DOL Finalizes Revisions to 2021 Form 5500 Instructions to Reflect SECURE Act Changes

Practical Law Legal Update w-033-9429 (Approx. 5 pages)

DOL Finalizes Revisions to 2021 Form 5500 Instructions to Reflect SECURE Act Changes

by Practical Law Employee Benefits & Executive Compensation

SECURE Act Changes

As background, the SECURE Act allows all members of a group of plans to file a single annual report (the Form 5500) instead of multiple reports for each plan. The plans eligible are individual account or defined contribution plans that have the same:

Trustee.
Fiduciary or fiduciaries.
Plan administrator.
Plan year.

The IRS and DOL were also directed to modify the Form 5500 requirements to implement the change by January 1, 2022. These changes apply to returns for plan years beginning after December 31, 2021.

In addition, the SECURE Act created a new multiple employer plan (MEP) called a pooled employer plan (PEP) that allows unrelated employers to join together to participate in one MEP (see Practice Note, Multiple Employer Retirement Plans (MEPs)). The SECURE Act amends ERISA to define PEPs and pooled plan providers, which administer this type of MEP.

Proposed Revisions to Form 5500

In September 2021, the DOL, Treasury, and PBGC (collectively, Departments) issued proposed form revisions and regulations that would update and expand Form 5500 reporting obligations for plans to reflect changes made by the SECURE Act (see Legal Update, Departments Propose Changes to Form 5500 and Schedules to Reflect SECURE Act and Additional Changes). Some of the proposed changes, including changes related to participating employer information and PEP provider information under ERISA Section 103(g), would be effective beginning with 2021 plan year reporting. All other changes would be effective for plan years beginning on or after January 1, 2022.

Final Revisions to 2021 Form 5500 Instructions

The final changes are limited to the changes that implement the SECURE Act provision that amended ERISA Section 103(g) to require certain MEPs, including PEPs, to include participating employer information with their annual returns (29 U.S.C. § 1023(g)). The final changes also clarify that multiple employer welfare arrangements (MEWAs) will still be required to report participating employer information.

Multiple Employer Retirement Plans (MEPs) Reporting

The final revisions update the Form 5500 instructions to reflect the SECURE Act's addition of PEPs as a type of MEP that must file a Form 5500. Regarding MEPs, the DOL:

Did not adopt the proposal requiring all MEPS to file the Form 5500, even if they are otherwise eligible to file Form 5500-SF. Instead, this proposal will be addressed in a future notice.
Amended the Form 5500-SF instructions to provide that PEPs are not eligible to use Form 5500-SF.

The final revisions also require MEPs to provide aggregate account balances for participating employers.

In a change from the proposed revisions, the final instructions clarify that only defined contribution MEPs must include aggregate account balances of participating employers. The DOL agreed with commenters who argued that defined benefit pension MEPs should not be required to include this information since they do not maintain account balances for each participant.

In addition, the final instructions clarify that when determining the aggregate account balances:

Filers should use end-of-year values.
Filers may round to the nearest dollar.

Regarding PEPs, the DOL is not requiring filers to provide the information from Schedule MEP. In the proposed revisions, filers would have been required to provide the information from proposed Schedule MEP for the 2021 plan year and file Schedule MEP beginning with the 2022 plan year. The DOL made this change after some commenters expressed concern regarding the proposed Schedule MEP, which the DOL plans to address in a future rule. Instead, PEPs should include in a non-standard attachment to their 2021 Form 5500:

A statement indicating whether they are in compliance with the Form PR registration requirements.
The AckID number for their most recent Form PR filing.

MEWA Reporting of Participating Employer Information

The DOL also adopted the proposed requirement that, for the 2021 plan year, all plan MEWAs will continue to be required to report participating employer information as a non-standard attachment to Form 5500.

Some commenters had argued that the DOL could no longer require participating employer information from MEWAs because the SECURE Act had eliminated that requirement regarding welfare benefit plans. The DOL acknowledged that the SECURE Act technically removed the requirement for multiple employer welfare plans, such as MEWAs, from ERISA Section 103(g). However, the agency concluded that it was still authorized to collect this information from MEWAs. As authority, the DOL relied on:

Another provision that requires plan administrators to provide the name and address of each fiduciary on Form 5500 (29 U.S.C. § 1023(c)(2)). In the DOL's view, participating employers are fiduciaries by virtue of their decision to join a MEWA and provide ERISA-covered benefits.
Its general authority to issue implementing regulations under ERISA (29 U.S.C. § 1135).

Regarding the latter statutory basis, the DOL noted that the participating employer reporting rule is relevant to the agency's enforcement of criminal penalties (under the Affordable Care Act (ACA)) for persons who knowingly submit false statements or representations of fact about:

A MEWA's financial condition (including a plan MEWA)
Benefits provided by a MEWA.
An arrangement's regulatory status as a MEWA.

(See Practice Note, Affordable Care Act (ACA) Overview: MEWAs and Legal Update, DOL Final Rules Target MEWA Abuses.)

The DOL reasoned that because participating employers in a MEWA may be the recipients of these false statements or representations, having data about the participating employers is useful in regulating whether these false statements or representations are being made to the employers.

Effective Date

The final revisions are effective for plan years beginning on or after January 1, 2021.

Practical Implications

Multiple employer plans, especially pooled employer plans and multiple employer welfare arrangements, should make sure they understand their annual Form 5500 filing requirements, which forms may be used, what information is required to be included and the effective dates of those requirements.

DOL Finalizes Revisions to 2021 Form 5500 Instructions to Reflect SECURE Act Changes | Practical Law