Preparing employer benefit plans’ annual filings to federal agencies can be detailed and time-consuming. A review of recent changes to the 2014 Form 5500 series indicates this process could become even more laborious for some plans, as the government seeks more data disclosure.
The Form 5500 is used by multiple government agencies (the U.S. Department of Labor’s Employee Benefits Security Administration, IRS and the U.S. Pension Benefit Guaranty Corp.) to obtain information about employee benefit plans. The information is then used by the agencies to monitor compliance and to develop targeted audit programs that ensure rules are followed and potential areas of abuse are uncovered.
Information submitted on these forms enables the agencies to develop educational initiatives to help plan sponsors better understand their fiduciary responsibilities. In addition, the data will be used by IRS to more appropriately structure its data request letters for plans the agency wishes to audit.
The Form 5500 is due seven months after the end of the plan year. An extension can be obtained by filing a Form 5558.
2014 Form 5500 and Proposed Form 5500-SUP
DOL released the draft 2014 Form 5500 and IRS released a draft of the “Form 5500-SUP — Annual Return of Employee Benefit Plan Supplemental Information,” followed by a draft Form 5500-SUP instruction. There weren’t many changes in the 2014 Form 5500. One noticeable change to it, though, is the requirement that Multiple Employer Plan filings include an attachment listing each participating employer, as well as each employer’s percentage of contributions for the year.
See “2014 Form 5500, Schedule and instruction changes” at the end of column for some of the changes. A copy of the new Form 5500 can be found on the Employee Benefits Security Administration website.
Proposed Form 5550-SUP and Instructions
Form 5500-SUP is a paper-only form containing information that will supplement the Form 5500 and the Form 5500-SF. Employers not subject to IRS electronic filing requirements (those with fewer than 250 tax returns of any type during the calendar year, which includes the first day of the plan year) may use the paper Form 5500-SUP instead of answering the questions on the Form 5500 filed electronically with DOL.
Form 5500-SUP will be used for the 2015 plan year.
At the end of this column is also a summary of new items appearing on the proposed Form 5500-SUP, to help you prepare for 2015’s filing, when the changes are expected to be approved and be integrated into the Form 5500.
The proposed Form 5500-SUP brings back some of the questions removed starting with the 2009 Form 5500, when the filing process was transitioning to electronic filling via EFast2, and adds some new questions. The instructions can be found online. It is interesting to note that the instructions issued after the Form 5500-SUP do not all correspond to the items on the Form 5500-SUP itself!
What Does It Mean to Plan Sponsors?
For some plan sponsors, the Form 5500-SUP will induce a bit of déjà vu; for others, it will be a learning opportunity or a refresher on ERISA compliance issues. However, if the proposed changes to the 2015 Form 5500 are accepted, the annual reporting process will require more concentrated effort for gathering data to answer the form’s questions. Plan sponsors should reach out to their various service providers and begin identifying who will provide what information, if the proposed changes are incorporated into the 2015 Forms 5500 series.
The proposed Form 5500-SUP is a draft. Given the disparity between the draft form and related instructions, we can expect to see revised drafts of one or both documents. For example, while not included among changes listed below, Line 9 of the Form 5500-SUP requests the amount of contributions deducted and whether the contributions exceeded the deductible limit. The instructions for Line 9, however, relate to the amount of distributions made under certain circumstances.
Form 5500-SUP and IRS Request for Comment
IRS expects that the questions on the Form 5500-SUP will be added to the 2015 Form 5500 and Form 5500-SF and related schedules. IRS issued a request for comments on the new Form 5500, including the agency’s rationale for each of the changes. The public comments are due on or before Feb. 23.
For the complete story on Thompson’s HR Compliance Manager, including a summary of some of the proposed changes to the 2015 Form 5500, click here.