This Client Action Bulletin outlines the changes to the annual Pension Benefit Guaranty Corporation (PBGC) premium filing for the 2024 plan year and the Form 5500 filing for the 2023 plan year. Plan sponsors of defined benefit (DB) and defined contribution (DC) plans covered by ERISA are advised to review new and changed items in advance and work with their service providers to address any questions before the filings are due.

• PBGC premiums are due¹ 9½ months after the beginning of the plan year for DB plans (e.g., October 15, 2024, for calendar-year plans).
• Form 5500 reports on a DB or DC plan’s financial status and operations for the plan year and is due² seven months after the end of the plan year (e.g., July 31, 2024, for calendar year plans). Prior to that date plans can file Form 5558 to extend the due date an additional 2½ months (e.g., to October 15, 2024, for calendar year plans).

PBGC premiums for the 2024 plan year

DB pension plans pay premiums to fund the PBGC’s single-employer and multiemployer insurance programs. The PBGC guarantees a significantly higher level of benefits for participants of single-employer plans than for those of multiemployer plans. This is reflected in the premium rates these plans pay.

Multiemployer plans

These plans pay a per-participant annual premium. For the 2024 plan year, the premium has increased to $37 per participant (up from $35 per participant in 2023).

Single-employer plans

All these plans pay a per-participant annual premium, and underfunded plans also pay a variable-rate premium (VRP) based on the plan’s level of underfunding. For the 2024 plan year, the per-participant premium increased to $101 per participant (up from $96 per participant in 2023). The VRP remains at 5.2% of the plan’s unfunded vested benefits (UVB) and will no longer be indexed as provided by the SECURE 2.0 Act of 2022 (SECURE 2.0). VRPs are capped at $686 per participant (up from $652).

SECURE 2.0 also imposed a cap on mortality improvement rates of 0.78% at any age for years on or after the valuation date starting in 2024. This change will shorten projected life expectancies and lower the liability associated with vested benefits. The exact impact on the VRP will depend on the demographics of the plan. Small plans³ using the Lookback Rule will base their VRP on liabilities measured in 2023, which will not reflect this mortality change.

The variable rate premium can be determined using either the “Standard” or “Alternative” Premium Funding Target, the only difference being the interest rates used to determine the liability. The Standard method uses spot or current rates, whereas the Alternative method uses rates averaged over 24 months. Plan sponsors can switch between the two methodologies, but when a switch is made it must remain in place for five years, unless they decide to use the full yield curve.

Additional information is required to be disclosed on the filing if a plan transferred some or all of its assets and liabilities to another plan since last year’s premium filing; froze the plan to new entrants or froze benefit accruals; purchased annuities or provided a lump-sum window during 2023; or if the filing is subject to disaster relief.

Common filing errors

Filers should avoid making these common filing errors: providing incorrect plan Employer Identification Number (EIN) and plan number (PN), providing an incorrect plan effective date, sending premium payments without properly identifying the plan, calculating incorrect VRPs based on the Lookback Rule (small plans), not providing sufficient explanation for a change in premiums on an amended filing, reporting incorrect plan year information for short plan years, and disregarding warning messages when the filing is submitted.

Finally, the PBGC changed its email address for customer support to [email protected].

Form 5500 for the 2023 plan year

The Internal Revenue Service (IRS), U.S. Department of Labor (DOL), and PBGC (the Agencies) made changes to the Form 5500 filing for plan years beginning on or after January 1, 2023, which are generally due in 2024. Plan sponsors may want to review these changes now with their service providers so that all the necessary information is compiled by the filing deadline.

File paper Form 5558 this year

The IRS recently postponed the electronic filing of Form 5558 until January 1, 2025, due to administrative issues involving the EFAST2 system. Therefore, for 2023 plan year filings, a paper Form 5558 must be filed by the plan’s normal filing due date to obtain the one-time 2½ month extension. Be sure to use the most recent version of Form 5558, “Rev. January 2024.”

Smaller DC plans should review their participants count on Form 5500

The Agencies made an important change to how 401(k) and other DC plans count the number of participants to determine whether the plan may file as a small plan (generally fewer than 100 participants) that is exempt from the independent qualified public accountant (IQPA) audit requirement. Previously, this number included individuals who were eligible to have 401(k) contributions made, even if they did not elect to have such contributions made and did not have an account balance. This number now includes only participants and beneficiaries with account balances as of the beginning of the plan year.

One reason for this change is because long-term part-time (LTPT) workers who meet the minimum age and hours requirements become eligible to participate in these plans beginning on or after January 1, 2024. Including these individuals would have pushed some plans over the 100-participant threshold, thereby requiring more extensive reporting requirements including an IQPA audit.

Instead, by counting only those with an account balance, some DC plans are expected to fall below the 100-participant threshold, allowing them to file as a small plan, which could exempt them from an IQPA audit if certain requirements are met. Plan sponsors of smaller 401(k) plans and ERISA-covered 403(b) plans are advised to review their participant counts to see whether they are eligible to file as a small plan for the 2023 plan year filing and save on IQPA audit expenses.

New Schedule MEP (Multiple-Employer Retirement Plan Information)

This new schedule is required to be completed by DC multiple-employer plans that are association retirement plans, professional employer organization (PEO) plans, and pooled employer plans (PEPs), and other DC and DB multiple-employer plans that are not multiemployer plans. These plans must report:

• Name of each participating employer and EIN
• Percentage of total contributions to the plan by each participating employer
• Aggregate account balances for the employees of each participating employer (DC plans only)
• Contribution percentage and account balance information (reported collectively) for individuals not participating through an employer or who are individual working owners

In addition, PEPs must verify their compliance with Form PR (Registration for Pooled Plan Provider) requirements and provide the acknowledgment code (ACK_ID) for their most recent Form PR submission.

