By Jane Meacham

The U.S. Department of Labor (DOL) on July 11 issued a notice of proposed revisions and other guidance outlining several changes to Form 5500 aimed at keeping annual reporting by employee benefit plans in line with technical, legal, and regulatory changes.

The 777-page notice on changes to Form 5500, to be published July 21 in the Federal Register (FR)—along with a Notice of Proposed Rulemaking (NPRM) on updates to DOL’s regulations implementing the changes—is expected to be effective for the 2019 plan year, for which report filing starts January 1, 2020. The DOL is joined by the Internal Revenue Service (IRS) and the U.S. Pension Benefit Guaranty Corporation (PBGC) in issuing the planned revisions.

Form 5500 is the primary source of information about the operation, funding, assets, and investments of employer-sponsored retirement and health plans.

Why make the changes?

The DOL said in a fact sheet on the changes that “it is important that the Form 5500 keep pace with changes in the legal requirements governing employee benefit plans and market developments.”

The changes are also designed to make available more data to meet the agencies’ enforcement priorities, policy analysis, and compliance assistance, the fact sheet said. In addition, the revisions should improve publicly available information about employee benefit plans and their service providers.

The proposed changes address five broad goals for improving employee benefit plan reporting for filers, plan participants, the agencies, and the public, four of which affect retirement plans:

• Modernize financial reporting. The proposal is meant to improve the reliability and transparency of information reported on benefit plan investments and their other financial transactions. Specifically, the proposed updates focus on better reporting on alternative investments and those made through collective investment vehicles, fewer of which existed when the last major changes were made to the annual reporting rules for the 2009 plan year.
• Enhance data mineability. The proposal would convert more elements of the Form 5500 into data or information that is organized in a structured way to make it able to be processed, identified, and analyzed by computer. The changes would allow private sector plan data users or vendors to develop more individualized tools for employers and participants.
• Improve service provider fee information. The proposal would better harmonize reporting on Form 5500’s Schedule C with final disclosure requirements established by the DOL. The Schedule C reporting requirements, once modified, will more closely track the information that plan service providers must disclose to plan fiduciaries.
• Enhance compliance with Employee Retirement Income Security Act (ERISA) and the federal tax Code. Last, the proposal would also enhance reporting on plan compliance to improve operations, protect participants and beneficiaries, and educate plan fiduciaries. The proposed new forms add questions about plan operations, service provider relationships, and financial management of plans.

Many of the changes contained in the newly issued notice have been discussed with or proposed by practitioners earlier, but not without some bumps. In February, the IRS announced on its website that retirement plan sponsors should not complete the proposed 2015 compliance questions appearing on Forms 5500 and 5500-SF.

The new questions on the annual filing forms, as well as on Schedules H, I, and R, were not approved by the Office of Management and Budget when the 2015 Forms 5500 and 5500-SF were published on December 7, 2015, so the IRS said it has decided that plan sponsors should not respond to these questions for the 2015 plan year.

The publication of the notices on July 21 in the FR marks the start of a 75-day comment period.