Regulators submitted a proposal to implement sweeping changes to the forms and regulations that govern annual employee benefit plan reporting on Form 5500. Form 5500 is the primary source of information about the operation, funding, assets and investments of these plans. Regulators are increasingly relying on the Form 5500 as a key component of their enforcement efforts. On July 21, 2016, the Department of Labor (DOL), Internal Revenue Service (IRS) and the Pension Benefit Guaranty Corporation (PBGC) published proposed reporting updates for employee benefit plans subject to the Employee Retirement Income Security Act of 1974 (ERISA). The extent of the changes is under debate.

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A publication of the Professional Standards Group
March 2017
Proposed Changes to the Form 5500 and the AICPA’s Response
Regulators submitted a proposal to implement
sweeping changes to the forms and regulations
that govern annual employee benefit plan reporting
on Form 5500. Form 5500 is the primary source of
information about the operation, funding, assets
and investments of these plans. Regulators are
increasingly relying on the Form 5500 as a key
component of their enforcement efforts.
On July 21, 2016, the Department of Labor (DOL),
Internal Revenue Service (IRS) and the Pension
Benefit Guaranty Corporation (PBGC) published
proposed reporting updates for employee benefit
plans subject to the Employee Retirement Income
Security Act of 1974 (ERISA). The extent of the
changes is under debate.
As a whole, these changes are designed to meet five
goals: modernize financial reporting, provide greater
information regarding group health plans, enhance
data analysis, improve disclosures of service provider
fee information and improve compliance with ERISA
and the Internal Revenue Code. If enacted, the
changes would take effect in 2019.
Comments on the reporting updates were due Dec. 5,
2016. The AICPA weighed in and questioned the need
for some of the changes, which would significantly
increase reporting obligations for employee benefit
plans. A joint task force that included the AICPA’s
Employee Benefit Plan Expert Panel and the AICPA
Employee Benefit Plan Tax Technical Resource panel
submitted a comment letter on the changes on Nov.
21, 2016.
Three issues in the changes are of particular interest
to the AICPA, changes to alternative investment
disclosures, the identification of the audit partner
in the Form 5500 and the enhanced disclosures
proposed to the Form 5500 Schedule C, Service
Provider Information.
Alternative Investment Disclosures
Defined benefit plans have actuarially determined
obligations and investment targets to meet and
accordingly, many defined benefit plans make use of
alternativeinvestmentstomeetthesetargets.Although
defined benefit plans have relied on alternative
investments for decades, there is increased interest
and usage of alternative investments in defined
contribution plans.
Investments that are not listed on over-the-counter
markets or national exchanges are considered
alternative investments. These include pooled
separate accounts, private equity funds, stable value
investments, real estate investment trusts and funds
of funds. Alternative investments are not subject to
the same types of regulatory oversight as traditional
investments (i.e., those that are listed on over-the-
counter markets or national exchanges).
Under the proposed changes, entities would be
required to report more detailed information about
alternative investments and other hard-to-value
assets. Subcategories would be created for derivatives
and foreign investments as well as investments in
partnerships and joint ventures on the Form 5500
Schedule H, Financial Information. Additionally,
plans would be required to disclose specifics on
the alternative investments including interest rate,
issuance and maturity dates and current value.

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Copyright ©2017, Mayer Hoffman McCann P.C. All rights Reserved.
MHM (Mayer Hoffman McCann P.C.) is an independent CPA firm that is a member firm of Kreston International Limited, a global network of independent accounting firms.
877-887-1090 | www.mhmcpa.com | @mhm_pc Mayer Hoffman McCann P.C.
The AICPA issued several comments on the changes
to the Schedule H, including eliminating “hedge fund”
as a separate category, as well as the proposed
requirement to subdivide cash into interest-bearing
cash, certifications of deposit and money market
accounts. For derivatives, it suggested adding
subcategories for exchange-traded or centrally
cleared derivative instruments and subdividing the
non-exchange traded investment category.
Disclosing the Name of the Audit Partner
In 2015, the Public Company Accounting Oversight
Board (PCAOB) adopted rules to provide users of
public companies’ financial statements with more
information about the companies’ auditors. Public
company auditors now file a PCAOB form that includes
the legal name of the firm issuing the audit report,
the name of the engagement partner, audit partner
identification numbers as well as the participation of
other accounting firms participating in the audit.
The DOL appears to be looking for a similar level of
transparency for ERISA plans. One of the proposed
changes to the Form 5500 includes listing the name
of the audit engagement partner on Schedule H.
The AICPA is calling for that provision to be removed,
on the basis that the audit partner does not provide
the user of the Form 5500 with useful information.
Naming the audit partner for the engagement puts
unnecessary focus on one individual when an audit
team is performing the work of the audit. The AICPA
also asked that the DOL rework its language about
the audit report to clarify the report does not include
the plan’s financial statements.
Plan Fees
Regulators are seeking increased transparency
about the reasonableness of fees paid to service
providers. To bring more focus on plan fees, the
proposed changes include adding information about
plan fees, including how fees are allocated to plan
participants in the Schedule H. Participant-directed
defined contribution plans would be required to
include an Investment Option Comparative Chart to
the Form 5500. Schedule C would also be affected.
Plans would be required to file a Schedule C for every
covered provider who received more than $1,000
from plan administration fees and a Schedule C for a
non-covered provider who received $5,000 or more.
The AICPA voices its general support for the
increased transparency surrounding plan fees, but
it recommended a clearer definition for contract
administrator fees, which could be confused with the
accounting and bookkeeping fees already reported
in the plan’s income and expense statement. It
recommends adding additional administrative
expenses, Form 5500 preparation fees and PGBC
premiums. In current practice, these expenses may
be recorded in different places including contract
administrator fees, audit fees or recordkeeping fees.
Limited Scope Audits
Under the DOL limited scope audit exemption, a plan
can exclude from an auditor’s examination certain
assets that are held by a bank, or similar institution
or an insurance company. While this remains an
option for certain plans, the DOL has long targeted
the limited scope exemption as a provision to change.
In its 2014 employee benefit plan audit quality report,
the DOL recommended eliminating the limited scope
exemption.
The proposed changes recommend that plans electing
a limited scope employee benefit plan audit submit
limited scope audit certifications supporting their
response to Schedule H, Accountant’s Opinion (Line
3b). In its comment letter, the AICPA recommended
additional information be provided in the Schedule H,
including naming the service provider that certified
plan investment information to meet the limited scope
exemption. Additionally, it asks that plan administrators

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MHM (Mayer Hoffman McCann P.C.) is an independent CPA firm that is a member firm of Kreston International Limited, a global network of independent accounting firms.
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The information in this MHM Messenger is a brief summary and may not include all the details relevant to your situation. Please
contact your MHM auditor to further discuss the impact on your audit or audit report.
confirm that they are responsible for determining if the
audit meets the qualifications for the limited scope
exemption.
Monitoring the Changes
These and other updates to the reporting requirements
for Form 5500 should be closely monitored. The
revised reporting requirements, if adopted, generally
would apply for plan years beginning on and after
Jan. 1, 2019. MHM will keep be keeping you informed
of any new developments.
For specific comments, questions or concerns
about how the proposed changes may impact your
plan reporting, please contact Hal Hunt of MHM’s
Professional Standards Group. Hal can be reached at
816.945.5610 or hhunt@cbiz.com.