New Schedule DCG (Individual Plan Information)

The SECURE Act changed the way certain DC plans can file their Form 5500 as part of a group of similar plans, mainly intended for unrelated small businesses that adopted IRS preapproved DC plans that use the same administrator. The change is intended to decrease the costs associated with preparing filings for these plans.

Instead of a separate filing for each plan, eligible DC group (DCG) arrangements are now given the option to submit a single consolidated Form 5500. Eligible DCGs are single-employer or collectively bargained individual account plans or defined contribution plans (excluding MEPs, PEPs, and multiemployer plans) with a common trustee, fiduciaries, administrator, and plan year. They must offer the same investments or provide the same investment options to all participants and are not allowed to hold any employer securities directly. DCGs are recognized as a new type of direct filing entity (DFE) and are required to file a large plan Form 5500. Small plans and one-participant plans may find it more cost-effective to file their own Form 5500-SF or Form 5500-EZ rather than be included in a DCG filing.

The new Schedule DCG is used to report the following information for each plan included in the DCG:

• DCG name, EIN, and plan number
• Basic individual plan information, including plan name, EIN, plan number, plan effective date, plan sponsor and plan administrator information, number of active and total participants, number of participants with account balances, and the number of participants who terminated during the plan year who were not 100% vested
• Plan financial information, including plan assets and liabilities, participant loans, employer and employee contributions, other income (loss), benefit payments, corrective distributions, deemed distributions of participant loans, direct expenses, net income, and transfers to and from other plans
• Plan characteristic codes, identifying the features of the plan
• Compliance questions, including delinquent participant contributions, nonexempt transactions, fidelity bond information, plan coverage, and nondiscrimination testing information
• If the plan is an adopter of a preapproved plan, information about the preapproved plan’s favorable IRS Opinion Letter
• An IQPA audit for each large plan⁴

All other information for the Form 5500 schedules is reported in the aggregate. For example, fees for all service providers would be combined and reported on Schedule C even if some of the service providers didn’t charge any fees to an individual plan because there were no participants who elected a particular investment option. DCG filers do not complete Schedule R.

The consolidated reporting does not apply to Form 8955-SSA, which is used to report terminated participants with deferred vested benefits. Each individual plan is responsible for filing its own Form 8955-SSA.

Expanded administrative expenses reported on Schedule H

Plans are required to break down administrative expenses into 11 categories (up from four categories in the past) to help the Agencies better understand the types of expenses paid to the plan’s service providers. Auditors and professionals preparing financial statements should adjust their reports to reflect this increased level of reporting. The new expense categories are underlined below:

SFA reporting on the Schedule MB

Actuaries for multiemployer plans that received special financial assistance (SFA) before the first day of the 2023 plan year will need to exclude the SFA for certain reporting requirements and must report the plan in critical status through the plan year ending in 2051.

New compliance reporting and asset class breakdown on the Schedule R

Compliance questions were added for DB and DC plans to report the following:

• If plans⁵ were permissively aggregated for nondiscrimination and coverage tests under Internal Revenue Code (IRC) Sections 401(a)(4) and 410(b).
• If applicable, whether a 401(k) plan⁶ used the design-based safe harbor rules or the “prior year” or “current year” average deferral percentage (ADP) test.
• If the plan is a preapproved plan that received a favorable IRS Opinion Letter, provide the date and serial number of the Opinion Letter.

DB plans with 1,000 or more participants as of the beginning of the plan year must break down the percentage of the plan’s assets as of the end (rather than the beginning) of the plan year into the following reconfigured asset categories. Auditors and professionals preparing financial statements should adjust their reports to reflect this increased level of reporting.

The average duration of the investment-grade debt and interest rate hedging assets category must also be reported, with check boxes for multiple five-year duration periods ranging from zero to five years up to 15 years or more.

Schedule SB

Actuaries for certain single-employer plans must adjust their target normal cost for plans with mandatory employee contributions. In addition, plans that pay some or all benefits as lump sums (such as cash balance plans) have the option to show projected annuity payouts as an attachment to Schedule SB if liabilities are calculated using annuities instead of lump sums.

Modified Summary Annual Report (SAR) for the 2023 plan year

The SAR provides a summary of the information reported on the Form 5500 for participants and beneficiaries of DC plans.⁷ The ERISA regulations, which supply the template language for the SAR, have been updated to reflect the changes to Form 5500 described above, including the new filing alternative for DCG reporting arrangements and the information contained on the new Schedules MEP and DCG.

Plan sponsors are advised to review the changes in PBGC premiums and Form 5500 reporting requirements in detail and consult with their service providers to understand how the changes impact them and what information will be needed to complete the filings later this year.

Please contact your Milliman consultant regarding how these provisions may impact your plans.

¹ Due dates can be extended for plans affected by federally declared disasters. The PBGC generally grants disaster relief when the IRS grants such relief for taxpayers. IRS announcements for tax relief are found here.

² Due dates can be extended for plans affected by federally declared disasters. The PBGC generally grants disaster relief when the IRS grants such relief for taxpayers. IRS announcements for tax relief are found here.

³ A small plan either has less than 100 participants for the 2024 plan year or has a funding valuation date that is not the first day of the plan year.

⁴ Small plans with fewer than 100 participants may have to attach an IQPA audit if they are not eligible for a waiver.

⁵ Excluding multiple-employer plans or pooled employer plans.

⁶ Excluding multiple-employer plans or pooled employer plans.

⁷ DB plans covered by the PBGC single-employer and multiemployer insurance programs are exempt from the SAR requirement.