Significant Changes Proposed for Form 5500

On July 21, 2016 the Department of Labor (DOL), the Internal Revenue Service (IRS) and the Pension Benefit Guaranty Corporation (PBGC) published proposed rules that would make significant revisions to the Form 5500 Annual Return/Report as of the 2019 filing year.

DOL explains in a Fact Sheet that the proposed form revisions and the DOL’s related implementing regulations are intended to address changes in applicable law and in the employee benefit plan and financial markets, and to accommodate shifts in the data the DOL, IRS and PBGC need for their enforcement priorities, policy analysis, rulemaking, compliance assistance, and educational activities.

The major proposed changes are summarized below:

  • Retirement Plan Changes– The new Form 5500 will request more information about participant accounts, contributions, and distributions. It will also ask about plan design features, including whether the plan uses a safe harbor or SIMPLE design and whether it includes a Roth feature. The form will also ask about investment education and investment advice features, default investments, rollovers used for business start-ups (ROBS), leased employees, and pre-approved plan designs.  Schedule R will include new questions about participation rates, matching contributions, and nondiscrimination.
  • Group Health Plan Changes– The most significant change for health plans is that all ERISA group health plans, including small plans that are currently exempt from filing, will be required to file a Form 5500.  The new filing requirement includes a new Schedule J (Group Health Plan Information), which will list the types of health benefits provided, the plan’s funding method (self insured or fully insured), information about participant and employer contributions, information about COBRA coverage, whether the plan is grandfathered under health care reform, and whether it includes a high deductible health plan, HRA, or health FSA.  In addition, most filings (except those for small fully insured plans) would have to provide financial and claims information, disclose stop-loss carriers, third party administrators and other plan service providers, and provide details regarding compliance with HIPAA, GINA, health care reform and other compliance issues.
  • Other Changes– The proposed changes affect many of the existing Form 5500 schedules, including:
    • Schedule C would be revised to coordinate with the service provider fee disclosure rules.
    • Schedule C would be required from some small plans currently exempt from filing it.
    • Schedule H would be expanded to include questions on fee disclosures, annual fair market valuations, designated investment alternatives, investment managers, plan terminations, asset transfers, administrative expenses and uncashed participant checks.
    • Schedule I would be eliminated.
    • Small plans that currently file Schedule I would generally need to file Schedule H.

Effective Date– The new Form 5500 is expected to be required as of the 2019 plan year filings.

Proposed Rule Making Form 5500 Changes

DOL and IRS Releases Updated Form 5500 Series for 2015

DOL and IRS recently posted the new 2015 Form 5500, Form 5500-SF, and a draft of the 2015 Form 5500-EZ. Of significance is the “IRS Compliance Questions” added to the various forms and schedules:

  • Schedules H and I add two new compliance questions about unrelated business taxable income and in-service distributions.
  • Schedule R adds ten new compliance questions in five areas: (1) ADP and ACP testing; (2) coverage testing and plan aggregation; (3) recently adopted plan amendments; (4) the type of plan (whether individually designed or preapproved); and (5) plans maintained in U.S. territories.
  • Form 5500-SF adds the above compliance questions and one additional question about whether required minimum distributions were properly made to 5% owners who are still employed and are were 70-1/2  or older.
  • Form 5500-EZ adds most of the above questions, except the testing and coverage questions, which do not apply to single person plans.

2015 Form 5500 series and Instructions

Draft 5500-EZ and Instructions