US Labor Department releases proposal to improve, modernize Form 5500 Annual Return/Report filed by employee benefit plans

WASHINGTON – The U.S. Department of Labor’s Employee Benefits Security Administration, the Internal Revenue Service, and the Pension Benefit Guaranty Corporation are seeking public comments on proposed revisions to modernize and improve the Form 5500 Annual Return/Report filed by private-sector employee benefit plans. Today, EBSA also published a related notice of proposed changes to its annual reporting regulations under Title I of the Employee Retirement Income Security Act.

The Form 5500 is the primary source of information about the operations, funding and investments of private-sector, employment-based pension and welfare benefit plans in the U.S. There are an estimated 2.3 million health plans, a similar number of other welfare plans and nearly 681,000 pension plans. Covering roughly 143 million private-sector workers, retirees and dependents, these plans have an estimated $8.7 trillion in assets.

The proposed revisions are intended to:

• Modernize the financial statements and investment information filed about employee benefit plans.
• Update the reporting requirements for service provider fee and expense information.
• Enhance accessibility and usability of data filed on the forms.
• Require reporting by all group health plans covered by Title I of ERISA.
• Improve compliance under ERISA and the Internal Revenue Code through new questions regarding plan operations, service provider relationships, and financial management of the plan.  

The proposed regulations also would make improvements to the certification requirements for the limited scope audit requirements under 29 CFR 2520.103-8, and allow group health plans to use the Form 5500 to satisfy certain reporting requirements in the Affordable Care Act. The proposed changes to the DOL regulations are also needed to implement the form revisions.

“The proposed form changes and related regulatory amendments are important steps toward improving this critical enforcement, research and public disclosure tool,” said Assistant Secretary for the Employee Benefits Security Administration Phyllis C. Borzi. “The 5500 is in serious need of updates to continue to keep pace with changing conditions in the employee benefit plan and financial market sectors. We must also remedy the form’s current gaps in collecting data from ERISA group health plans.”

As Form 5500 information is open to public inspection, not only would expanded data collection assist in the agencies’ research and policymaking objectives, public access to this information would enable interested private sector and other governmental stakeholders to perform data-based research or help plan sponsors, fiduciaries, and participants and beneficiaries better understand their plans and plan investments.

Under Titles I and IV of ERISA and the Internal Revenue Code, pension and other employee benefit plans are generally required to file annual returns/reports concerning, among other things, the financial condition and operations of the plan. Filing a Form 5500 Annual Return/Report of Employee Benefit Plan, or a Form 5500-SF Annual Return/Report of Small Employee Benefit Plan – together with any required schedules and attachments – generally satisfies these annual reporting requirements.

Under the proposal, the form revisions would begin with the Plan Year 2019 Form 5500 series returns/reports. The form improvements and regulatory changes are generally being coordinated with a procurement process related to the Electronic Filing Acceptance System, the government’s electronic filing and processing system that a private sector contractor operates. Some form changes may be implemented earlier or later depending on the public comments and developments in the EFAST2 procurement process.

The publication of the notices in the Federal Register marks the start of a 75-day comment period. The agencies encourage all stakeholders to submit comments on the proposals, including any suggestions on how the agencies can better achieve the goal of transforming the Form 5500 into a “21^st Century” information collection tool while minimizing administrative burdens with respect to the operation of plans.

The proposals will be published in the July 21 edition of the Federal Register. The proposals and a Fact Sheet are also available on EBSA’s website at www.dol.gov/ebsa/.

Editor’s Note: The Request for Information and draft requirements for continuation of EFAST2 operations was published on July 12, 2016.