The IRS has released the 2021 Form 5500. With all of the changes to employee benefit plans due to the COVID-19 pandemic and the SECURE Act, we to put together a quick summary of the key changes from the instructions for 2021 to get you up to speed on the new Form 5500 requirements.
The instructions have been revised to implement an amendment to ERISA section 103(g) in the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act). Multiple-employer defined contribution pension plans now are required to report aggregate account balance information by employer in a new Element #4 on the existing Form 5500 attachment for reporting participating employer information. Other multiple-employer pension and welfare plans continue to report the information for participating employers as before on an attachment that lists each participating employer in the plan during the plan year, identified by (#1) name and (#2) employer identification number (EIN), and (#3) includes a good faith estimate of each employer’s percentage of the total contributions (including employer and participant contributions) made by all participating employers during the year. Multiple-employer welfare plans that are exempt under 29 CFR 2520.104-44 from the obligation to file financial statements with their annual report also, as before, are required to include only a list of participating employers with the corresponding EIN on the attachment.
Pooled Employer Plans.
In light of the SECURE Act authorization for pooled employer plans to begin operating in 2021, the Form 5500 instructions have been amended to make clear that a pooled employer plan is a multiple-employer plan that files a single Form 5500 Annual Return/Report. Pooled employer plans are required to check the multiple-employer plan box in Part A of the Form 5500 and include the attachment for reporting participating employer information for multiple-employer plans to the Form 5500. In addition, pooled employer plans must either on a separate attachment or as part of the participating employer attachment for multiple-employer plans, answer whether the pooled plan provider administering the plan has complied with the Form PR filing requirements. If the answer is “yes,” the AckID number for the pooled plan provider’s latest Form PR filing must be provided.
Retroactively adopted plan permitted by SECURE Act section 201.
New Checkbox E is added to Part I for a plan sponsor who adopted the plan in the 2021 plan year and treated the plan as being adopted and effective in the 2020 plan year pursuant to SECURE Act section 201. For defined benefit plans in this category, the 2021 instructions provide information about how to report data regarding 2020 funding requirements (i.e., Schedule SB data).
The instructions have been updated to reflect an increase in the maximum civil penalty amount assessable under Employee Retirement Income Security Act section 502(c)(2), as required by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015.
A new line 3(d) has been added to require a multiemployer defined benefit plan to report the amount of withdrawal liability payments that is included in line 3(b) employer contributions. Line 6c, mortality table, has been revised to add new mortality tables released by the Society of Actuaries and to simplify reporting of older mortality tables. Line 7, New Amortization Bases Established, has been revised reflecting changes made by the American Rescue Plan Act of 2021 for Code 8 to be used for net investment losses and other losses related to the virus SARS-CoV-2 or coronavirus disease 2019 (COVID-19) incurred in either or both of the first two plan years ending after February 29, 2020.
Line 6 is broken down into new lines 6a, 6b, and 6c requiring that the target normal cost and expected plan related expenses be reported separately. Line 6a requires the plan to report the present value of current plan year accruals decreased by any mandatory employee contributions. Line 6b requires the plan to report expected plan-related expenses, and line 6c requires it to report the sum of lines 6a and 6b. Line 31a makes a conforming change to reflect that it is total target normal cost as reported on line 6c. The table in the instructions for line 27 contains an additional code (Code 9) for community newspapers as described in the SECURE Act.
For more information about this topic, please contact Diane Nesbit for assistance.