Department of Labor Issues Final Changes to the 2023 Form 5500
The Department of Labor has finalized multiple changes to Form 5500, the document designed to satisfy Employee Retirement Income Security Act (ERISA) and Internal Revenue Code Title I and Title IV reporting requirements.
The changes are across a broad spectrum and include:
- A consolidated filing option for various groups of plans including pooled employer plans and other multiple employer plans
- Change in the participant-counting method to determine “small plans”
- Breakout of administrative expenses paid by the plan
- Improvements to reporting by Pension Benefit Guaranty Corporation (PBGC)-covered defined benefit plans
- The addition of selected Internal Revenue Code compliance questions for tax-qualified retirement plans
- Technical and conforming changes as part of the annual rollover of forms and instructions
Small plans are the biggest change
For many plan sponsors, the most significant change is participant counting to determine if a plan qualifies as a “small plan,” which is generally defined as a plan with fewer than 100 participants. This matters because small plans are excluded from the annual audit requirement, which saves both time and cost for the small plan sponsor.
Under the new participant counting rule, only participants with an account balance at the beginning of the plan year will be counted, rather than the current method, which counts all individuals who are eligible to participate, whether they’re participating or not.
When does this go into effect?
This change will be effective for the 2023 plan year for 5500s filed in 2024 and will impact some plans that have low participation, which may now be able to get under the 100 eligible participant threshold now that only active accounts are included in the computation.
The full spectrum of changes
For more insights into small plans and audit requirements for employee benefit plans, here’s a great blog post on the 80-120 rule, as well as a short video on how to prepare for your first employee benefit plan audit. You can access our full library of employee benefit plan audit content, and also get insights into 401(k) plan management with our exclusive plan management benchmarking report or watch a video of study finding highlights. Have a question about employee benefit plan audits or want to talk to a plan audit professional? Contact us for a free consultation – we’re here to help.