Federal regulators recently finalized rules aimed at simplifying the Form 5500 process for retirement plan sponsors, but also signaled that bigger changes are coming.
"The changes finalized in this round were fairly specific to certain group plans, but the preamble gave a lot of information about where DOL is going for plan sponsors of single employer plans in the future," said Allison Itami, principal, co-chair plan sponsor practice at Groom Law Group.
The Department of Labor, the IRS and the Pension Benefit Guaranty Corp. last month announced changes to the 2023 Form 5500 and Form 5500-SF that are estimated to reduce overall filing costs for employee benefit plans by $95 million annually, according to a Labor Department news release.
But in the final rules' preamble, the agencies noted that they deferred implementation of other provisions outlined in a September 2021 proposal, including one to revise the content requirements for the "Schedule of Assets Held for Investment" and the "Schedule of Assets Held and Disposed of within the Plan Year" sections of Form 5500's Schedule H. The proposed changes are designed to improve the consistency, transparency and usability of information reported regarding plan investments. But after reading public comments, the agencies decided to defer those changes and consider them as part of a forthcoming broader Form 5500 modernization project.
"It's not off the table, it's just something they're not pushing plans to do at the moment," Ms. Itami said. "Commenters said it's a big record-keeping lift, so I think that extra time is appreciated."
The changes finalized last month marked the third phase under the Setting Every Community Up for Retirement Enforcement Act, known as the SECURE Act, which affected annual reporting requirements under the Employee Retirement Income Security Act and the Internal Revenue Code.
The phase three changes included a consolidated Form 5500 reporting option for certain groups of defined contribution retirement plans, improved reporting by pooled employer plans and other multiple employer plans.
Also, new breakout categories were added to the "Administrative Expenses" lines of Schedule H, including specific lines for audit fees, bank or trust company fees, actuarial fees, legal fees, valuation fees, salaries, trustee fees and expenses.
"That's really going to shine a really big light on those expenses," Ms. Itami said. "It could cause more scrutiny of those fees, which could lead to more audits."
Separately, the agencies changed the independent qualified public accountant, or IQPA, audit requirements. Historically, a "large" plan with 100 or more eligible employees was required to attach an IQPA audit report and related financial statements to its Form 5500. The final rules changed the way a company is determined to be large for purposes of the audit requirement. Instead of counting the number employees who are eligible to participate in a plan at the beginning of the plan year, the new rule stated that whether the plan is large or small would depend upon the number of participants with account balances at the beginning of the plan year.
"That's going to be super helpful for plans with employees who have decided not to participate," Ms. Itami said. "Those plans might fall under 100 and then avoid the expense of the audit."
