Changes to the Form 5500 filed in 2024 and the Summary Annual Report

On February 24, 2023, the Internal Revenue Service (IRS), the U.S. Department of Labor (DOL), and the Pension Benefit Guaranty Corporation (PBGC), the “Agencies,” jointly released revisions to the Form 5500. On the same day, the DOL issued revisions to the Summary Annual Report (SAR), incorporating the changes made to the Form 5500. These revisions apply to plan years beginning on or after January 1, 2023.

The Agencies embarked on a multiphase project to revise the Form 5500 to reflect amendments made to the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code (Code) by the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019. Revisions under Phases I and II were made to the 2021 and 2022 plan year filings, respectively. Phase III revisions, reviewed in this Client Action Bulletin (CAB), impact the 2023 plan year filing. In this phase, additional reporting is required for multiple-employer plans (MEPs) and defined contribution group (DCG) arrangements, and changes were made to the financial, tax qualification, and compliance reporting requirements for other retirement plans.

Plan sponsors of defined benefit (DB) and defined contribution (DC) pension plans are advised to review the new and changed items and address any questions before the filings are due.

• The Form 5500 is due¹ seven months after the end of the plan year (e.g., July 31 for calendar year plans). Prior to that date plans can file Form 5558 to extend the due date an additional 2½ months. Therefore, the due date for the 2023 Form 5500 is October 15, 2024 for calendar year plans on extension.
• The SAR must be sent to participants and beneficiaries of DC plans within nine months after the end of the plan year (e.g., September 30 for calendar year plans), or two months after the Form 5500 is extended. Therefore, the due date for the 2023 SAR is December 15, 2024, for calendar year plans on extension.

Form 5500 for the 2023 plan year

The Form 5500 reports on a DB or DC plan’s financial status and operations for a plan year. Changes to large plan² filings are described below. Modifications impacting DC plans are highlighted in blue, those impacting DB plans are in red, and changes that apply to both DB and DC plans are in green.

Form 5500

This new beginning of year count is used to determine whether the plan is eligible to file as a small plan. Previously, the count of all individuals eligible to participate in the plan was used for this purpose. The Agencies expect that the number of DC plans eligible to file as a small plan will increase, and such plans may save on audit fees. Plans with fewer than 100 participants may be exempt from obtaining an independent qualified public accountant (IQPA) audit if certain requirements are met.

In addition, new checkboxes have been added for filers attaching the new Schedule MEP and Schedule DCG. (Part II, Line 10)

Schedule MEP (Multiple-Employer Retirement Plan Information)

This new schedule is required to be completed by association retirement plans, professional employer organization (PEO) plans, pooled employer plans (PEP), and other multiple-employer plans that are not multiemployer plans. These plans must report:

• Name of each participating employer or plan sponsor and Employer Identification Number (EIN)
• Percentage of total contributions to the plan by each participating employer
• Aggregate account balance information (DC plans only)
• Contribution percentage and account balance information (reported collectively) for individuals not participating through an employer or who are individual working owners

In addition, PEPs must confirm they comply with Form PR (Pooled Plan Provider Registration Statement) requirements and provide the acknowledgment code (ACK) ID for the most recent Form PR filed.

Schedule DCG (Individual Plan Information)

Eligible DC group arrangements have the option to submit a single consolidated Form 5500 instead of submitting separate filings for each individual plan. Eligible DCGs must be single-employer or collectively bargained individual accounts or defined contribution plans (excluding MEP and multiemployer plans) with a common trustee, common fiduciaries, common administrator, and common plan year. They must have the same investments or provide the same investment options to all participants and may not directly hold any employer securities. DCGs are treated as a new type of direct filing entity (DFE) and must file a large-plan Form 5500. Small plans and one-participant plans may find it more cost-effective to file their own Form 5500-SF or Form 5500-EZ rather than be included in a DCG filing.

