Earlier this year, the IRS, the Department of Labor, and the Pension Benefit Guaranty Corporation (PBGC) updated the 2023 Form 5500 and Form 5500-SF. The DOL makes these changes yearly to keep Form 5500 current with various regulatory updates. All companies that offer employee benefit plans must file a 5500 to the IRS and DOL each year. The 2023 changes included a simplified Form 5500 option for specific retirement plans and technical adjustments that address updates from the SECURE 2.0 Act of 2022. According to the DOL, these changes are expected to decrease the total filing costs for employee benefit plans by about $95 million annually.
What is Form 5500?
The Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code (IRC) mandate filing Form 5500 and 5500-SF for employee benefit plans. These forms serve as tools for research and compliance by the DOL, IRS, and PBGC, and they are also accessible to the public. The shorter form 5500-SF is used for plans that don’t require an audit, while the regular Form 5500 is for plans that necessitate an audit. For a plan that follows the calendar year, the deadline for submitting Form 5500 is July 31 (the final day of the seventh month after the plan year’s end), and an extension of two and a half months is available until October 15.
What Are the Latest Form 5500 Changes?
Employee benefit plans that begin on or after January 1, 2023, are subject to the following changes to Form 5500:
- Small plans, usually with fewer than 100 participants, will have a new way to determine if they can use more straightforward reporting options. Instead of counting all eligible individuals, the new method focuses on the number of participants with account balances.
- Improved reporting by multiple-employer plans, including pooled-employer plans, makes providing more detailed information easier.
- Breakout categories were added to the Income and Expenses section of the Schedule H balance sheet. This change aims to improve transparency in fees and costs.
- Certain groups of plans will have the option to use a consolidated reporting form called defined contribution group (DCG) reporting. This change means that DCGs will now generally follow the reporting requirements of large pension plans using Form 5500.
- The PBGC-covered defined benefit plans will see further enhancements in reporting financial and funding information.
- More questions about IRC compliance will be included to ensure that tax-qualified retirement plans comply with tax rules.
- Technical and conforming changes will be made to the forms and instructions as part of the regular update process.
Next Steps for Plan Sponsors
The changes to Form 5500 are intended to provide more detailed and comprehensive information about employee benefit plans, improve transparency, and facilitate compliance with applicable laws and regulations. Plan sponsors and administrators should be aware of these changes and prepare accordingly to ensure timely and accurate filing of Form 5500 and any potential shift in audit requirements for their plan. For more information, read our insights on preparing for an employee benefit plan audit and protecting your benefit plan from cyber criminals.
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