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Is the Revised Form 5500 the Next Big Thing?

Over the past decade, the Department of Labor has implemented new fee and expense disclosure on Schedule C of Form 5500, increased service provider fee disclosure under ERISA section 408(b)(2), participant level fee disclosure under ERISA section 404(a), and new conflict requirements under the final investment advice fiduciary rule. For now and through at least 2017, the final investment advice fiduciary rule is the center of many advisers’ attention. However, there is more to come in subsequent years.


On July 11, 2016, the Department of Labor issued proposed forms and regulations that would significantly overhaul the Form 5500 again. These changes would apply to 2019 and later plan years. So is this change to a government form “the next big thing”? Very likely, yes.

While the current Form 5500 was at the start of the Department of Labor’s current push for increased transparency and openness, the new Form 5500 would take this “big data” gathering to a whole new level with its very detailed focus on specific categories of plan operations, plan expenses, plan investment options and reportable prohibited transactions. When the new Form 5500 goes into effect:


  • The Department of Labor will have a broad-based data set that can be used to target and develop its investigations. This data set, when coupled with other ERISA disclosures and the new investment advice fiduciary rules, will strengthen the DOL’s ability to identify and assert violations of ERISA against plan fiduciaries and services providers.

  • Since the new Form 5500 will, like the current version, be publicly available and available for data mining, anyone will be able to use this same data for other purposes – from bringing lawsuits to competing in RFPs.


Because of these changes, there will be numerous impacts, including the following.

First, as the Department of Labor continues with its national enforcement projects that focus on advisers, such as the Plan Investment Conflicts project, this new data set will put advisers and their services under a greater microscope than ever. As such, soon after advisers think they have put their houses in order for the final fiduciary regulation, they will have a whole new set of compliance items to double check and evaluate in order to prepared for a Department of Labor investigation.



Click here to browse past columns by David Levine.



Second, right behind the Department of Labor will be the plaintiffs’ bar. Plaintiffs’ attorneys already have advisers on their radar. This new tool will provide them insight beyond what is now available before lawsuits begin, thus leading to further and more detailed litigation – and litigation risk.

Third, the commoditization of certain adviser services will continue. With the data generated by the new Form 5500, individuals competing to retain existing business or new business will have a higher degree of transparency on costs.

Even though these consequences can sound like doom and gloom, the Form 5500 is not a reason for an adviser to despair. With many advisers already on the path to enhanced compliance efforts, the new Form 5500 will be another step in that process. Could it lead to more enforcement, litigation, and price competition? Yes. But these items will also give advisers another chance – to differentiate, to show how they add value, and to show how they are focused on compliance. Change can be difficult, no matter the business, but proactively engaging with the Form 5500 changes will most certainly be a boon for some. Now is the time to start thinking about what it means to you.

David N. Levine is a principal with the Groom Law Group, Chartered, in Washington, D.C. This column appeared in the Winter 2016 issue of NAPA Net the Magazine.

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