The American Retirement Association (ARA) has submitted a letter (“the letter”) in response to a request for comments from the Department of Labor’s Employee Benefits Security Administration on the proposal (“Proposal) made by the Department of Labor, Internal Revenue Service and Pension Benefit Guaranty Corporation (collectively, “Agencies”), made to modernize and improve the Form 5500.
EXTRAORDINARY TIME AND COST BURDENS
The ARA takes aim at the Agencies contention that the form 5500 Proposal do not pose a time, resource and financial burden. ARA also highlights that the 777-page proposal itself represents an undue burden to small companies with regard to legal compliance.
According to the letter, “The ARA recommends that the Agencies review the cost impact to the recordkeeping and reporting infrastructure when quantifying the cost increase of the Proposal and reconsider the extent of the changes in light of these cost considerations.”
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BURDEN ON SMALL PLAN FILERS
Small plan filers, those eligible to file a simplified version of the Form 5500 (5500-SF), constitute 86% of all 5500 filers (621,800 out of 723,300 total retirement plan filers). “The Proposal creates a substantial burden for small plan filers, particularly those defined contribution plans, including 401(k) plans, with participant directed investments..” according to the letter.
The letter goes on to contend that the Proposal would compel a majority of those companies now filing a Form 5500-SF to file the longer, more complex Form 5500.
As to the impact on small businesses, the letter concludes:
The cost and time burdens of the Proposal will weigh heavily upon small businesses and the participants in plans impacted by this apparently intentional change in the definition of “eligible assets.” From a policy perspective, these changes could have the unintended consequence of plans being terminated or small employers choosing not to sponsor a new plan. The ARA recommends that the Agencies consider the substantial impact of the Proposal on small plan filers.
The Letter also takes issue with several other elements of the proposal including: questioning the costs versus the benefits, questioning the ability of companies to comply with the Proposal time-line, as well as making alternative proposals.
The open period for comments ends today, December 5, 2016.
