A Closer Look at the Form 5500 Modernization Initiative
Transparency and accountability are behind the Department of Labor’s (DOL) latest effort to update the Form 5500. At least so say the speakers in ASPPA’s recent webcast on the subject.
In the Oct. 6 ASPPA webcast, “DOL's Proposed Form 5500 Modernization Initiative
,” four speakers from three federal agencies discussed the proposals. They included Marianne Gibbs, ERISA Filing Acceptance System Program Manager at the DOL’s Employee Benefits Security Administration (EBSA); Elizabeth A. Goodman, Senior Employee Benefits Law Specialist, Office of Regulations and Interpretations, EBSA; Grace Kraemer, Esq., of the Pension Benefits Guaranty Corporation’s (PBGC) Legislative and Regulatory Department; and Yaguo Zhang, Senior Tax Law Specialist at the IRS Office of Employee Plans.
On July 12, the DOL, the IRS, and the PBGC proposed
significant revisions to the Form 5500 and related schedules. The agencies intend the changes to modernize the forms, improve the transparency and “mineability” of the information they provide and enhance compliance with ERISA and the Internal Revenue Code. “The changes are focused on increasing transparency and accountability,” said Goodman.
Goodman noted that the initiative was many years in coming, and was the result not just of activity by the three agencies. In addition, she said, it takes into account more than 15 reports from a variety of agencies and councils.
And the proposal also takes the views of those who use the forms into account, including those conveyed through informal outreach. They are “looking for advice from you who are experts,” Goodman said to attendees, “on how best to make the form and instructions more usable and understandable.”
Kraemer outlined the five major goals of the proposal, which she called “interrelated”:
1. Modernize the financial statements and investment information filed about employee benefit plans.
2. Enhance accessibility and usability of data filed on the forms.
3. Update reporting requirements for service provider fee and expense information.
4. Require reporting by all group health plans covered by Title I of ERISA.
5. Improve compliance through new questions on plan operations and financial management of the plan.
Kraemer indicated that the agencies are aware that using the form and its schedules can be challenging, and that they hope the proposed changes will address that. For instance, regarding Schedule H (Financial Information), she assured attendees, “We recognize that collective investment vehicles are hard to define.” She added that the government hopes that changes to information on plan terminations, mergers, consolidations and investment alternatives in participant-directed 401(k)-style plans will help employers with benchmarking. It also hopes that the new standardized format will improve the quality of data.
Not only that, added Elizabeth, the agencies hope that with the changes, employers will have better access to information, and that data operators will have a better understanding of financial performance and risks and be better able to protect participants and beneficiaries.
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