Agencies Change Form 5500 Schedules
The third phase of updates to Form 5500, Annual Return/Report of Employee Benefit Plan, was recently released by the Department of Labor’s (DOL’s) Employee Benefits Security Administration, the IRS, and the Pension Benefit Guaranty Corporation (the “Agencies”). This guidance addresses changes related to provisions in the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE 1.0).
The Agencies’ third phase of final forms revisions are effective for plan years beginning on or after January 1, 2023. The DOL simultaneously published a final rule with an effective date of April 25, 2023, which is required to implement the Agencies’ third phase of final forms.
SECURE 1.0 Changes to Form 5500
SECURE 1.0 required MEP plan sponsors to report a new data element and required PEP plan sponsors to identify pooled plan providers. SECURE 1.0 also required the Secretaries of Labor and Treasury to update Form 5500 to allow a single consolidated annual report to be filed on behalf of certain groups of DCGs.
Schedule MEP
MEP reporting requirements previously identified in Phases I and II that were required to be included as an attachment to the annual filing will now be reported on the new Schedule MEP. Required data includes the type of MEP, participating employers and percentage of contributions and aggregate account balances, PEP PR registration information, and Ack ID (if applicable). To accommodate SECURE 2.0 provisions, this final forms revision also amends the definition of a PEP in the Schedule MEP instructions to permit 403(b) plans meeting certain criteria to participate in PEPs.
Schedule DCG
This guidance also implements requirements for a combined annual report for a group of plans under Section 202 of SECURE 1.0. A separate Schedule DCG is required for each individual plan relying on the DCG consolidated Form 5500 to satisfy their annual return/filing obligation. Schedule DCG has seven parts or sections that are designed to permit participants to find information on their specific plan within the consolidated annual filing. (There are no Form 5500-SF or Form 5500-EZ filing options for DCGs.)
Changes to Schedules R and SB
Defined benefit plans may be required to complete Schedule R, Retirement Plan Information and Schedule SB, Single-Employer Defined Benefit Plan Actuarial Information. The Agencies have updated each of these schedules for Form 5500.
Schedule R
This schedule currently requires defined benefit plans with 1,000 or more participants to provide a breakdown of assets in five investment categories. These categories have been modified and expanded to permit more detailed reporting of investment types. For example, the investment category “Stock” has been replaced by “Public Equity” and “Private Equity” and the investment category “Real Estate” will now be categorized as “Real Assets.” In addition, account balances will now be reported as of the end of the plan year rather than as of the beginning of the plan year.
Schedule SB
This schedule reports demographics and benefits of single-employer defined benefit plans. Changes to this schedule include revising the form and instructions to represent the present value of expected benefit accruals. Specifically, the instructions for Line 6a no longer require decreasing the present value of accruals by any mandatory employee contributions expected to be made during the plan year. In addition, instructions for Line 6c are modified to require reporting the sum of Lines 6a and 6b, ‘‘reduced (but not below zero) by any mandatory employee contributions expected to be made during the plan year.’’
Large Plan Filers Required to Complete a More Detailed Version of Schedule H
Large plan filers will now be required to complete a more detailed version of Schedule H, Financial Information.
Schedule H
The expense breakdown on Schedule H has been expanded from five lines to 12 lines to capture more detailed expense categories, including salaries and allowances, recordkeeping fees, IQPA audit fees, bank or trust company trustee/custodial fees, actuarial fees, legal fees, and valuation/appraisal fees.
Future Guidance
While the majority of provisions that were included in Phases I, II, and III have been adopted in final form, there are some remaining provisions that are deferred for further development and public input as part of a more general Form 5500 improvement project listed on the DOL’s semi-annual regulatory agenda.
