First/random thoughts on the proposed changes to 5500 reporting

The Department of Labor (DOL), Internal Revenue Service, and Pension Benefit Guarantee Corporation (PBGC) recently issued a 777 page tome of proposed changes to the Form 5500 Annual Return/Report forms.

Most of the changes would be effective for the 2019 or 2020 plan year, and to be honest I hardly ever bore people, especially my clients, with reviews of things so far off (experience has shown they are likely to change – a lot – by the time they are effective).

But something compels me to comment…


In an age where the perception is that any/all information is available at the click of a button or two, they have taken the request for details to new levels.  New breakdowns of assets by subtypes, and (of course) more fee disclosures, just begin to scratch the surface of the additional information requested. I get it – the DOL likes index funds, and especially doesn’t like alternative investments (and I’ve been warning my clients away from them for years, for that reason and others).  Since they can’t legislate permitted investments in plans, they’re going to wear you down with onerous reporting. Thank goodness most of our plans are small (under 100 participants) and don’t get caught up in this (but they don’t get off scott-free; see below) and our larger plans have straightforward investments. So for us and most of our clients, it will “just” mean more hassles and higher fees.  Here are the um, highlights…

  • We’ll have to report if there are uncashed distribution checks, how many and the total dollar value. (Memo to DOL – because of the way these checks are handled by large institutions, we don’t necessarily know that they are uncashed!)
  • We’ll have to report on the number of participants making catch-up contributions, investing in default investment options, maximizing the employer match, and deferring compensation.
  • We’ll have to include an electronic copy of the comparative chart of designated investment alternatives (we call it the fee disclosure document).
  • A major piece of good news is that the count for determining the threshold for an audit is changed from 100 participants to 100 participants with an account balance. (Frankly we’d be unlikely to be involved with such a boilerplate/turnkey type of plan but it will cut costs significantly for some of those who want to offer a deferral-only type plan.)
  • Participant-directed plans must report the number of Designated Investment Alternatives that are index funds (an ominous nod to the DOL’s preference for index funds…makes one wonder what happens if the answer is “none”).
  • All group health plans will now have to file a return (previously, those with under 100 participants were exempt). (We don’t do too much with health plans now but there will be a need for many of our small clients to start filing these returns and we’ll probably be in a position to help.)