Form 5500 Overhaul Would Be Costly for Employers


Proposed changes to IRS Form 5500 reporting would be costly for employers and may not provide much additional value to the federal agencies that govern employee benefits plans, the Society for Human Resource Management (SHRM) wrote in comments to the U.S. Department of Labor's (DOL's) Employee Benefits Security Administration.

Under the Employee Retirement Income Security Act and the Internal Revenue Code, many employers must file annual reports about their employee benefits plans' operations and financial condition.

[SHRM members-only HR Q&A: What is Form 5500, and where are instructions for completing it?]

The DOL, IRS and Pension Benefit Guaranty Corp. want to collect a broader range of plan information to increase transparency, improve data mining and modernize reporting requirements. The agencies seek to "help plan sponsors, fiduciaries, and participants and beneficiaries better understand their plans and plan investments," according to a DOL fact sheet

Among other things, the proposed changes would eliminate filing exemptions for certain plans that cover fewer than 100 employees. This would force millions of employers with currently exempt plans to begin filing annual reports.

SHRM said it appreciates the agencies' efforts to modernize the reporting requirements. However, it "is very concerned that the sweeping increased burdens and costs of compliance will discourage employers (especially small employers) from establishing and maintaining health and welfare and retirement plans for their employees," wrote Mike Aitken, SHRM vice president, government affairs. He stated that the reporting requirements shouldn't be extended to currently exempt small group health plans.

Multiple-Employer Plans

The proposed changes would also finalize an interim rule requiring multi-employer plans to list each participating employer and an estimate of each employer's percentage of total contributions.

"Because Form 5500 information is generally available to the general public, this participating employer information is accessible by competitors of any association, financial institution or other entity sponsoring a multiple-employer plan," according to SHRM's comments.

Therefore, SHRM asked the agencies to revise the proposal to give such plans the option of separately submitting their lists of participating employers and contribution percentage estimates in a way that keeps the information confidential.

"[T]his alternative method of filing provides the department with the information it wants to receive about participating employers, while allowing multiple-employer plans to protect themselves from competitors if they determine hardships could result," SHRM stated.

Impact on Large Employers

Large employers would also be negatively affected by some of the proposed changes, according to SHRM's comments.

Employers that are already required to file Form 5500 and related schedules each year would be asked for a lot more information, including information about investments, other financial transactions and service provider fees.

Employers would have to develop new systems to collect, process and verify that information and would have to spend more time soliciting relevant information from vendors.

"Even for large employers, the agencies should not be willing to impose new information requirements on them without compelling reasons to support those changes," Aitken wrote.

SHRM is "concerned that the changes being proposed to Form 5500 don't provide participants, regulators or policymakers with much additional useful insight," according to the comments. "Rather, the proposed changes add unnecessary burdens to plan sponsors, as well as to their accountants and record keepers who collect information on investments and service provider fees."


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