The Department of Labor, the Pension Benefit Guaranty Corporation, and the Internal Revenue Service (collectively the “agencies”) have issued the final forms revisions for the Form 5500 Annual Return/Report of Employee Benefit Plan for plan years beginning on or after January 1, 2022 (the 2022 Form 5500 and related schedules). The changes primarily impact the reporting for multiemployer plans and are described in this alert.

Schedule MB Changes

The changes made to Schedule MB which contains the actuarial information for multiemployer plans, and the instructions, will require that the plan’s actuary get additional information from the plan administrator. The changes are as follows:

1. Line 3 – the instructions for line 3(d) have been modified to require an attachment that shows the withdrawal liability contributions broken down by date, periodic payments, and lump sum payments instead of simply the amounts and the dates of withdrawal liability payments. This change will require that the plan administrator provide the plan’s actuary a breakdown of the withdrawal liability payments between periodic payments and lump sum payments.

2. Line 4 – the question for line 4(f) is revised to provide three choices: emerge from critical status within 30 years, become insolvent within 30 years, and neither projected to emerge nor projected to become insolvent within 30 years. The instructions for line 4(f) have been modified to clarify the 20-year period over which cash flow projections are to be provided if the plan is neither projected to emerge from critical status nor to become insolvent within 30 years. The revised instructions will better align with the 20-year projections with the projections being made to determine whether insolvency will occur within 30 years.

3. Line 6 – The checklist of actuarial assumptions is being revised and has two key changes. First, line 6(f) has been revised to require that the withdrawal liability interest rate be reported for withdrawals during the plan year. There are check boxes on line 6(f)(1) for a single rate, the ERISA 4044 rate, other, or “N/A.” If a single rate is used, the rate is reported on line 6(f)(2). If the “other” box is checked, then an attachment to describe the interest rate is required. If there were no withdrawals during the plan year, then the “N/A” box would apply. Second, a new line 6(i) is added to better report the expense load included in the normal cost.

4. Line 8 – There are several substantive changes to the miscellaneous information reported in item 8.

1. 1. Line 8(b)(1) – There are three changes with respect to the requirement to provide an attachment showing a projection of benefits expected to be paid. First, the plans required to provide the benefit projections will be limited to those plans with 1,000 or more participants as of the beginning of the plan year rather than the current 500 or more participants as of the valuation date. Second, the benefit projection period is increased from 10 years to 50 years and is clarified to start with the current plan year. Third, the benefit projections must be broken down into three categories: active participants, terminated vested participants, and retirees and beneficiaries.¹ Note that the agencies specifically rejected a suggested change to require that the benefit projections include additional benefit accruals. The instructions therefore continue to state that the benefit projections assume no additional accruals and no new entrants.
   2. Line 8(b)(2) – The required attachment showing the average age and service of the active participants is revised to replace the requirement for plans with 1,000 or more participants to report the average cash balance account with a requirement to report the average accrued monthly benefits (payable at normal retirement age) as of the valuation date for each grouping. The change was made, in part, because there are few, if any, multiemployer cash balance plans. It does allow the agencies to gather information on the average accrued monthly benefits for all large multiemployer plans.
   3. Line 8(b)(3) – A new line 8(b)(3) is being added to require an attachment showing a projection of employer contributions and withdrawal liability payments for those plans with 1,000 or more participants as of the beginning of the plan year. The projection period is 10 years, starting with the current plan year. The employer contributions and withdrawal liability payments are shown separately.

The agencies will permit the attachments to the Schedule MB (and SB) to be provided in a spreadsheet file (CVS format) rather than a pdf or plain text file.

Schedule R Change

Currently, Part V, line 13, of Schedule R requires that a multiemployer defined benefit plan report identifying information about any participating employer whose contributions to the plan account for more than five percent of the total contributions for the plan year. The agencies have revised this reporting requirement for the 2022 Schedule R to require information about any participating employer that either (1) contributed more than five percent of the plan’s total contributions, or (2) was one of the top ten highest contributors, listed in descending order according to the dollar amount of their contributions to the plan.

Cheiron Observation: While the expansion of the projection period for benefits from 10 years to 50 years will not be a particular problem, the projected benefits shown for the later years will not be accurate because additional accruals will not be reflected. The revised reporting requirements with respect to withdrawal liability payments will require that additional information be provided by the plan administrator.

Cheiron is an actuarial consulting firm that provides actuarial and consulting advice. However, we are neither attorneys nor accountants. Accordingly, we do not provide legal services or tax advice.