Compliance News | September 22, 2021
The DOL, Treasury and the PBGC (referred to below as the ERISA agencies) proposed revisions to the Form 5500 annual report on September 14, 2021. The proposal would implement changes reflecting the SECURE Act of 2019 and make changes to existing reporting requirements for single-employer and multiemployer defined benefit plans.
Separately, the DOL published a change in the governing rule for the Form 5500 under ERISA.
The ERISA agencies welcome comments. The comment deadline is November 1, 2021.
The Form 5500 annual filings serve as the main source of information and data concerning the operations, funding and investments of plans. The ERISA agencies use the information in their enforcement and research. Small employers have been asking the ERISA agencies for simplified reporting that would reduce the cost and burden of administering a retirement plan.
The SECURE Act made changes that require adjustments to Form 5500. Specifically, the SECURE Act:
The package would:
The DCG would file the Form 5500 directly with the government, (like existing direct filing entities). Only DC plans having the same plan administrator, named fiduciaries, trustees, trust, plan year and investments or investment options would be able to participate in a DCG. In addition, the plans could not hold any employer securities and would have to be 100 percent invested in certain secure, easy-to-value assets.
In addition, each participating plan would have to file a Schedule DCG to report individual plan level information. The DCG would require less plan-level information than if each plan filed its own Form 5500. The trust for the DCG would be subject to an independent qualified public accountant audit, and any large plans participating in the DCG would be subject to a separate plan-level audit.
Neither a multiemployer plan nor a MEP could be treated as or be in a DCG.
For reporting purposes, a PEP would be treated the same as a MEP. Both would be subject to new reporting requirements including filing the Form 5500 regardless of size (this also would apply to DCGs). Plans would have to file a new Schedule MEP (Multiple-Employer Retirement Plan Information) providing information on the type of MEP and confirming for PEPs that the plan provider filed the Form PR (Pooled Plan Provider Information).
The proposal would redefine “small plan” for filing (and audit) purposes to be based on the number of participants who have account balances. Under current law, eligible participants are counted even if they don’t have account balances.
Questions would be added relating to, among other things, whether the plan sponsor aggregates plans to pass nondiscrimination and coverage testing and if the plan uses a safe harbor design.
The PBGC is seeking additional information from DB multiemployer plans through an amended Form 5500 Schedule MB. The amended form asks for details on whether the withdrawal liability reported is a periodic payment or a one-time payment and also asks for the interest rate the plan uses to determine withdrawal liability.
Other questions relate to how the plan incorporates “expense loads” and details on the age/service scatter attachment for plans regardless of size. Plans with more than 500 participants will have to include additional demographic, benefit and contribution information.
Schedule R reporting would change to require plans to identify the 10 participating employers with the largest contributions for the year (even if that employer accounts for less than 5 percent of the total contributions).
The filing requirements for single-employer DB plans would be modified to increase reporting of demographics and benefits and to substitute information on elective funding relief under the American Rescue Plan Act of 2021 for information on relief under the Pension Relief Act of 2010.
For the Form 5500, the proposed effective date for most of the changes is for plan years beginning on or after January 1, 2022. (Those filings are due 7 months after the end of the plan year, or 9½ months with an extension.)
However, certain changes in MEP and PEP reporting would have to be addressed on the 2021 Form 5500: the change in participating employer information and the reporting of basic PEP identifying information.
The ERISA agencies ask for public comment by November 1, 2021 on a number of issues, including the following:
Comments are due by November 1, 2021. As a result, plans need to review the guidance quickly to determine whether the new requirements would be burdensome or the relief from the independent audit requirements would be inadequate.
This page is for informational purposes only and does not constitute legal, tax or investment advice. You are encouraged to discuss the issues raised here with your legal, tax and other advisors before determining how the issues apply to your specific situations.
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