Proposed Changes to Form 5500

It is important for employers to be aware of future compliance changes affecting their employee benefit plans (EBPs). One of the most significant changes anticipated for EBPs was the requirement to respond to the IRS Compliance Questions in the Form 5500 Series and Schedules H, I, and R. The Department of Labor (DOL) and IRS recently announced these questions will remain optional for 2016. The compliance questions are part of a larger initiative by the DOL and IRS to make “sweeping changes” to the 5500 and related forms.

The proposed overhaul focuses on three major areas:

Financial Disclosures

EBPs would be required to break out their investments and financial assets more thoroughly. They would also be required to disclose certain derivative instruments, hard-to-value assets, and other sophisticated investments separately.

Service Provider Fee Disclosure

A more detailed breakout of the plan’s administrative expenses would be required. Another proposal aims to simplify the requirements for indirect compensation by eliminating alternative measurements of indirect compensation so that figures more closely align with actual compensation on Schedule C.

Compliance Questions

The proposed questions are already in the Form 5500 series and include questions such as:

  • Is the plan maintained in the United States?
  • Is the plan a 401(k) plan?
  • Does the plan comply with nondiscrimination requirements?
  • Has the plan been amended for tax law changes?

We encourage you to review the proposed IRS compliance questions and be aware of the potential overhaul to the Schedules for the Form 5500 series in the coming years. The compliance questions are anticipated to be effective for plan years beginning on or after January 1, 2017. All other proposed changes are anticipated to be effective for plan years beginning on or after January 1, 2019.

Johnson Lambert
Johnson Lambert | Author
Nathan Miller
Nathan Miller | Associate