On February 23, 2023, the U.S. Department of Labor, Internal Revenue Service, and Pension Benefit Guaranty Corporation (PBGC) announced revisions to Form 5500, effective for employee benefit plan years beginning on or after January 1, 2023. This third – and final – phase of changes to Form 5500 is part of a 2021 regulatory proposal to comply with the Setting Every Community Up for Retirement Enforcement (SECURE) Act.
The most notable change is the method of counting participants for purposes of determining when a defined contribution plan may file as a “small plan,” which is generally a plan with fewer than 100 eligible participants. Rather than counting individuals who are eligible to participate even if they have not elected to participate and do not have an account in the plan, the new counting methodology will be based on the number of participants with account balances at the beginning of the plan year.
Other changes being made for 2023 plan year also include:
- A consolidated reporting option for certain groups of defined contribution plans.
- Improved reporting by pooled and other multiple employer plans.
- A breakout of reporting on administrative expenses paid by the plan on the financial statements.
- Technical and conforming changes as part of the annual rollover of forms and instructions.
- Further improvements in financial and funding reporting by PBGC-covered defined benefit plans.
- The addition of selected Internal Revenue Code compliance questions to improve tax oversight and compliance of tax-qualified retirement plans.
- Technical adjustments that address certain provisions in the SECURE 2.0 Act of 2022 regarding 403(b) pooled and multiple employer plans, including minimum required distributions and audit requirements for plans in defined contribution group reporting arrangements.
This new guidance could present alternative, cost-saving options and ultimately eliminate the need for an audit altogether, which could impact approximately 19,000 large benefit plans. Be sure to reach out to your professional advisors to determine your financial reporting requirements. As always, our employee benefit plan accounting experts are here to help.