>The US Government Accountability Office (GAO) asserted that the current reporting system not only produces delays of up to three years until some agencies can access computerized Form 5500 data, a document that nonetheless doesn’t collect key plan data that would allow regulators to more effectively spot pension problems.
That is why the GAO argued that officials should require the documents to be filed and more speedily checked for errors electronically and that the document be revised so that it collects the needed data.
“Changes in the private pension world illustrate why improvements to the Form 5500 and its processing are so important,” the GAO wrote in the report. “For example, the private pension environment has been changing fundamentally in the types of plans offered today’s workers, yet little has been done to reflect these changes in the types of data collected. In addition, the sudden deterioration in funding levels for some large defined benefit plans has brought financial pressures to PBGC and led to calls for comprehensive reforms, but Form 5500 data are not timely enough to help policy makers in developing effective responses.”
Specifically, the GAO recommended the US Department of Labor (DoL), the Internal Revenue Service (IRS) and the Pension Benefit Guaranty Corporation (PBGC):
- develop ways to better track plans from year to year, even when plans change employer identification and plan numbers
- change the 5500 form so that it better collects information on multiemployer plans, including names of all involved employers, their annual contributions, and the extent to which the employer is responsible for unfunded or underfunded liabilities
- update the form so it better reflects the realities of the current US pension system, including the shift from defined benefit to defined contribution plans by many employers. For example, the GAO said the form doesn’t allow them to monitor plan fees and K plan employer match levels as well as whether DB sponsors can still meet the plan’s obligations if the plan is terminated.
- Improve the current electronic filing process to make it less burdensome by revising the procedure for signing and authenticating an electronic document.
>The latest GAO report is here .
>The GAO also most recently recommended a restructuring of plan funding rules to better reflect a plan’s actual financial condition. (See GAO: Reform DB Funding Rules ).