Agencies Propose SECURE Act and Other Revisions to Form 5500

The DOL, IRS, and PBGC have jointly proposed changes to the Form 5500 series. The changes primarily reflect amendments to the Code and ERISA made by the Setting Every Community Up for Retirement Enhancement (SECURE) Act (see our Checkpoint article). The SECURE Act directed the IRS and DOL to modify the annual reporting rules to allow members of certain groups of defined contribution plans to file a single aggregated Form 5500 if they have the same plan year, plan investments, trustee, named fiduciaries, and administrator. The SECURE Act also amended the Code and ERISA to allow pooled plan providers to offer and operate a new type of multiple employer plan (MEP) known as a “pooled employer plan” (PEP). PEPs are defined contribution plans (including 401(k) plans) established or maintained for the purpose of providing benefits to the employees of two or more employers that do not have a common interest other than having adopted the plan. The proposed revisions to Form 5500 would implement the SECURE Act amendments and make changes designed to improve financial reporting, collect additional funding information from PBGC-covered defined benefit plans, and simplify compliance for certain smaller defined contribution plans. While focused largely on retirement plans, some of the changes also affect welfare plans, notably multiple employer welfare arrangements (MEWAs). Here are highlights of the provisions affecting defined contribution plans and MEWAs:

• Combined Reporting by DCGs. Under the proposed changes, the plan administrator for a defined contribution group (DCG) reporting entity could file a single aggregated Form 5500 for the DCG, generally using the rules applicable to large defined contribution plans. Plan-level information would be reported on new Schedule DCG (Individual Plan Information), which would collect basic identifying information, participant and financial data, and other information about each participating plan. The single shared trust would need to be audited by an independent qualified public accountant. If a participating plan was also required to be audited, the plan-level auditor’s report and financial statements would have to be attached to the Schedule DCG for that plan.
• MEPs. A new Schedule MEP (Multiple Employer Retirement Information) would be used to report the type of MEP, participating employer and contribution information (currently collected as a nonstandard attachment), and aggregate account balances attributable to each employer (required by the SECURE Act’s amendment of ERISA § 103(g)). The final part of the schedule—to be completed only by PEPs—would require information regarding the pooled plan provider and its compliance with certain obligations, including the filing of Form PR (Pooled Plan Provider Registration Statement) (see our Checkpoint article). Schedule MEP would not be filed by welfare plans.
• Participant Counting. The proposal would expand 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 would be based on the number of participants with account balances instead of on the number eligible to participate.
• Financial Reporting and Trust Information. Schedules of investment assets would be standardized (for purposes of Schedule H), and questions would be added to collect information about plans’ trusts and trustees.
• Form 5500-SF. Under the proposal, all MEPs (including PEPs) and all DCGs would be required to file Form 5500 regardless of their size; they would not have the option of filing Form 5500-SF.
• Compliance Questions. Questions would be added regarding nondiscrimination and coverage testing, 401(k) plan testing and the use of design-based safe harbors, and whether the plan uses a pre-approved document.
• MEWAs. Like MEPs, MEWAs must identify participating employers and—unless unfunded or insured—provide an estimate of each participating employer’s contributions during the year (see our Checkpoint article). For MEWAs that provide medical benefits, participating employer information currently reported on Form 5500 would instead be reported on the annual Form M-1 (Report for Multiple Employer Welfare Arrangements (MEWAs) and Certain Entities Claiming Exception (ECEs)). MEWAs providing other types of benefits would still provide the information using Form 5500. [EBIA Comment: This change would extend the participating employer reporting requirement to “non-plan” MEWAs providing medical benefits, as those MEWAs are required to file Form M-1 but not Form 5500.]
• Appendices. The revision package includes five appendices: proposed Schedule MEP and instructions; Schedule DCG and instructions; proposed changes to Form 5500 and 5500-SF to solicit the additional participating employer information required by amended ERISA § 103(g) for 2021 forms; proposed changes to 2022 Form M-1 and instructions; and other changes to the Form 5500 series forms, schedules, and instructions (including some applicable only to PBGC-covered defined benefits plans). The package does not provide a complete restatement of Form 5500.

Amendments to the DOL’s annual reporting regulations proposed contemporaneously with the Form 5500 changes would follow and conform the regulations to those changes. Proposed new regulations would describe the conditions for collective reporting by a DCG reporting arrangement, the required content of those collective reports, and the filing deadline. Conforming amendments are also proposed to the requirements for summary annual reports.

Generally, the changes would apply only to reporting for plan years beginning on or after January 1, 2022. Changes to the additional reporting requirements for MEPs under ERISA § 103(g), however, including the aggregate account balance disclosures and basic identifying information for PEPs, would apply to reporting for plan years beginning on or after January 1, 2021. Comments on the proposed Form 5500 changes and related amendments must be received on or before November 1, 2021.

EBIA Comment: This package of changes to Form 5500 goes well beyond satisfying the agencies’ obligations under the SECURE Act. And more changes may be in the offing—the DOL is apparently planning another, broader set of improvements to the annual reporting requirements. (An earlier modernization proposal published in 2016 (see our Checkpoint article) was never adopted.) Also, the DOL has not acted on a SECURE Act provision that authorized simplified reporting for certain MEPs with fewer than 1,000 participants. (The DOL has invited comments on the need for different requirements and appropriate limitations and conditions.) For more information, see EBIA’s 401(k) Plans manual at Section XXXI.E (“Completing the Form 5500”) and EBIA’s ERISA Compliance manual at Sections XIX (“MEWAs—Multiple Employer Welfare Arrangements”) and XXII (“Annual Form 5500 Reporting to the DOL”). See also EBIA’s Self-Insured Health Plans manual at Section XXIX.B (“Annual Form 5500 Reporting”).

Contributing Editors: EBIA Staff.