. In the meantime, please contact us with any questions.
If you need further information, please contact us.
Aaron K. Plath, CPA | Partner