Changes for the Form 5500

An overview and detailed analysis of key changes

October 2023

Overview

Earlier this year, the U.S. Department of Labor (DOL), Internal Revenue Service (IRS), and the Pension Benefit Guaranty Corporation released two Federal Register Notices announcing changes to Form 5500 (Annual Return/Report of Employee Benefit Plan) effective for plan years beginning on or after January 1, 2023. There are five key changes:

1. A consolidated Form 5500 reporting option for certain groups of defined contribution (DC) retirement plans – defined contribution group (DCG) reporting arrangements.
2. Improved reporting by multiple-employer plans (MEPs), including pooled employer plans (PEPs).
3. A change in the participant-counting methodology for determining eligibility for simplified reporting alternatives available to small plans.
4. Detailed reporting of administrative expenses paid by the plan on a plan’s financial statements.
5. The addition of selected Internal Revenue Code compliance questions to improve tax oversight and compliance of tax-qualified retirement plans.

Detailed Description of the Key Changes

1. Defined Contribution Group - Consolidated Form 5500 for Defined Contribution Retirement Plan Groups implements the SECURE Act requirement that DOL and IRS jointly develop a consolidated annual reporting option for certain groups of DC retirement plans. They include a filing option for a new type of direct filing entity called a DCG reporting arrangement and a new Schedule DCG (Individual Plan Information). DCGs are generally subject to the Form 5500 requirements for large pension plans. Large plans in a DCG arrangement and small plans not meeting the audit waiver conditions will still be subject to a separate plan-level audit by an independent qualified public accountant (IQPA) as if they were filing separately.
2. Schedule MEP - Reporting by Pooled Employer Plans (PEPs) and other Multiple-Employer Plans (MEPs) includes modifications to Form 5500 to further implement SECURE Act changes that establish PEPs as a new type of retirement plan. These steps will be accomplished primarily by the new Schedule MEP (Multiple-Employer Retirement Plan Information). As with Schedule DCG, some aspects of the proposed Schedule MEP have been streamlined, mainly relating to PEP-specific questions.
3. Change in Participant-Count Methodology - Revises the counting methodology for determining the 100-participant threshold for certain small plan simplified reporting alternatives, including the conditional waiver of the Independent Qualified Public Accountant annual audit. The counting methodology for defined contribution retirement plans will be based on the number of participants with account balances, rather than the current method that counts individuals who are eligible to participate even if they have not elected to participate and do not have an account in the plan. This method is also applicable to the 80/120 rule. This change is intended to reduce expenses for small plans and encourage more small employers to offer workplace retirement savings plans to their employees.
4. Schedule H Detail of Administrative Expenses - Schedule H is updated to add new detailed categories for “Administrative Expenses” to improve fee and expense transparency. This change provides a better picture of plan expenses, particularly those related to service providers, including fee categories related to contract administration, recordkeeping, audit fees, investment advisory and management, trustee and custodial, actuarial, legal, valuation/appraisal, and other expenses.
5. Schedule R Selected Tax Qualification Compliance Questions - Several new IRS tax compliance questions are being added to Schedule R (Retirement Plan Information) beginning with the 2023 plan year. The changes add questions in three major areas:
   1. Nondiscrimination testing - Does the plan satisfy the coverage and nondiscrimination tests of Internal Revenue Code sections 410(b) and 401(a)(4) by combining this plan with any other plans under the permissive aggregation rules?
   2. ADP testing - If this is a 401(k) plan, check all applicable boxes to indicate how the plan is intended to satisfy the nondiscrimination requirements.
   3. Pre-approved plan letters - If the plan sponsor is an adopter of a pre-approved plan that received a favorable IRS Opinion Letter, enter the date of the Opinion Letter.

We encourage plan sponsors to review the changes so they are prepared when completing and filing Form 5500. Fidelity is updating our processes, procedures, reporting, and system enhancements for the changes.