Form 5500 Updated For 2023 Reporting


The changes on the recently released Form 5500, for use when reporting on 2023, are significant. Expert analysis concludes that successive revisions to Form 5500 are sharpening its use as a tool for oversight and enforcement. Be prepared. 

Retirement Plan Oversight

Form 5500 is shepherded by three “Agencies”: the Department of Labor (DOL); the Internal Revenue Service (IRS) and the Pension Benefit Guaranty Corporation (PBGC). Experts point out that working together, these agencies have been incrementally adding to the complexity of Form 5500, turning it into a “major enforcement and oversight tool.” Revisions to Form 5500, effective when reporting against 2023, include changes on Schedule H related to income and expense reporting:

Schedule H has been updated to add new breakout categories to the administrative expenses reported on the Income and Expenses section of Schedule H.  Several new expenses lines have been added, including new lines for actuarial expenses, audit fees, legal fees, trustee/custodial fees, valuation/appraisal fees, and others.  These lines will require plans to break out expense categories with more granularity, and enable DOL to  more closely oversee plan expenses paid for various services.

 Plan sponsors are reminded that the annual submission of Form 5500 provides both the DOL and IRS with information on how the plan is doing. Though preparation of Form 5500 is generally done through service providers, sign off must be taken seriously: “Form 5500 is filed under penalty of perjury  which means that anyone signing should, at a minimum, review the form at a high level to be sure that nothing in the form is obviously inaccurate.”  Failures and shortcomings related to filing Form 5500 come with steep penalties from both the DOL and IRS:

Currently, the DOL has the authority to assess civil penalties of up to $2586 per day against a plan administrator that fails to file a complete or accurate Form 5500, and that amount increases each year.  The IRS has separate authority to assess penalties of $250 per day (up to $150,000) for failing to file a Form 5500 in the case of a qualified plan.   These potential penalties should motivate plan sponsors to have a diligent process for complying with the Form 5500 reporting rules as they continue to evolve.

 One common compliance trigger related to the filing of Form 5500 is failure to have an up to date and adequate ERISA fidelity bond, obtained from a surety listed by the US Department of Treasury, to protect the assets of the retirement plan from theft. To ensure compliance, plan sponsors across the country obtain their ERISA fidelity bonds from leading national provider, Colonial Surety. Uniquely, Colonial includes retroactive ERISA fidelity bond coverage for years when the plan was not adequately covered, and makes it possible for plan sponsors to protect themselves by opting into an affordable fiduciary and cyber liability coverage package.

Armed with Colonial’s ERISA bond plus liability coverage, if you face claims of alleged or actual breaches of duty in connection with the employee retirement plan, you’ll be protected with defense costs and penalty limits up to $1,000,000. Protect yourself and your business, for a few dollars a day, now:

ERISA Fidelity Bond Plus Fiduciary Liability Insurance

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