The Department of Labor has issued new rules detailing a number of changes to Form 5500 and Form 5500-SF reporting, starting for plan years beginning on or after January 1, 2023. These rules are the final phase in implementing changes to annual reporting requirements first proposed in September 2021.
Among other changes, the new rules provide for a number of changes related to the SECURE Act and SECURE Act 2.0, including consolidated reporting for groups of defined contribution plans, improved reporting by pooled employer plans and multiple employer plans, and technical adjustments for 403(b) multiple employer plans. The rules also improve financial and funding reporting by PBGC-covered defined benefit plans.
Form 5500 will now have breakout categories for administrative expenses to improve fee and expense transparency. Tax-qualified plans will also have to answer new Internal Revenue Code compliance questions, including whether a plan that is aggregated with other plans for testing satisfied nondiscrimination and coverage testing, whether the plan was a safe harbor plan for ADP testing and the date of the plan’s last opinion letter for pre-approved plans.
The change that will likely impact plan sponsors most is a change in counting participants for individual account-defined contribution plans (i.e., 401(k) and 403(b) plans). Currently, the participant count for Form 5500 is determined by counting individuals eligible for the plan, even if they do not have an account balance because they never made elective deferrals and never received employer contributions. This caused some plans to be considered a “large plan” subject to an independent audit because their participant count was 100 or more at the beginning of the year. Under the new rules, for plan years starting on or after January 1, 2023, to determine whether a plan is a large or small plan, the participant count will be the number of participants or beneficiaries with account balances at the beginning of the plan year, and some plans may no longer be subject to the independent audit requirements for 2023. With the long-term part-time employee rule taking effect in 2024, plans will need to pay attention to these new counting rules to ensure they satisfy any audit requirement.
Plan sponsors and administrators should evaluate the new rules to determine if they will need to make any changes to their Form 5500 reporting for the 2023 plan year. For calendar year plans, Form 5500 for 2023 will be due by July 31, 2024 (or October 15, 2024 on extension).
If you have any questions about the new Form 5500 rules, please contact a Boutwell Fay attorney at attorneys@boutwellfay.com.