Form 5500: Its Changes and Implications

Filing the Form 5500 is a regulatory requirement imposed by the government among benefit plan sponsors, who are mandated to do so.

It is through this form that the government monitors benefit plans and pension operations and investments, since it is in their interest to protect the welfare of the American people.

As a concerted effort among Pension Benefit Guaranty Corporation (PBGC), the Department of Treasury’s IRS, and the Department of Labor (DOL), the rule on filing the Form 5500 had been enforced. Since then, companies with welfare plan and 401(k) retirement plan must comply with this annually.

But the current form does not seem to be informative enough. This year, a proposal has been made to improve the Form 5500 reporting. This is to assist in the update of the current plan st

Since the announcement of the proposed changes, the government opened its communication lines and accepted comments from plan sponsors. Information on Form 5500 revisions is already being disseminated by government agencies for a successful implementation of the new form in 2019.

What are the changes to expect?

The proposal is bound to make valuable changes in the governance of benefit plans, as well as in the lives of individuals and employers. It is expected to benefit compliance with certain laws, provide a more comprehensive financial report, and cover a broader span of companies mandated to comply with Form 5500 reporting.

One of the salient features of the proposal is the addition of Schedule J. This requires employers to provide more detailed information on their benefit health plan packages and ensure compliance with the laws focused on protecting the rights and access of individuals to healthcare and welfare benefits. Those laws are the Employee Retirement Income Security Act (ERISA), Affordable Care Act, and Michelle’s Law, among others.

Another key feature of the new form is the addition of companies with welfare plans, which cover less than 100 employees, required to comply with the reporting. This aims for a wider coverage and greater transparency in the framework of group benefit plans among all plan sponsors.

What do the changes imply?

This is most advantageous for the companies that sponsor the benefit plans and the government. Their access to a large database of consumer information will help them improve the policies and plans that only aim to protect its beneficiaries.

Another advantage is for the individuals whose rights and interests are the highlight of the proposed changes. There will be extensive inquiries on the companies’ compliance with state rules on healthcare and retirement. Therefore, employers will be encouraged to offer benefit plans that are both compliant and competitive.

The disadvantages, on the other hand, are overwhelming. First, the cost of filing the Form 5500 is expected to increase approximately 5,500% more (in aggregate). This is because those companies that were previously exempted from filing will bring the numbers expected to comply from only a few thousands to 2 million.

Second, the processing, although electronic, will take more time. There will be more details required from plan sponsors such as questions on their full compliance with certain state laws and disclosure requirements.

The most apparent implication is that the change presents the government’s continued commitment to support the welfare and healthcare of its people. This is promising for most Americans that will need greater welfare benefits, health protection, and better healthcare services in the future.

The higher standards of compliance that will be enforced on more companies raise the standards of providing benefit plans in the U.S. as well. Although the reporting might pose some inefficiencies or inconveniences from the employers’ end, the consequence of non compliance is more costly. Failure to file Form 5500 on time is a fine of $2,063 daily. All these are great incentives that benefit compliance.

The healthcare reform that gave birth into improving the form 5500 aims only to reinforce the rights and give importance to health and welfare of individuals. While the changes are still in its early stages, it’s worth it to know about what the changes are and what they imply. Before the change reach its full shape, individuals and employers alike should take an active role in forming the reporting standards that will ultimately change America’s health care system.

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Comparing Forms 10-K and 5500: How Do They Differ?

Comparing Forms 10-K and 5500: How Do They Differ?

The benefit plans provided by companies and firms are regulated by the government. The government does this by assigning some of its agencies to specifically monitor pension fund performance. For public pensions, two forms are studied by the government: form 10-K and form 5500. Let us compare these two data sources and find out what distinguishes one from the other.

US benefit consulting groupThe element that these two forms have in common is that both are required by the government to be submitted annually for the purpose of assessing the performance of a company when it comes to providing employee benefits and keeping the rights of their employees protected.

Form 10-K is a report made annually to the US Securities and Exchange Commission or SEC. This report must be filed 90 days after the fiscal year ends. The nature of the report will depend on how big the company is and how long the company has been public. This form details the financial situation of a company. It also includes information about the business’s current condition. The form includes financial statements that have gone through auditing by a third party accounting firm. This form is not similar to the report given to shareholders in the form of a booklet whenever they meet to choose new directors.

