Form 5500 filings: Where’s the beef?

This past January was the 30-year anniversary of the burger chain commercial where the little old lady asked, “Where’s the beef?” I was reminded of this expression recently in a phone call with our marketing people. As a value-added service, our marketers prepare prospecting guides for our wholesalers to share with financial professionals. Part of the information includes valuable local plan sponsor information that’s gleaned from publicly available Form 5500 databases.

As a matter of background, until 2009 plan years, ERISA 403(b) plans needed only to complete an abbreviated Form 5500; just having to answer a handful of questions. No financial information, schedules or audit information was necessary. (Note that non-ERISA 403(b) plans have always been exempt from filing Form 5500s.) Limited information was of little-to-no use for our marketers and wholesalers with financial professionals.

The rules for ERISA 403(b) plans changed, however, beginning with the 2009 plan year. The Department of Labor now requires plans to follow all of the Form 5500 rules, including all financial information, inclusion of applicable schedules and required independent audit. From a marketing standpoint, we believed we were going to be able to get information that would truly help financial professionals in their prospecting efforts.

Much to my surprise, however, I discovered in this conversation that significant information seems to be missing -- meaning it isn’t being filed. For example, there is a dearth of Schedule As (insurance information) in the public databases for 403(b) plans. In particular, this seems to be a problem with private higher education organizations. There is also limited use of Schedule Cs (service provider Information) among large plans where fee information is provided. This missing information has me asking, “Where’s the beef?”

According to the Plan Sponsor Council of America 2014 403(b) Plan Survey, 45.2% of all 403(b) plans use annuity contracts. Annuities are insurance, and Schedule A needs to be completed as part of the Form 5500 filing. In addition, I find it difficult to believe that there are so many plans without fees that need to be reported on Schedule C. Not only is this a problem for marketers, but I’m concerned about what’s going to happen with DOL enforcement action. Perhaps the DOL assumed too much knowledge among 403(b) plan sponsors, or perhaps they didn’t do enough to educate them. I certainly hope that education comes before enforcement against non-profit organizations that are just trying to offer benefits while achieving their societal mission.

In the meantime, financial professionals can help with that education process to get appropriate Form 5500 compliance before the DOL starts opening up that burger and realizes there’s nothing inside the bun.

Friedman is the tax-exempt national practice leader with the Principal Financial Group, an investment management and retirement leader. A noted expert on 403(b) plan design, he has been consulting with tax-exempt organizations for over 20 years and has been in the retirement plan business since 1986. A version of this blog originally ran on The Principal blog. Follow Aaron on Twitter @1AaronFriedman1.