DOL Releases Proposed Revisions to Form 5500 Reporting

The Department of Labor’s Employee Benefits Security Administration (EBSA), in conjunction with the IRS and Pension Benefit Guarantee Corporation (PBGC), have released proposed forms revisions modifying requirements for Form 5500, Annual Return/Report of Employee Benefit Plan, reporting. Additionally, the EBSA has issued a proposed rule to amend regulations relating to annual reporting requirements under Title I of the Employee Retirement Income Security Act of 1974 (ERISA).

The Setting Every Community Up for Retirement Enhancement (SECURE) Act included a provision that would allow employers sponsoring defined contribution plans that have the same trustee, administrator, fiduciaries, plan year, and investment options the opportunity to file one common Form 5500 beginning in 2022. While guidance outlining reporting requirements in accordance with the Act had been anticipated, the proposals also appear to include several other forms modifications.

The following revisions have been highlighted as part of the guidance package release.

  • Implement SECURE Act requirements by establishing a new type of direct filing entity called a Defined Contribution Group Reporting Arrangement and add a new Schedule DCG that such reporting group must file
  • Modify Form 5500 to reflect pooled employer plans as a new type of plan and modify multiple employer plan reporting of information by establishing a new Schedule MEP
  • For multiple employer welfare plans that provide medical benefits, move questions regarding participating employers from the Form 5500 to the Form M-1 Report for Multiple Employer Welfare Arrangement (MEWA) and Certain Entities Claiming Exception, and apply that reporting requirement to non-plan MEWAs that file the Form M-1
  • Expand reporting requirements to add new fee and expense reporting and enhance the content of the existing schedules of assets held for investment
  • Add questions to improve financial and funding reporting by PBGC-covered defined benefit pension plans

There will be a 45-day comment period following publication in the Federal Register.



IRS Priority Guidance Plan Includes Retirement Items

The IRS has issued its initial 2021-2022 Priority Guidance Plan, in which it describes guidance projects in the current fiscal year. Many items in the plan have appeared in prior years’ Priority Guidance Plans. A number of the guidance items deal with retirement savings arrangements, including the following.

  • Guidance related to several IRS tax-exempt and government entities programs, including the EPCRS, pre-approved plan, and determination letter programs
  • Regulations and guidance relating to the 10 percent early distribution tax
  • Comprehensive IRA regulations
  • Final regulations on normal retirement age under governmental plans (proposed regulations issued in January 2016)
  • Regulations and guidance updating electronic delivery rules for providing applicable notices and making participant elections
  • Regulations relating to SECURE Act modifications, including required minimum distributions and other rules for 401(k) plans
  • Guidance on student loan payments and their interplay with qualified retirement plans and 403(b) plans
  • Regulations on closed defined benefit plans (proposed regulations issued in January 2016)
  • Guidance on missing participants and uncashed checks
  • Regulations on the exception to the unified plan rule for Internal Revenue Code Section 413(e) multiple employer plans (proposed regulations issued in July 2019)
  • Regulations on the definition of “governmental plan”
  • Final regulations updating minimum-present-value requirements for defined benefit pension plans (proposed regulations issued in November 2016)
  • Regulations on mortality tables to determine present value for single-employer defined benefit pension plans
  • Guidance implementing changes and relief provided under the American Rescue Plan Act of 2021 for defined benefit plans
  • Final regulations for withholding on distributions when payments are made to a non-U.S. address (proposed regulations issued in May 2019)
  • Regulations relating to the Section 6057 reporting requirements (proposed regulations issued in June 2012)
  • Guidance updating electronic filing requirements as required by the Taxpayer First Act

Plans Retroactively Adopted Under SECURE Act Do Not Have to File 2020 Form 5500

The IRS stated in its August 6, 2021 edition of the Employee Plans newsletter that employers that adopt retirement plans during the 2021 tax year, but before their 2020 tax filing deadline (including extensions) and elect to treat the plan as effective as of the last day of the 2020 tax year, as permitted by the SECURE Act, are not required to file a Form 5500 series for the 2020 tax year.

