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.

Background

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:

• Authorized “pooled plan providers” to create “pooled employer plans” (PEPs), which allow unrelated employers to participate in a single plan without having to have a common interest, as is required for a multiple employer plan (MEP), and required both MEPs and the new PEPs to provide additional information to the ERISA agencies
• Instructed the secretaries of the Treasury and DOL to modify Form 5500 so that a group of DC plans that satisfy certain criteria may file a single consolidated Form 5500 beginning with the 2022 plan year

The proposal

The proposal package includes Form 5500 changes and the proposed rule. DOL also issued a fact sheet describes the package.

The package would:

• Create a new direct filing entity called a Defined Contribution Group (DCG).
• Make reporting equal for MEPs and PEPs.
• Simplify how to count participants.
• Add compliance questions.
• Request additional information from multiemployer DB plans.
• Modify the filing requirements for single-employer DB plans.

DCG

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.

PEPs and MEPs

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).

Participant-count methodology for simplified reporting

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.

Compliance questions

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.

Multiemployer DB plans

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).

Single-employer DB plans

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.

Timing of the proposed changes

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 welcome comments

The ERISA agencies ask for public comment by November 1, 2021 on a number of issues, including the following:

• Should consolidated reporting rules be extended to plans (including 403(b) plans) that use the same custodial account or insurance policy rather than a trust and, thus, have no trustee?
• Should large plans participating in a DCG have to have a full individual independent audit?
• Should a plan participating in a DCG be able to offer a brokerage window and what reporting should apply to the window?
• Are there changes needed in the Form 5500 instructions so that filers can complete the form without references to statutes or regulations?
• Do the new Schedules create any new recordkeeping burdens?
• Is it feasible to allow non-ERISA covered plans (e.g., plans that file the Form 5500-EZ) to participate in a DCG? Are there any savings for such a plan?

Action item

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.