Proposed revisions to Form 5500

The Department of Labor, Internal Revenue Service and the Pension Benefit Guaranty Corporation (the Agencies) have jointly recommended expanded filing requirements to the Form 5500, Annual Return/Report of Employee Benefit Plans.

The changes, originally proposed on July 21, 2016, are intended to:

Modernize the financial statement and investment information reported for employee benefit plans.
The current categories on the Schedule H-Financial Information do not accurately reflect the expanding use of non-traditional investments such as alternatives or collective funds. One benefit to plan sponsors is that greater detail about the plan’s investments should help to benchmark their plan’s investments against those other plans.

Update the reporting requirements for service provider fee and expense information.

The Agencies note there is inconsistency by preparers completing Schedule C-Service Provider Information included with the Form 5500. The Agencies are interested in expanding the information provided by service providers that would allow for comparability to other plans expenditures by requiring a single Schedule C for each provider rather than one form for all providers.

Enhance accessibility and usability of data filed on the forms.

By converting Form 5500 data from a PDF format to an electronic format it would allow readers to perform data-mining to enhance comparability with the market in many aspects of plan operations. One example is that the supplemental schedules attached to the Form 5500 will be required to disclose additional information not previously required such as Committee on Uniform Securities Identification Procedures (CUSIP), Central Index Key (CIK), Legal Entity Identifier (LEI) and National Association of Insurance Commissioners (NAIC) numbers

Require reporting by all group health plans covered by Title I of ERISA.

The proposal would require all group health plans, including those with less than 100 participants who are not currently reporting, to file a Form 5500. This change is intended to capture data that would lead to enhanced agency oversight and facilitate collection of information for congressionally mandated reports, for example,improve compliance under the Employee Retirement Income Security Act and the Internal Revenue Code through new questions regarding plan operations, service provider relationships, and financial management of the plan.

The changes are intended not only to improve plan compliance with the law but also to protect benefits for participants and beneficiaries and to provide education and discipline to plan fiduciaries. The changes are also intended to disclose much more information on fee disclosure related to insurance products, employee stock ownership plans, actuarial information and plan audits.

The proposed regulations also would make improvements to the certification requirements for the limited scope audit requirements under 29 CFR 2520.103-8, and allow group health plans to use the Form 5500 to satisfy certain reporting requirements in the Affordable Care Act.

The American Institute of Certified Public Accountants wrote a lengthy response to each item in the proposal.

The changes, which will place additional burdens on plan sponsors to gather the applicable information, expected to begin with the Plan Year 2019 Form 5500 returns filed in 2020. There has been no recent updates regarding this issue by the Agencies as of this summary.