While a 2020 Form 5500 is not required, the IRS explained that the 2021 Form 5500 will include a check box that the employer will mark indicating that it elects to treat the plan as retroactively adopted as of the last day of its 2020 tax year. Employers with defined benefit plans will also be required to attach a 2020 Schedule SB to their 2021 Form 5500, along with the 2021 Schedule SB.

The IRS notes that it anticipates applying similar rules to retroactively adopted plans after the employer’s 2021 tax year.

Women’s Retirement Protection Act Re-Introduced in House/Senate

Senator Patty Murray (D-WA) and Representative Lauren Underwood (D-IL) have introduced the Women’s Retirement Protection Act of 2021 in their respective chambers. The legislation is intended to address what some have identified as a gap between the retirement preparedness of women compared to their male counterparts—a gap seemingly exacerbated by the COVID-19 pandemic. Key provisions of the legislation are as follows.

  • Require consent of marital partner for retirement plan loans or distributions
  • Reduce long-term, part-time worker eligibility from three years during which an employee earns 500 hours as enacted under the Setting Every Community Up for Retirement Enhancement (SECURE) Act, to two years (this proposal is included in other retirement reform legislation under consideration in the House and Senate)
  • Require the providing of consumer protection-type information with financial product or service proposals
  • Provide Department of Labor-administered grants to community-based organizations to improve the financial literacy of women and assist in obtaining qualified domestic relations orders

DOL Provides FAQs for Lifetime Income Illustrations

The Department of Labor (DOL) has provided FAQs addressing questions about the timing of implementation of pension benefit statement lifetime income illustrations under the Setting Every Community Up for Retirement Enhancement (SECURE) Act. The SECURE Act requires plan sponsors of ERISA-covered plans to disclose annually a projection of a lifetime income stream that could be generated by a participant’s total accrued benefit. Implementation is to be effective for benefit statements provided more than 12 months after the DOL issued guidance.

The DOL published an Interim Final Rule (IFR) entitled, “Pension Benefit Statements – Disclosure Regarding Lifetime Income” in the Federal Register on September 18, 2020. The FAQ illustrates and confirms that for participant-directed plans required to provide quarterly statements, the first quarterly statement that must meet the lifetime illustration requirements is the second calendar quarter in 2022, or June 30, 2022. For plans that are not participant directed, the first statement will generally be required for calendar year 2021, which would be furnished no later than October 15, 2022.

The FAQ also clarifies that benefit statements providing lifetime income illustrations meeting DOL guidelines under a 2013 Notice of Proposed Rulemaking will satisfy disclosure obligations under the IFR.

The DOL intends to issue a final rule as soon as practicable and acknowledged commenter concerns about potential challenges if a final rule differs materially from the IFR.


SECURE Act Video Series: IRA Amendments

Ascensus is excited to present the SECURE Act Video Series. This multi-video series will provide a snapshot of retirement-related SECURE Act provisions, included in the Further Consolidated Appropriations Act, 2020.

For more coverage from our experts on the SECURE Act and its implications, check out our latest news.

IRS Issues Revised 2020 Publication 590-B

The IRS has issued a revised 2020 Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs), intended to clarify the application of required minimum distribution (RMD) rules under the Setting Every Community Up for Retirement Enhancement Act (SECURE Act).

The explanation of the 10-year rule has been expanded to indicate that, if applicable, the entire balance of the IRA must be withdrawn by December 31 of the year containing the 10th anniversary of the owner’s death, and the beneficiary is allowed, but not required, to take a distribution before that date. The publication notes that the 10-year rule applies if

  • the beneficiary is an eligible designated beneficiary who elects the 10-year rule if the owner died before reaching his required beginning date, or
  • the beneficiary is a designated beneficiary who is not an eligible designated beneficiary, regardless of whether the owner died before reaching his required beginning date.

