Key insights
- The biggest change for employee benefit plan fiduciaries is likely the new method in counting plan participants, which may affect whether you’ll need an audit.
- The Secure 2.0 Act also establishes new rules for plan administrators, including requiring most employers to automatically enroll employees in their retirement plan.
- There are also new audit standards fiduciaries should know.
Learn the latest updates for employee benefit plan fiduciaries.
There’s a lot that goes into being a fiduciary on an employee benefit plan (EBP), especially when it comes to being on top of the many regulations. As you prepare for your audit, there are new regulations to be aware of, especially how participants are counted.
Learn about the participant count methodology change and other updates EBP fiduciaries should be aware of for your current plans.
2023 Form 5500 changes
In February 2023, the IRS, Department of Labor (DOL), and Pension Benefit Guaranty Corporation (PBGC) announced their annual revisions to the 2023 Form 5500 Series to be used by employee benefit plans with plan years beginning on or after January 1, 2023.
Some of the most significant changes are:
Participant count methodology
Prior to the new changes, an individual was considered a plan participant if they were actively employed and eligible to participate in the plan, regardless of whether they contributed. Under the new methodology, only employees with an account balance are considered a participant. This is likely the most impactful change for many plan administrators.
This change will likely result in a significant number of plans falling below the 100-participant threshold for large plan filers, enabling them to file as a small filer using Form 5500-SF — which includes a waiver of the independent audit requirement. The change was implemented to alleviate the administrative and financial burden to smaller plan sponsors.
New schedules
The 2023 Form 5500 includes new schedules for multiple employer plans and defined contribution groups. Schedule MEP consolidates and regulates information related to multiple employer plans and Schedule DCG simplifies the filing requirements for defined contribution groups by allowing sponsors to file only one consolidated Form 5500 at the overall plan level.
Updates to existing schedules
he new form includes changes to existing Schedules SB and MB as well as Schedule R associated with defined benefit plan reporting. These enhancements will provide the PBGC with information related to funding and other compliance and financial aspects of the plan. Schedule H of Form 5500 will have its administrative expenses section expanded to further detail the breakdown of expenses paid out of plan assets to continuously improve on fee transparency.
Other important updates
Secure 2.0 Act
The new SECURE 2.0 Act of 2022 includes sweeping changes intended to enhance and protect retirement security. Some of the most significant provisions include:
- Requiring most employers to automatically enroll employees in their retirement plan at a rate of at least 3%, but no more than 10% for any plans established after December 29, 2022.
- Increasing the age required minimum distributions (RMDs) start from 72 to 73 in 2023 and then to 75 by 2033.
- Requiring plan sponsors who employ part-time employees who work between 500 and 999 hours annually to become eligible to participate in the company’s retirement plan after no more than two consecutive years.
- Allowing penalty-free access to retirement accounts for qualifying emergencies, up to $1,000 annually, starting in 2024.
New audit standards
Effective for periods ending on or after December 15, 2023, the American Institute of Certified Public Accountants (AICPA) issued statements on auditing standards (SAS) 143-145. The new standards come from continued changes in international accounting standards, observations from AICPA peer reviews, and need for standards modernization. The new standards address:
- SAS 143, auditing accounting estimates and related disclosures
- SAS 144, amendments to AU-C sections 501, 540, and 620 related to the use of specialists and the use of pricing information obtained from external information sources
- SAS 145, understanding the entity and its environment and assessing the risks of material misstatement
New contribution limits
In November 2023, the IRS released the 2024 contribution and income limits for retirement accounts. These limits typically increase annually to reflect cost-of-living adjustments. Changes include limits to defined contributions, defined benefits, IRAs, and compensation.
Participant contribution remittances
The DOL continues to emphasize the importance of timely remittance of participant withholdings into the plan. While there is a safe harbor of seven business days for small plans (under 100 participants), the guideline for large plans continues to be “as soon as administratively feasible.” The DOL interpretation of this regulation is generally within a few business days and is expected to be done consistently.
Reportable findings
Auditors are required to communicate reportable findings that are significant and relevant to governance. Reportable findings are items not in accordance with the criteria specified (for example, not in accordance with the plan instrument).
Strong Practices for Plan Management
In managing your plan, fiduciaries should be mindful of:
- Cybersecurity controls
- Benchmarking investments
- ERISA fiduciary responsibilities
- Audit quality
- Service organization control reports
- Service provider changes
- Missing participants
- Fees reasonableness
- DEI considerations
How we can help
Stay abreast of your requirements as an EBP plan fiduciary. We’ve compiled a basic summary of recent legislation, regulations, and trends within the employee benefit plan industry.
Download our new report Key Updates for Your Employee Benefit Plans to learn the new regulations and insights you should know as a plan advisor.