The Form 5500, Annual Return/Report of Employee Benefit Plan, is an informational return used to report on employee benefit plans and Direct Filing Entities (DFEs). Some changes were implemented to the form for plan years beginning on or after January 1, 2023. The following is a summary of the most significant changes to the Form.
Section 202 of the SECURE Act directed the Internal Revenue Service (IRS) and Department of Labor (DOL) to modify the Form 5500 to allow certain groups of defined contribution retirement plans to file a single consolidated annual return/report. For 2023, a revision has been made to have a Defined Contribution Group (DCG) Reporting Arrangements filing option. A new schedule DCG was also added. This schedule includes individual plan information for plans reporting within a DCG. There are eligibility requirements that must be met for plans to be able to use this filing option.
Another change that was made for 2023 impacts both Form 5500 and Form 5500-SF. There was a change in the methodology for counting the number of participants used to determine when a plan may file as a small plan (less than 100 participants). Small plans are not required to have an annual audit. Starting in 2023, defined contribution pension plans count participants with account balances at the beginning of the plan year, and new plans will use the number of participants with account balances at the end of the plan year. Previously, the count of participants included all individuals who were eligible to participate even if they didn’t have a balance in the plan.
Schedule H will also include new breakout categories within the “Administrative Expenses” category to provide additional fee and expense transparency. Fee categories such as contract administration, recordkeeping, audit fees, investment advisory and management, trustee and custodial, actuarial, legal, valuation/appraisal and other expenses are now included on the form as separate lines.
Another new schedule, Schedule MEP, has been added in 2023 to consolidate SECURE Act related and other multiple-employer plan reporting into one schedule. Certain reporting requirements for pooled employer plans (PEPs), a new type of plan established by the SECURE Act, are included on this schedule in addition to previously required information for other multiple-employer plans.
Finally, Schedule R has been updated for 2023 plan year reports. Several tax compliance questions have been added to the schedule. These include changes to the non-discrimination testing, ADP testing, and pre-approved plan letter areas. In addition, line 19 of Schedule R has multiple modifications. Line 19a now has seven category choices of plan assets compared to five categories in prior years and line 19b has a decreased number of options for the average duration of the investment-grade debt and interest rate hedging assets. Line 19c was eliminated.
In addition to the more significant changes noted above, there were a number of other small changes to Form 5500 and its instructions. If you have specific questions on how these changes impact your plan, reach out to your Hawkins Ash representative.