The US Securities and Exchange Commission requires that disclosure sections need to be included in the form 10-K. Usually, this form can include some, if not all, the following elements:

  • Financial data. A financial summary detailing data over the past five years must be included in the form. This provides an overview of the financial performance of the firm. Pension obligations is not necessarily included in this part.
  • Results of Operations and Analysis of Financial Condition. This section can include any of the following:
    • Accounting for pensions
    • Net pension liabilities
    • Pension plan cash contributions
    • Unfunded pension obligations

If you need more information regarding pension obligations, the footnotes contained in Form 10-K may provide the information you need. When it comes to welfare plans and pension, the following information may be available in the form:

  • Benefit obligations
  • Pension funding requirements
  • Pension plan asset return rates
  • Return of assets
  • Trends in health care cost

On the other hand, form 5500 is a report also made annually to the Department of Labor, the IRS, and the Pension Benefit Guaranty Corporation.

After all of the required information has been attached to the form, the total you will submit can amount to tens of pages’ worth of documents. The form 5500 includes the following:

  • Financial information
  • Insurance information
  • Participating plan information
  • Retirement plan information
  • Service provider information
  • Single employer defined benefit plan information

The filing of this form can easily be started by checking of the website of the Department of Labor.

The difference between these two is that Form 10-K provides projections for the future, whereas form 5500 only focuses on the present. Therefore, the information provided in 10-K is significantly bigger, from the reports on pension obligation to the number of requirements to be submitted.

Form 5500 provides more information since it includes present-dated information that is not really shown in form 10-K, such as the present liability amount.

If you are wondering how to reconcile the information in these two forms, the answer is you don’t. The information provided by these two forms naturally differ because they do not serve the same function, and they do not focus at the same time frame. The government requires firms to submit different forms that are designed to provide different points of view to those who are going to be checking them, so thinking that these two forms should be the same would be wrong.

It is important to understand what each of these two forms do and which agencies look at the information. These forms are checked in order to ensure quality in benefit planning and in upholding employee rights.


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Back To the Basics: Form 5500

Form 5500: The Basics

One of the most important government forms you need to complete to secure your retirement plan is form 5500. If you work for a company that offers either a retirement plan or a 401 (k) plan, you should be annually completing the form since the plan began to be implemented. Every year, the Pension Benefit Guaranty Corporation, the Department of labor, and the IRS check if your company is still able to protect you, and whether your plan continues to be compliant with the set regulations.

The form is always heavily scrutinized by many individuals and government offices, so knowing what it does, what it contains, and when to file it is of extreme importance.

What is Form 5500?

If you work for a firm that offers a tax qualified retirement plan such as the 401(k) or something similar, during the time you worked for that firm, you should have been filing form 5500 every year since your business started adopting the plan.

The form looks almost the same as other forms issued by the IRS; the only difference being this form is not just held by the IRS, but also by other government bodies such as the Pension Benefit Guaranty Corporation and the Department of labor. Each of these agencies have their own set goals when they look at your form, but ultimately, what they are trying to ensure is that your plan is being operated for your benefit and that it is being correctly processed every year.

  • The IRS uses the information on your form to determine your tax compliance. The IRS is the agency responsible for the regulations that allow tax benefits and retirement plans to be implemented to both workers and employers.
  • The Department of labor uses the information on your form to ensure that the plan your company is using is not breaking any rules. It is also used to make sure that the company keeps your rights protected and secure. The DOL monitors how the company operates the plan.
  • The Pension Benefit Guaranty Corporation monitors what is written on your form to determine whether the firm you work for is compliant in providing you with the benefits you ought to receive, regardless if the firm has moved on to using a new plan.

In summary, the 5500 form is used not only for law enforcement, but also for analysis. The government checks how many businesses offer retirement plans, whether workers are recipients of any type of benefit, how many large and small plans are available to people at a given time, and what new regulations may be enforced in order to improve the present situation.

What are “small” and “large” plans?

Plans that are assessed in your form are categorized as being either “large” or “small”.

If the plan had less than one hundred members on its first day of implementation, the plan is considered to be a “small” plan. Those that exceed that number are called “large” plans. It is those firms that have large plans that need to file the 5500 every year, while firms with small plans only have to complete a simpler form called the form 5500-SF.

A plan can continue to be considered small if the number of participants does not exceed 120 at the start of the new plan year. Every participant regardless of whether they are active or not are considered in the head count.

When should it be filed?

The form 5500 should be filed after the end of the plan year, on the last day of the seventh month. If you need more time, you need to file form 5558, which can extend the deadline for another two and a half months.

The form is never the same every year, and there are always changes introduced in order to ensure that it matches the needs of firms and workers today. Every year, the IRS imposes new changes to the form, and the IRS simply sends instructions to firms on what has been updated on the form.


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