100 is the Limit! Form 5500 Reporting for Small Retirement Plans

New regulations dealing with Form 5500 filings (for 2023 plan years and after) could reduce filing requirements for small employer plans. 88 Fed. Reg.  11,984 (Feb. 24, 2023). The agencies modified the participant counting methodology for small/large plan status, which matters because small plans can file a short-form Form 5500; audited financial statements are not required and filing requirements are simpler. Currently, DC plans, which dominate the retirement plan spectrum, are characterized as small plans if they cover fewer than 100 participants at the beginning of the plan year. Current methodology  counts participants based on (1) the number of participants with account balances (active and terminated), and (2) the number of participants who are eligible to contribute, even if they don’t have an account balance. The new rule will limit the count to active and terminated participants with an account balance at the beginning of the year. This makes a difference! Combined with the cash-out limit rising to $7,000, under SECURE 2.0, beginning in 2024, smallish employers can better manage accounts to 100 by dutifully cashing-out small accounts following employee terminations.  

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