DOL Releases Proposal to Revamp Form 5500

By Nevin Adams • July 12, 2016 • 0 Comments
The Department of Labor (DOL) wants the information form that private-sector employee benefit plans file each year to have more information — and to be more “mineable.”

The DOL’s Employee Benefits Security Administration, the IRS and the PBGC are seeking public comments on proposed revisions that the agencies say will “modernize and improve the Form 5500 Annual Return/Report.” And it would like the changes in place for the 2019 plan year filings.

Proposal Designs

According to a fact sheet issued along with the proposed changes, the Labor Department claims that the proposal is designed to:

Modernize financial reporting — especially in its focus on “improving reporting regarding alternative investments, hard-to-value assets, and investments through collective investment vehicles,” as well as fostering “ongoing monitoring of employee benefit plans by employers, plan fiduciaries, and participants and beneficiaries, and improve the ability of the Agencies to fulfill their statutory oversight roles.”

Enhance data mineability — the DOL says that its proposal would “convert more elements of the Form 5500 into data or information that is organized in a structured manner to make them computer-processable and identifiable for data-mining and analytic purposes,” including the schedules of assets held for investment purposes. It also notes that those changes would “enable private sector data users to develop more individualized tools for employers to evaluate their retirement plans and for employees to manage their retirement savings.”

Improve service provider fee information — by better harmonizing reporting on Form 5500 Schedule C with the now final disclosure requirements in DOL’s service provider disclosure regulation at 29 CFR 2550.408b-2. The DOL notes that the proposed updates are “intended to provide a powerful tool for improved evaluation of service arrangements involving investments, recordkeeping, and other administrative services,” and that the Schedule C reporting requirements for employee benefit plans would then “more closely track the information that plan service providers are required to disclose to plan fiduciaries.”

New Questions

The DOL notes that the proposal would add selected new questions regarding plan operations, service provider relationships and financial management of plans — questions that the agency says are “intended to compel fiduciaries to evaluate plan compliance with important requirements under ERISA and the Code and to provide the Agencies with improved tools to focus oversight and enforcement resources.”

While under the proposal the form revisions would begin with the Plan Year 2019 Form 5500 series returns/reports, the form improvements and regulatory changes are generally being coordinated with a procurement process related to the Electronic Filing Acceptance System (EFAST). Some form changes may be implemented earlier or later depending on the public comments and developments in the EFAST2 procurement process.

Speaking of comments, the publication of the notices in the Federal Register marks the start of a 75-day comment period. Comments are due by Oct. 4, 2016. The 123-page proposal is here. Oh, and did we mention that the Notice of Proposed Form Revisions is 777 pages long?