An example in the prior version of the publication that was carried forward from 2019 has caused some confusion in that it suggested a required life expectancy distribution where the 10-year rule would have been applicable. This example has been modified to reflect life expectancy payments for an eligible designated beneficiary, and a note has been added clarifying that, if death occurred before the required beginning date and the 10-year rule applies, no distribution is required for any year before the 10th year.

Taken together, the publication appears to suggest that the 10-year rule may not be an option for an eligible designated beneficiary for death on or after the account owner’s required beginning date.

The IRS has indicated that it will soon issue proposed regulations regarding changes made to the RMD rules under the SECURE Act.

Retirement Security and Savings Act Re-Introduced

Senators Rob Portman (R-OH), and Ben Cardin (D-MD), have introduced the Retirement Security and Savings Act of 2021, legislation that was last introduced in 2019. This bill, like the Securing a Strong Retirement Act introduced in the House of Representatives earlier this month, is intended to build on the Setting Every Community Up for Retirement Enhancement Act (SECURE) of 2019. With more than 50 provisions, this bill contains a broad set of retirement reforms under the following categories, highlights of which are enumerated below.

Expanding Coverage and Increasing Retirement Savings

  • Establishes a new automatic enrollment safe harbor with contributions starting at 6 percent in the first year and a three-tier rate of matching contributions on deferrals up to 10 percent of pay
  • Provides for a special tax credit on the first 2 percent of pay to nonhighly compensated employees for employers that adopt the new safe harbor
  • Makes the individual taxpayer’s saver’s credit refundable and would require that the credit be contributed directly to a Roth IRA or designated Roth in a qualified plan
  • Reduces the long-term part-time threshold implemented under the SECURE Act from three consecutive years with at least 500 hours to two consecutive years with at least 500 hours
  • Provides for a 60-day rollover to an inherited IRA for nonspouse beneficiaries
  • Raises the RMD age to 75 in 2032
  • Creates an additional catch-up contribution for those who have attained age 60 that is $10,000 for retirement plans that are not SIMPLE IRA or 401(k) plans, and $5,000 for SIMPLE plans and will be indexed with the cost of living
  • Allows deferral of tax on gain from sale of employer securities to an ESOP


Preservation of Income

  • Increases the maximum amount that can be funded to a qualifying longevity annuity contract (QLAC) to $200,000
  • Directs the Secretary of the Treasury to update regulations to allow exchange-traded funds (ETFs) to be included in variable annuity products


Simplification and Clarification of Qualified Retirement Plan Rules

  • Directs the Secretaries of the Treasury and Labor to adopt regulations outlining the consolidation of certain employee notices into a single notice
  • Permits nonspouse beneficiaries to roll over assets to 401(k), 403(b), and 457 plans
  • Allows contributions to SIMPLE IRA plans on a Roth basis
  • Reduces the 50 percent penalty for late distribution of a required minimum distribution (RMD) to 25 percent
  • Allows mergers of 401(a) and 403(b) plans
  • Exempts retirement savers that have $100,000 or less in retirement assets from taking RMDs
  • Reduces penalties for IRA excess contributions and the failure to take an RMD from an IRA if corrected timely, and removes requirements that, in case of a prohibited transaction, the IRA ceases to be qualified as an IRA and that assets are deemed to be distributed
  • Creates a national retirement savings lost and found (including an online searchable database to reunite retirement savers with their savings), increases the cash-out limit to $6,000, and requires that unclaimed balances under $1,000 are transferred to the Pension Benefit Guarantee Corporation (PBGC)


Defined Benefit Plan Reform

  • Clarifies that the variable interest crediting rate used as the projected interest crediting rate for cash balance plans is a reasonable projection subject to a maximum of 6 percent
  • Eliminates indexing of PBGC variable rate premiums
  • Reduces the overfunding threshold by which employers with overfunded pension plans may use a portion of the surplus assets to fund welfare benefits to the same population of retirees and extends provision through 2031


