The US Department of Labor (DOL) issued a final regulation (Final Rule) on December 29, 2021, updating the 2021 Form 5500 to reflect certain statutory changes included in the Setting Every Community Up for Retirement Enhancement Act (SECURE Act). The Final Rule focuses primarily on changes to accommodate pooled employer plans (PEPs) and other defined contribution multiple employer plans (MEPs).
Specifically, the Final Rule updates the Form 5500 and instructions to enable MEPs to report aggregate account balance information on a participating-employer-by-participating-employer basis. The Final Rule also updates the Form 5500 and instructions to clarify that PEPs are precluded from filing Forms 5500-SF (the short form for “small” plans) and to further clarify that a PEP is treated as a MEP, meaning that a PEP is required to file a single Form 5500 and to include such other information as is required of MEPs. Additionally, the Final Rule updates the Form 5500 to require PEP sponsors to indicate whether they have complied with the Form PR filing requirements and, if so, to provide the AckID number for the most recent Form PR filed by the PEP’s pooled plan provider.
In addition to addressing PEPs and MEPs, the Final Rule makes minor changes to Schedules SB and MB to reflect changes in law due to the SECURE Act and the American Rescue Plan Act of 2021 (ARPA). It also updates the Form 5500 instructions to reflect the updated maximum civil penalty available under ERISA Section 502(c)(2). It further updates Forms 5500 and 5500-SF to address plans that were retroactively adopted as permitted under the SECURE Act.
Final Rule Does Not Finalize Proposed Schedule MEP or Discuss “Groups of Plans”
The Final Rule does not address all of the issues considered in an earlier proposed regulation (the NPRM). Notably, the Final Rule does not include a finalized Schedule MEP, which the Final Rule implies will be published in advance of the 2022 Form 5500 filing deadline. Additionally, the Final Rule does not directly address Form 5500 filings for “groups of plans” (GoPs, referred to in the NPRM as “defined contribution groups” or DCGs), which were discussed at length in the NPRM.
Section 202 of the SECURE Act instructs the DOL to permit each GoP to file a single Form 5500 for plan years beginning on and after January 1, 2022. For this purpose, a GoP is a group of individual account or defined contribution plans that have (1) the same trustee, (2) the same one or more named fiduciaries, and (3) the same administrator and plan administrator, and which provide the same investments or investment options to their respective participants and beneficiaries. Some in the retirement plan marketplace see GoPs as an attractive alternative to PEPs for those employers that desire the economies of scale associated with a PEP but do not wish to give up the control associated with maintaining a single employer plan.
The NPRM takes the position that each plan within the GoP is required to receive a separate independent qualified public accountant (IQPA) report and opinion. This runs in contrast to a PEP, which is a single plan that is generally only required to receive one IQPA report and opinion. While some expected that the Final Rule would take a position on this issue, the DOL treated GoPs as outside of the scope of the Final Rule because the Final Rule addresses only changes for the 2021 Form 5500 and GoP filings will not be permitted until plans are filing Forms 5500 for 2022 plan years. If the DOL continues to take the position that each plan in the GoP requires its own IQPA report and opinion, some predict that the additional cost associated with these separate audits will disincentivize the use of GoPs as an alternative to PEPs.
If you have any questions about PEPs, MEPs, GoPs, or Form 5500 filing requirements in general, please feel free to contact the authors or your Morgan Lewis contacts.