The AICPA is urging four federal agencies to reconsider some of the changes they jointly proposed to Form 5500, which employers use to satisfy employee benefit plan reporting requirements under the Internal Revenue Code and the Employee Retirement Income Security Act (ERISA).
The proposed changes are part of a federal effort to improve employers’ reporting about employee benefit plans, modernize the financial information that is filed about the plans, harmonize annual reporting requirements with the Department of Labor’s (DOL’s) reporting requirements, enhance the ability to mine data filed on annual returns and reports, and improve compliance under the Internal Revenue Code and ERISA.
Proposed Revision of Annual Information Return/Reports (RIN1210—AB63) describes the intended changes to Form 5500, which were proposed jointly by the DOL, the Department of the Treasury, the IRS, and the Pension Benefit Guaranty Corp.
In two comment letters sent to the DOL, the AICPA expressed support for many of the proposed changes but said some of them would create inconsistencies and confusion about the reporting requirements. The comment letters are available here and here on the AICPA website.
The AICPA wrote that the proposed changes will require plans to spend more time and effort requesting and collecting information and making sure it is properly reported. The proposal also would lead to more time spent performing work on new information required to be reported in the supplemental schedules, and more time drafting audit-related disclosures on Schedule H, according to the AICPA.
In addition, the AICPA is concerned that plan sponsors may:
- Pass on the additional expenses to plan participants.
- Attempt to save costs by preparing forms on their own or choosing providers who have little or no experience.
- Discontinue plan sponsorship or reduce the level of benefits provided.
The AICPA is urging the federal agencies to hold public hearings on the proposal before the revised forms are finalized.
Concerns about the proposal
Some of the AICPA’s additional concerns about the proposal include:
- Disclosure of the audit engagement partner. Disclosing the name in Schedule H as proposed could place a misleading emphasis on the role of a single individual rather than the role of the firm, the AICPA wrote. Current rules do not require disclosing the name of the engagement partner in an employee benefit plan audit.
- Peer review disclosure. A newly proposed Schedule H disclosure would require information about the employee benefit plan auditor’s peer review. Disclosure of this information could mislead or confuse users who are not aware of the nature, objectives, scope, limitations of, and procedures performed in a peer review, according to the AICPA.
- Group health plan information in Schedule J. An estimated 2.1 million additional plan sponsors will be required to file Form 5500 and Schedule J as a result of a proposed new requirement for ERISA-covered health plans, the AICPA wrote. Most of these would be small businesses and entities that have never filed a Form 5500, according to the AICPA, and they would need to collect and report a substantial amount of information on Form 5500 and Schedule J.
The AICPA’s comments were prepared by a joint task force consisting of the AICPA Employee Benefit Plan Audit Quality Center Executive Committee, the AICPA Employee Benefit Plan Expert Panel, and the AICPA Employee Benefit Plan Tax Technical Resource Panel.
—Ken Tysiac (firstname.lastname@example.org) is a JofA editorial director.