Several new changes to the annual Form 5500 filing take effect this year for annual returns/reports due for plan years beginning on or after January 1, 2023 – which are generally being filed by the end of this month.
Generally, the Employee Retirement Income Security Act of 1974, and its accompanying regulations promulgated thereunder (together, “ERISA”), require employee benefit plans to file annual returns/reports with the government detailing certain information concerning the financial status and operation of the plan. Employee benefit plans satisfy this requirement through the filing of a Form 5500 Annual Return (along with any required schedules or attachments).
The tri-agencies of the U.S. Department of Labor (“DOL”), Internal Revenue Service (“IRS”), and the Pension Benefit Guaranty Corporation (“PBGC”) periodically update the Forms 5500, 5500-SF (the version used for small plans), and 5500-EZ (the version used for one-participant plans and certain foreign plans) (the “Form 5500 Series”) to reflect changes in law, update older sections, and streamline the form. The tri-agencies enacted various changes to the Form 5500 Series for plan years beginning on or after January 1, 2023. Since plans that are operated on a calendar year have a Form 5500 filing deadline of July 31, 2024 (with an alternative for an automatic extension of 2.5 months), many plans are currently feverishly working to finalize their returns and grappling with how to address the new changes.
Overview: Many of the changes were in response to provisions in the Setting Every Community Up for Retirement Enhancement Act of 2019 (“SECURE Act”) and include the following:
- General additions to the Form 5500 Series;
- New Tax Qualification Compliance Questions;
- A requirement to breakdown Administrative Expenses; and
- Changes to the forms used for extensions (Form 5558 and Form 8868).
A more detailed dive into the key changes for 2023:
General Changes to Form 5500-SF/EZ: The updated Form 5500-SF includes a revised Line D in Part I indicating whether a plan is collectively bargained. Additionally, like the regular Form 5500, the 5500-SF adds lines 5c(1) and 5c(2) to indicate the number of participants with account balances at the beginning and end of the plan year in a defined contribution plan.
Compliance Questions: Several IRS tax compliance questions have been added to the Form 5500 Series. For Form 5500 and 5500-SF, this includes questions that inquire about coverage and nondiscrimination testing. Additionally, the DOL clarified the instructions with respect to reporting failures to transmit participant contributions to the plan within the timeframe required by law. All Forms in the Form 5500 Series were updated with a question whether there is a pre-approved plan opinion letter.
Administrative Expenses: Schedule H has been updated to add new categories for “Administrative Expenses,” which allows for greater fee and expense transparency. These new categories can be found in Part II (Income and Expenses) from 2i(1)-2i(12) and include items such as IQPA audit fees, recordkeeping fees, legal fees, trustee fees and expenses, among others. Part IV (Compliance Question DCG Attachments) adds the following lines: Line 4g (Plans in DCG holding Line 4g Assets), Line h (Plans in DCG holding line 4h Noncash Contributions), Line 4m (Plans in a DCG that have a Blackout Period), and Line 4n (Plans in a DCG that failed to provide required Blackout Notice).
Changes to Form 5558 and Form 8868: As of 2024, Form 5558 (the application to apply for a one-time extension for various filings) has been condensed to only include requests for extensions for Form 5500 and 8955-SSA. Additionally, extensions under Form 5330 (the form to report and pay excise taxes regarding an employee benefit plan) have been shifted to Form 8868.
Notably, there is a consolidated Form 5500 reporting option for certain groups of defined contribution plans - defined contribution group (“DCG”) reporting arrangements and improved reporting by multiple-employer plans (“MEPs”), including pooled employer plans (“PEPs”) which are beyond the scope of this alert.
These changes will likely require careful attention from those responsible for completing and filing the Form 5500 Series and related forms. Plan fiduciaries should carefully review the updated instructions and information on how to complete the Form 5500 Series.