Final Forms Revisions: Annual Information Return/Reports, 26 CFR Part 301; 29 CFR Part 2520; 29 CFR Part 4065, 88 Fed. Reg. 11984 (Feb. 24, 2023); Final Rule: Annual Reporting and Disclosure, 29 CFR Part 2520, 88 Fed. Reg. 11793 (Feb. 24, 2023); Fact Sheet: Changes for the 2023 Form 5500 and Form 5500-SF Annual Return/Reports (Feb. 23, 2023)
The DOL, IRS, and PBGC have announced revisions to Forms 5500 and 5500-SF that apply to reporting for plan years beginning on or after January 1, 2023. The revisions are the third phase of implementation of a September 2021 regulatory proposal that included changes for the original SECURE Act (see our Checkpoint article). Some changes were finalized for 2021 reporting (see our Checkpoint article) and others for 2022 reporting (see our Checkpoint article). The current changes focus largely on retirement plans, with limited impact on welfare plans. Other proposed changes, notably the proposal to move participating employer information reported for certain multiple employer welfare arrangements (MEWAs) from Form 5500 to Form M-1, have been deferred for further development as part of a broader Form 5500 improvement project. Here are highlights for defined contribution plans, including 401(k) plans:
Combined Reporting by DCGs. The plan administrator for a defined contribution group (DCG) reporting entity can file a single aggregated Form 5500 for the DCG, generally using the rules applicable to large defined contribution plans. A new Schedule DCG (Individual Plan Information) must be attached for each plan included in the DCG filing. The final rules mirror the proposed rules, except that they eliminate the requirements that participating plans (1) use a single DCG trust, (2) obtain an independent audit of that trust, and (3) invest only in specified assets.
Form 5500-SF. This form cannot be used for DCG reporting arrangements.
MEPs. Consistent with the proposed rules, the final rules add a new Schedule MEP (Multiple-Employer Pension Plan Information) and a limited number of additional data items relevant to MEPs to the Form 5500. Multiemployer plans and MEPs are prohibited from being part of DCG combined reporting arrangements.
Participant Counting. The final rules mirror the proposed rules by expanding the availability of simplified Form 5500 reporting by changing how defined contribution plan participants are counted. When determining whether a plan is a “small plan,” the determination is based on the number of participants with account balances as of the beginning of the year instead of on the number eligible to participate.
Internal Revenue Code Compliance Questions. The final revisions include questions about whether a plan maintained by an employer that has aggregated plans in its testing group satisfied applicable nondiscrimination and coverage tests, whether a 401(k) plan sponsor used a design-based safe harbor approach (or, if applicable, the ‘‘prior year’’ or ‘‘current year’’ ADP test), and whether a plan uses a pre-approved document.
Schedule H Changes. Schedule H has been updated to add new breakout categories to the ‘‘Administrative Expenses’’ category of the Income and Expenses section of the balance sheet. Proposed revisions that would modernize the data elements reported about a plan’s investments on Schedule H and require that the schedules be filed electronically in a format that can be mined for data will be addressed as part of the broader Form 5500 improvement project. [EBIA Comment: In addition to being filed by retirement plans, Schedule H is filed by large funded welfare plans.]
The DOL simultaneously released final reporting regulations that reflect the changes to Forms 5500 and 5500-SF and include conforming changes to the requirements for the summary annual report.
EBIA Comment: Although the DOL Fact Sheet characterizes this as the third and “final” phase of implementing the proposed changes, the deferment of some proposals means that even more changes are coming. It will be interesting to see whether the broader improvement project resurrects elements first proposed in 2016, including significant additional reporting requirements for group health plans (see our Checkpoint article). Meanwhile, retirement plan administrators should familiarize themselves with the changes in the final forms and regulations to ensure seamless reporting. The Fact Sheet indicates that mock-ups of the forms and instructions will be made available on reginfo.gov, and the usual “for information-only” copies of the forms and instructions will be released later in 2023. For more information, see EBIA’s 401(k) Plans manual at Section XXXI (“Plan Administration: Annual Form 5500 Reports and SARs”), and EBIA’s ERISA Compliance manual at Sections XIX.F (“Form 5500 Obligations for MEWAs and Participating Employers”) and XXII.L (“Schedule H (Large Plan Financial Information) & Accountant’s Opinion”).
Contributing Editors: EBIA Staff.