Filed under: Retirement Plan Audits

By Shawn Hansen, CPA

Under the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code (IRC), private-sector retirement and welfare plans are required to file annual returns/reports.

Filing a Form 5500, along with any required schedules and attachments, typically satisfies the annual reporting requirement. The Form 5500 is the primary source of information about a plan’s financial condition and operations. Federal agencies use this important tool to determine compliance and enforcement initiatives.

Last July, the Department of Labor (DOL), IRS, and the Pension Benefit Guaranty Corporation (PBGC) proposed changes to employee benefit plan annual reporting. These new regulations would update and expand Form 5500 reporting requirements.

The proposed changes would increase the amount of information reported, as well as the time needed to request, collect, and accurately present this information on the Form 5500.

Why the proposed revisions? According to the DOL, the proposed revisions are intended to:

  • Update/modernize employee benefit plan financial statements and investment information;
  • Update reporting requirements for service provider fee and expense information. Specifically, these regulations would represent an attempt to synchronize annual reporting requirements on Schedule C of Form 5500 with the DOL’s service provider fee disclosures under Section 408(b)(2);
  • Enhance the government’s ability to access and use data included in Form 5500 for research, policy analysis, and enforcement purposes;
  • Require reporting by all group health plans covered by Title I of ERISA; and
  • Improve compliance under ERISA and the IRC, through new questions about plan operations, service provider relationships, and financial management of the plan.

The proposed regulations would enable group health plans to use Form 5500 to meet specified reporting requirements in the Affordable Care Act (ACA). According to the DOL, proposed changes to the regulations are necessary for implementing the form revisions.

The proposed revisions would also affect small plans that are filing a Form 5500-SF, Short Form Annual Return/Report of Small Employee Benefit Plan. For example, they would be required to disclose detailed information regarding the types of investments held.

Under the proposal, form revisions would apply to plan years beginning on or after January 1, 2019. These revisions would affect employee pension and welfare benefit plans, as well as plan sponsors, administrators, and service providers.

In the DOL release, Phyllis C. Borzi, Assistant Secretary for the Employee Benefits Security Administration, said,

The proposed form changes and related regulatory amendments are important steps toward improving this critical enforcement, research, and public disclosure tool. The 5500 is in serious need of updates to continue to keep pace with changing conditions in the employee benefit plan and financial market sectors. We must also remedy the form’s current gaps in collecting data from ERISA group health plans.

Concluding Thoughts

Although the proposed revisions will likely be subject to changes based on feedback from various stakeholders, the new Form 5500 will require more time and resources to complete.

Plan sponsors and their service providers should consider whether they have the systems in place to capture the information needed.

Expanded data collection will assist federal agencies in research and policymaking objectives, and may also help plan sponsors and fiduciaries better understand their plans and plan investments.

If you need additional information about employee benefit plan reporting, please contact us.

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This article or blog contains general information only and should not be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services. Before making any decision or taking any action, you should engage a qualified professional advisor.