• The new Schedule DCG is used to report the following information for each plan included in the DCG:
• DCG name, EIN, and plan number
• Basic individual plan information, including plan name, EIN, plan number, plan sponsor and plan administrator information, number of active and total participants, number of participants with account balances, and the number of participants who terminated during the plan year who were not 100% vested
• Plan financial information, including plan assets and liabilities, participant loans, employer and employee contributions, benefit payments, corrective distributions, deemed distributions of participant loans, direct expenses, net income, and transfers to and from other plans
• Plan characteristic codes, identifying the features of the plan
• Compliance questions, including delinquent participant contributions, nonexempt transactions, plan coverage, and nondiscrimination information
• An IQPA audit for each large plan³
• Information for all the other Form 5500 schedules is reported in the aggregate. For example, fees for all service providers would be aggregated and reported on Schedule C even if some of the service providers didn’t charge any fees to an individual plan because there were no participants who elected a particular investment option. DCG filers do not complete Schedule R.
• The consolidated reporting does not extend to Form 8955-SSA to report terminated participants with deferred vested benefits. Each individual plan must file its own Form 8955-SSA.

Schedule H

New categories of administrative expenses were added so the Agencies could better understand the type of expenses paid to the plan’s service providers. (Part II, Line 2i)

Schedule MB

Multiemployer DB plans that received special financial assistance (SFA) before the valuation date must exclude the SFA in all asset amounts (Lines 1b[1], 1b[2], and 2a). The SFA is excluded for purposes of calculating a plan’s minimum funding requirements. In addition, plans that receive SFA should be reported in critical status from the plan year in which the effective date for such assistance occurs through the plan year ending in 2051. (Line 4b)

Schedule R

Compliance questions were added for DB and DC plans to report the following:

• If plans⁴ were permissively aggregated for nondiscrimination and coverage tests under Code Sections 401(a)(4) and 410(b). (Line 21a)
• If applicable, whether a 401(k) plan⁴ used the design-based safe harbor rules or the “prior year” or “current year” average deferral percentage (ADP) test. (Line 21b)
• If the plan is a preapproved plan that received a favorable IRS Opinion Letter, provide the date and serial number of the Opinion Letter. (Line 22)

In addition, three changes were made for DB plans to report the following financial information:

• Plans with 1,000 or more participants as of the beginning of the plan year must break down the percentage of the plan’s assets as of the end (rather than the beginning) of the plan year into new asset classes. (Line 19a)

• Previously, the reported average duration was based on the combined investment-grade debt and high-yield debt. Now the average duration is based on the investment-grade debt and interest rate hedging assets (excluding high-yield debt). The duration periods are also adjusted to multiple five-year periods (from three-year periods). (Line 19b)

Schedule SB

Reporting of actuarial information for single-employer DB plans is revised in two limited situations:

• Plans with mandatory employee contributions are to adjust the Target Normal Cost in a slightly different way from before to reflect employee contributions. (Line 6)
• Plans that pay some or all benefits as lump sums (such as cash balance plans) may calculate liabilities by valuing equivalent annuities instead of lump sums (i.e., annuity substitution rule). Previously, these plans were required to include the lump sum values in the 50-year projected benefit payments attachment. This was changed to allow these plans to reflect the annuity payments instead. (Line 26a)

Summary Annual Report for the 2023 plan year

The SAR summarizes information reported on the Form 5500 for participants and beneficiaries of DC plans.⁵ The ERISA regulations that provide the template language for the SAR have been amended for the changes to the Form 5500 described above, primarily to acknowledge the new filing option for DCG arrangements and the information contained on the new Schedules MEP and DCG.

More changes to come

The DOL’s semiannual regulatory agenda includes a strategic project by the Agencies to improve reporting on the annual Form 5500. The plan calls for “modernizing the financial and other annual reporting requirements on the Form 5500, making the investment and other information on the Form 5500 more data mineable, and potential changes to group health plan annual reporting requirements.” It also is “focused on enhancing the agencies’ ability to collect employee benefit plan data that best meets the needs of changing compliance projects, programs, and activities.” Proposed revisions are currently scheduled to be issued in June 2023.

Changes to the Form 5500 filing for the 2022 plan year are reviewed in a separate Client Action Bulletin.

Please contact your Milliman consultant for how these provisions may impact your plans.

¹ Due dates can be extended for plans affected by federally declared disasters. The PBGC generally grants disaster relief when the IRS grants such relief for taxpayers. IRS announcements for tax relief are found here.

² Similar changes were made to the Form 5500-SF for small plan filings, but these changes are not highlighted in this CAB.

³ Small plans with fewer than 100 participants may have to attach an IQPA audit if they are not eligible for a waiver.

⁴ Excluding multiple-employer plans or pooled employer plans.

⁵ DB plans covered by the PBGC single-employer and multiemployer insurance programs are exempt from the SAR requirement.