On February 23, 2023, the DOL (along with IRS and PBGC) issued a pair of Federal Register Notices which announced changes to Form 5500 which will be effective for plan years beginning on or after January 1, 2023. Key among these revisions are an expected change in the threshold for determining which plans will require an independent audit of its financial statements to be attached to the Form 5500 filing.
Change in the Participant-Counting Methodology for Determining Plan Audit Requirements
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- Current: a plan is considered a “large plan” (and generally subject to an audit of its financial statements by an independent CPA firm) if there are more than 100 (or 120, initially) participants eligible to participate in the plan, regardless of if they have elected to do so.
- New: a plan would now be able to only consider those participants with an account balance in determining whether the plan was a large or small plan. “Small plans” are eligible for the conditional waiver of the annual audit requirement.
- Comment: While the 100-participant threshold is still in place, it would now only apply to those with account balances, presumably at the beginning of the plan year. For example, if your plan had 150 eligible participants but only 75 of them had account balances at 1/1/2023, your plan would not be subject to the audit requirement for the 2023 plan year.
Breakout of Administrative Expenses on Schedule H
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- Current: Plan sponsors must classify administrative expenses paid during a certain plan year in one of 4 categories: professional, contract administrator, investment advisory/management, and other.
- New: There would now be additional breakout categories to consider when disclosing administrative fees paid on Schedule H of Form 5500, in an effort to boost fee and expense transparency to participants, beneficiaries, and other users of the plan’s 5500.
Consolidated Form 5500 for Defined Contribution Retirement Plan Group (“DCGs”)
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- Certain groups of defined contribution retirement plans would file their Form 5500 as a new Direct Filing Entity called a “DCG”. These DCGs would be generally subject to the same 5500 reporting requirements as other “large plans”.
- Plans in such a DCG arrangement would still be subject to a separate plan-level audit by an independent qualified public accountant as if they were being filed separately. FAQ #2: May a qualified pension plan permit individuals who are working to commence in-service distributions.
- The IRS indicated that the answer is yes. As long as the individual has attained either age 59 ½ or the Plan’s normal retirement age (as defined), the plan may generally allow individuals to commence such “in-service distributions”.
More information on the Federal Register Notices can be found by navigating your browser to the link shown here.
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