Mary Beth’s Corner

Simplified Form 5500 Reporting: New Regulations

Administration, General, IRS Notices
March 23, 2023

Changes to Forms 5500 Annual Report (Report of Employee Benefit Plan) and Form 5500-SF 2023 Annual Report (Report of Small Employee Benefit Plan) have been announced in notices from the United States Department of Labor (DOL), the Internal Revenue Service (IRS), and the Pension Benefit Guaranty Corporation (PBGC), which will take effect for plan years beginning on or after January 1, 2023.

A Couple Key Revisions Include:

A change in the participant-counting methodology for determining eligibility for simplified reporting alternatives available to small plans.
A consolidated Form 5500 reporting option for certain groups of defined contribution retirement plans

Traditionally, Plans with less than 100 participants, regardless of number of account balances, can take advantage of the audit waiver and/or simplified Form 5500 reporting that is only granted to small plans.

Thanks to new regulations, starting with plan years beginning on or after January 1, 2023, only participants and beneficiaries with account balances at the beginning of the plan year will be considered when determining whether the plan has fewer than 100 participants. As such for reporting purposes, the inclusion of eligible but non-participating employees will no longer be the methodology used when determining the number of participants.

How Does This Affect Your Plan?

With this annual reporting update, you may avoid the substantial cost of time and resources a more complex Form 5500 requires. Most notably, the significant financial burden for an independent audit may be averted due to the new guidance.

If your plan has historically been subject to an independent plan audit because of your 100+ eligible participant count including terminated account balances, contact My Benefits to learn how this change can influence your 2023 tax year Form 5500 filing and the requirement for an independent audit.

For additional information please visit the DOL’s website.

Please be aware that the 100-participant threshold for the 2022 plan year will continue to be based on the total number of participants at the start of the plan year, including those who are qualified to receive contributions to the plan even if they have not chosen to participate and have no account balance.