Part of The Business of Retirement series
On July 21, 2016, the Department of Labor (DOL) issued proposed amendments to the 5500 series forms in a “Notice of Proposed Forms Revisions,” prepared jointly by three agencies: the DOL, the Internal Revenue Service and the Pension Benefit Guaranty Corporation, collectively referred to as “the agencies.”
Form 5500 has historically served as the primary source of information about the operations, funding and investments of private-sector, employment-based pension and welfare benefit plans in the US. However, existing forms have not kept pace with industry changes, making it difficult for the agencies to capture the information they need to protect employee retirement and health benefits.
The proposed revisions would add a number of new reporting requirements designed to aid the agencies in assessing whether a retirement plan is being operated and maintained in compliance with the Internal Revenue Code and the Employment Retirement Income Security Act of 1974 (ERISA). The changes would affect several existing reporting obligations for retirement plans, including:
- Financial information. The proposal modifies the asset breakouts on the balance sheet component of Schedule H (Financial Information), adding new subcategories of assets. The agencies are pursuing increased granularity of reporting to enable them to have a more accurate and detailed view of the types of assets held by a plan, including alternative investments, derivatives, hard-to-value assets and underlying holdings of collective investment vehicles.
- Service provider fee information. The proposed revisions to Form 5500 are also aimed at harmonizing the disclosure requirements on Schedule C (Service Provider Information) with the DOL’s service provider fee disclosure requirements under Section 408(b)(2) of ERISA. Updated fee reporting will include those covered service providers who receive less than $5,000 per year, especially in “indirect” compensation. The proposal would require plans to file separate Schedule Cs for each covered service provider.
- Compliance information. Select new questions will target issues concerning plan operations, service provider relationships and financial management of plans. The new questions are intended to compel fiduciaries to evaluate plan compliance with important requirements mandated by ERISA and the Code, and to provide the agencies with improved tools for oversight and enforcement and possible future regulation.
Although many of the proposed changes, if adopted, are targeted for 2019 plan year filings, plan sponsors should consider whether they currently have systems in place to capture the new data required by the proposed revisions.
For more details, the proposals and a fact sheet are available at www.dol.gov/agencies/ebsa.
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Jeffrey Hemker
National Sales Manager
Retirement Division
With more than 30 years of experience in the industry, Jeff Hemker has been a featured speaker at advisor meetings, training and education seminars and industry events throughout his career.
Prior to joining Invesco in 2004, he was a managing director of retirement outsourcing services for WySTAR Global Retirement Solutions and a senior vice president at both CIGNA Retirement & Investment Services and Van Kampen American Capital Funds.
Mr. Hemker graduated from the University of Wisconsin-La Crosse and Roosevelt University. He holds the 7, 63 and 66 registrations and is a Certified Investment Management AnalystSM (CIMA®) professional.
Important information
The information provided is for educational purposes only and does not constitute a recommendation of the suitability of any investment strategy for a particular investor. Invesco does not provide tax advice. The tax information contained herein is general and is not exhaustive by nature. Federal and state tax laws are complex and constantly changing. Investors should always consult their own legal or tax professional for information concerning their individual situation. The opinions expressed are those of the authors, are based on current market conditions and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals.
All data provided by Invesco unless otherwise noted.
Invesco Distributors, Inc. is the US distributor for Invesco Ltd.’s retail products and collective trust funds. Invesco Advisers, Inc. and other affiliated investment advisers mentioned provide investment advisory services and do not sell securities. Invesco Unit Investment Trusts are distributed by the sponsor, Invesco Capital Markets, Inc., and broker-dealers including Invesco Distributors, Inc. Each entity is an indirect, wholly owned subsidiary of Invesco Ltd. PowerShares® is a registered trademark of Invesco PowerShares Capital Management LLC, investment adviser. Invesco PowerShares Capital Management LLC (PowerShares) and Invesco Distributors, Inc., ETF distributor, are indirect, wholly owned subsidiaries of Invesco Ltd.
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Form 5500 gets a makeover: What does this mean for plan sponsors? by Invesco
