Employee Benefit Plan Guidance: Form 5500 Changes

To encourage more small business employers to offer workplace retirement accounts for their employees and to reduce expenses for small plan filers, the Department of Labor (DOL) has streamlined and eliminated certain requirements for Form 5500. The changes and impacts are outlined below:

• The counting methodology for defined contribution retirement plans is now based on actual accounts with balances rather than eligible accounts.
• Plans with fewer than 100 participants can use the easier Small Plan form (Form 5500-SF) and most will not require an audit.
• These changes are expected to save approximately $95 million in filing costs annually and reduce the number of overall filings requiring an audit by 19,500.

The new Form 5500 will affect plan years beginning on or after January 1, 2023. Filings for employee benefit plans beginning prior to Jan. 1, 2023 must follow the old methodology in which plans were based on the number of eligible plan participants, rather than actual participants.

Background: Titles I and IV of ERISA and the Internal Revenue Code, subject to exemptions, generally require employee benefit plans to file annual returns/reports about the financial state of the plans. Plans typically use Form 5500 Annual Return/Reports or, if eligible, Form 5500-SF Annual Returns/Reports. These forms satisfy the DOL, the IRS, and the Pension Benefit Guaranty Corporation, and are important for compliance, enforcement, and research.

The process for review and a 60-day comment period began on Sept. 15, 2021. Phase II changed the contribution and benefit attachment requirements for Schedules MB, SB and R, allowing for a simpler way of accessing defined benefit pension plans’ information and accurately forecasting insurance programs’ liabilities. Phase III Included revisions for DOL, IRS, and PBGC instructions. The IRS anticipated the new forms and instructions will be ready for release on Jan. 1, 2024.

Important Acronyms

• ERISA: Employee Retirement Income Security Act of 1974
• SECURE Act of 2019: Setting Every Community Up for Retirement Enhancement
• DCG: defined contribution group
• MEP: multiple-employer plan
• PEP: pooled employer plan
• Schedule MB: Multi-employer Defined Benefit Plan and Certain Money Purchase Plan Actuarial Information
• Schedule SB: Single Employer Defined Benefit Plan Actuarial Information
• Schedule R: Retirement Plan Information

A link to the DOL ruling is provided here. To make sure your business is in compliance, please contact your Weiss audit and assurance advisor.