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The United States Department of Labor, Internal Revenue Service, and the Pension Benefit Guaranty Corporation have announced changes to the Form 5500, which is the annual return or report of an employee benefit plan, effective for plan years beginning on or after January 1, 2023.
One of the key revisions to the Form 5500 is a change in the participant-counting methodology for determining eligibility for simplified reporting alternatives available to small plans. This change is only applicable to defined contribution retirement plans.
Currently, if your employee benefit plan has 100 or more participants as of the beginning of the plan year, the plan is classified as a large plan and has an annual audit requirement. The 100 participant count is determined based on any employee with an account balance in the plan, plus any employee who is eligible to participate but does not have an account balance in the plan.
Under the revised instructions, the participant count will now only include employees with an account balance in the plan. This will reduce the participant count for plans, and may cause plans hovering around that 100 participant count to fall below the 100 participant threshold, and, thus, be considered a small plan and no longer subject to an annual audit requirement.
This change is intended to reduce expenses for small plans and encourage more small employers to offer workplace retirement savings plans to their employees.
This change is just a small part of a multitude of retirement plan changes set forth by recent legislation.
Have questions? We would love to help!
Still need an audit even after the change in participant-counting methodology? We’re here for you! Contact us today to speak with a qualified employee benefit plan professional.