Reforming Employer Plan Rules to Harmonize with IRA Rules

  • Synchronizes retirement plan rules to allow the exemption of Roth balances from RMD rules
  • Allows plan participants to make charitable distributions
  • Allows spouse beneficiaries to treat a deceased participant’s balance as their own in the plan
  • Roth IRA amounts would be permitted to be rolled over to retirement plans


Plan Amendments

  • Establishes an amendment deadline on or before the last day of the first plan year beginning on or after January 1, 2023 (2025 for governmental plans), and conforms the plan amendment dates under the SECURE Act, Coronavirus Aid, Relief, and Economic Security (CARES) Act, and Taxpayer Certainty and Disaster Tax Relief Act to these new dates

Smaller Sequel to SECURE Act Re-Introduced in Senate

Senator Charles Grassley (R-IA), along with co-sponsors Maggie Hassan (D-NH) and James Lankford (R-OK), have re-introduced the Improving Access to Retirement Savings Act. The bill was originally introduced late in the last session of Congress and contains the following provisions.

  • Expands access to multiple employer plan (MEP) arrangements by allowing 403(b) plans of tax-exempt organizations to participate
  • Clarifies that eligibility for the small employer pension plan start-up credit for small employers joining a MEP is predicated on the first three years of participation in the MEP, irrespective of how long the MEP has been in existence
  • Provides a 9½-month safe harbor for correction of employee elective deferral failures in an automatic contribution arrangement
  • Allows retroactive amendments until the employer tax return due date plus extensions that increase certain benefit accruals for the preceding plan year

These provisions were included in a larger bill, Securing a Strong Retirement Act or SSRA, that was approved by the House Ways and Means Committee earlier this month.

Securing a Strong Retirement Act Re-Introduced

House Ways and Means Committee Chairman Richard Neal (D-MA) and Ranking Member Kevin Brady (R-TX) have introduced the Securing a Strong Retirement Act (SSRA) of 2021, legislation that was first introduced in October 2020. It builds upon the Setting Every Community Up for Retirement Enhancement Act (SECURE) Act of 2019. The House Ways and Means Committee held a markup hearing Wednesday, May 5, and unanimously voted to advance this legislation to the full House of Representatives to vote on the measure.

This legislation is the first comprehensive bipartisan retirement legislation introduced in 2021. SSRA of 2021 expands upon and includes additional provisions from the SSRA of 2020. While this bill (and others) have been coined by many as “SECURE 2.0,” it is prudent to follow retirement legislation developments by bill name for clarity and think of “SECURE 2.0” in the context of retirement reform generally.

The new and amended provisions include the following changes from the 2020 proposal.

