Prepare for new retirement plan reporting and audit methodology changes

The U.S. Department of Labor, Internal Revenue Service and Pension Benefit Guaranty Corporation released changes to the 2023 Form 5500 and Form 5500-SF on Feb. 23. The revisions incorporate statutory amendments to ERISA and the Internal Revenue Code enacted as part of the SECURE Act for multiple-employer plans and groups of plans.

They also made changes that are “intended to improve reporting of certain plan financial information regarding audits and plan expenses and enhance the reporting of certain tax qualification and other compliance information by retirement plans.”

Of particular note is a change in the participant-counting methodology for determining eligibility for simplified reporting alternatives available to “small plans” (generally plans with fewer than 100 participants).

Under the current methodology, an audit is required for all plans whose total number of participants with plan accounts as of the beginning of the plan year, combined with the number of participants who are active but chose not to have contributions made under a qualified cash or deferred arrangement (and do not have an account balance) equals or exceeds 100.

The revisions will now only use the total number of participants with plan accounts as of the beginning of the year to determine whether a typically costly and time-consuming audit is required.

What does this mean?

Plans with 100 or more active employees but low to moderate participation rates may find welcome relief from the annual audit requirement. Additionally, plans that are able to process small plan cash-outs timely (under $7,000, after the passage of SECURE 2.0), could land below the threshold of requiring an audit.

While this change will not be in effect until next year’s filing season, employers can prepare by reviewing their 2022 data and ensuring that distributions are processed timely during 2023.

Please reach out to HANYS Benefit Services to discuss how we can help. For more information about retirement plans, our services and products, contact us online or call 800.388.1963.

HANYS Benefit Services is a marketing name of Healthcare Community Securities Corp., member FINRA/SIPC, and an SEC Registered Investment Advisor. This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. The information in this piece is not a recommendation to invest nor should it be relied upon as instruction to invest.

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