  • Requires automatic enrollment of eligible employees in 401(k) and 403(b) plans with certain exceptions and grandfathering provisions, but eliminates the same requirement for SIMPLE IRA plans that appeared in the 2020 proposal
  • Increases the required minimum distribution (RMD) age to 73 on January 1, 2022; to age 74 on January 1, 2029; and to age 75 on January 1, 2032. The SECURE Act previously increased the age from 70½ to 72.
  • Drops the provision aligning ESOP rules of S Corporations with those of C Corporations that appeared in the 2020 proposal, but adds a placeholder that it is a Congressional goal to preserve and foster employee ownership of S Corporations through ESOPs
  • Provides an additional, indexed higher tier of catch-up deferral contributions for those who are age 62, 63, and 64
  • Permits 403(b) plans to participate in multiple employer plan (MEP) arrangements, specifically including pooled employer plans (PEPs)
  • Reduces from three years to two years the period of service requirement for long-term, part-time workers, and disregards pre-2021 service for vesting purposes
  • Directs the Departments of Labor (DOL) and Treasury to issue regulations explaining what fiduciaries need to do to meet their fiduciary duty in searching for missing participants
  • Eliminates the provision permitting tax-free qualified charitable contributions to be made from employer-sponsored retirement plans that appeared in the 2020 proposal
  • Permits employers to perform top-heavy tests separately for defined contribution plans covering excludable employees
  • Limits repayment of qualified birth or adoption distributions to three years
  • Permits participants to self-certify that deemed hardship distribution conditions are met in certain circumstances
  • Permits participants who self-certify that they have experienced domestic abuse to withdraw the lesser of $10,000 or 50 percent of their account without being subject to the 10 percent early distribution penalty tax. The funds could be repaid to the plan over three years.
  • Makes changes to stock attribution rules under family attribution for coverage and nondiscrimination testing
  • Permits discretionary amendments that increase benefits to participants to be adopted by the due date of the employer’s tax return
  • Permits new 401(k) plans established after the end of the taxable year but before the employer’s tax filing date that are treated as having been established on the last day of the taxable year to receive elective deferrals up to the due date of the employee’s tax return for the initial year when they are sponsored by sole proprietors and single-member LLCs
  • Limits only the portion of an IRA used in a prohibited transaction to be treated as distributed, as opposed to current rules disqualifying and treating the entire IRA as distributed
  • Permits SIMPLE IRAs to accept Roth contributions, and, plan permitting, allows employees to treat employee and employer SEP contributions as Roth contributions
  • Matches hardship rules for 403(b) plans to the 401(k) plan rules
  • Requires catch-up contributions to be made on a Roth basis beginning January 1, 2022
  • Permits defined contribution plans to provide participants with the option of receiving match contributions on a Roth basis
  • Plan amendments pursuant to this legislation must generally be made by the end of the 2023 plan year (2025 for governmental plans); plan amendment dates under the SECURE Act, CARES Act, and the Taxpayer Certainty and Disaster Tax Relief Act of 2020 are revised to conform with the same new dates


This legislation carries forward the following provisions from the 2020 proposal.

  • Further enhances the small retirement plan start-up credit, with a maximum credit of 100% (vs. the current 50%) for employers with no more than 50 employees
  • Requires the IRS to promote the saver’s credit
  • Permits 403(b) plans to invest in collective investment trusts
  • Provides for indexing of IRA catch-up contributions
  • Permits certain student loan repayments to qualify for employer retirement plan matching contributions
  • Allows a small employer joining a MEP or PEP arrangement to potentially claim a small plan start-up credit during the first three years of the MEP/PEP arrangement’s existence
  • Provides a new small employer tax credit for enhanced plan eligibility for military spouses
  • Permits immediate de minimis financial incentives, in addition to a matching contribution, to individuals for contributing to a retirement plan
  • Enhances options for correcting employee salary deferral errors
  • Increases the qualifying longevity annuity contract RMD exemption
  • Permits increasing payments in IRA and defined contribution plan life annuity benefits
  • Allows retirement plan fiduciaries additional discretion in whether to seek recoupment of accidental overpayments
  • Reduces excise tax on certain failures to take RMDs
  • Changes disclosure rules for performance benchmarks for asset allocation funds
  • Directs Treasury, DOL, and the Pension Benefit Guaranty Corporation (PBGC) to review and report on reporting and disclosure requirements and makes recommendations to Congress to consolidate, simplify, standardized, and improve such requirements
  • Simplifies retirement plan disclosures to non-participating employees
  • Creates a national online “lost and found” database to connect individuals with unclaimed retirement account benefits
  • Expands the IRS retirement plan correction program to permit self-correction of certain inadvertent IRA errors
  • Eliminates “first day of the month” deferral election requirement for governmental 457(b) plans
  • Requires defined contribution plans to provide paper benefit statements at least once annually, unless a participant elects otherwise
  • Makes certain technical corrections to SECURE Act provisions