Administration August 28, 2023

EBSA Extends Form 5500 Credential Deadline

Users must obtain new sign-on credentials by December 31, according to the Department of Labor.

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The Employee Benefits Security Administration extended the grace period to obtain new single-sign-on credentials for the EFAST2 Form 5500 filing system until December 31, part of the Department of Labor’s efforts to streamline the process.

EBSA began in January the process of moving EFAST2 users to a single-sign-on solution at the web address Login.gov to access many federal government agency websites, ending the need for users to obtain unique EFAST2-issued credentials, according to the DOL’s announcement.

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“The changes made to the EFAST2 website are needed to allow users to obtain new electronic signature credentials for the Form 5500 Series, and to file Form PR or to use IFILE, the government’s free Form 5500 Series filing application,” the DOL release stated. “For existing Form 5500 Series filers using approved private software, logging into the EFAST2 website is generally not necessary.”

The extension helps users to make a gradual transition by allowing those with EFAST2 accounts established before January 1 to use those credentials through the end of the year. However, all users must obtain Login.gov credentials by the December deadline, EBSA noted. Users who have created new EFAST2 accounts in 2023 have already been directed to obtain Login.gov credentials.

Each year, the DOL makes changes to Form 5500, which contains information about a retirement plan’s financial condition, investments and operation. All U.S. defined contribution and defined benefit plans covered by the Employee Retirement Security Income Act must file a version of the form annually with the DOL and the IRS.

Benefits August 28, 2023

NQDC Plans: An Opportunity for Improving Retention, but Underutilized by Participants

A vast majority of employers feel remaining competitive in the race for talent is ‘more expensive than ever,’ and businesses are turning to creative offers to keep executives satisfied without breaking the bank, according to NFP.

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A key factor in retaining top executive talent is offering a nonqualified deferred compensation plan, according to 92% of employers who participated in NFP’s recent Executive Benefits Trend Study. 

However, NFP, a benefits consultant, wealth manager and retirement plan adviser, found that while NQDC plans are appealing to companies of all sizes, they appear to be underutilized, with eligibility rates outpacing population and few companies planning to make near-term changes. 

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An NQDC plan essentially allows an employee to earn wages, bonuses or other compensation in one year but receive the earnings—and defer income tax on them—in a later year. With any type of deferral, the plan sponsor can design the plan to specify whether the participants’ money is available to them before retirement or at separation of service. 

Out of the 98 executive benefits employers who partner with NFP for executive compensation packages, only 32% said participation in their NQDC plan had increased since 2020, and 75% said they do not plan to make any changes to their NQDC plan. Meanwhile 45% said eligibility has increased since 2020; NFP argued that increased communication can help close the gap between eligibility and participation. 

“Nonqualified deferred compensation is an essential lever in creating executive benefits programs that enhance retention of top talent, but the plans are being underutilized,” said Joe Carpenter, head of executive benefits at NFP, in a press release. “Companies need to tailor their plans to the unique needs of their executives and untangle the complicated plan details for them. Continuous plan communication and knowledge-sharing also matters as it helps drive how executives perceive the value of the benefit.” 

The majority of employers surveyed (79%) allow participants to defer their base salary, and a little more than half (58%) allow participants to defer annual bonuses. Almost 60% of employers contribute a discretionary and/or percentage of the employee contribution on top of that.  

Carpenter added that there are several untapped benefits that employers can offer to their executives, such as supplemental executive medical insurance and college tuition for children, that can set them apart from others. 

However, 85% of employers said they feel remaining competitive in the executive benefits market is “more expensive than ever,” and many businesses are resorting to creative offers to keep their executives satisfied at a manageable cost.  

According to PLANSPONSOR’s 2023 Defined Contribution Plan Benchmarking Report, which surveyed 2,562 plan sponsors from a variety of industries, 7.9% of plan sponsors reported offering an NQDC plan. Plan sponsors that had greater than $1 billion in DC plan assets were the most likely to have an NQDC plan, with 42.9% offering one.  

NFP also found that executive retirement behaviors are evolving in opposite directions, with one-third retiring later and one-quarter retiring sooner. But regardless of when these executives plan to retire, most feel behind in preparation.  

“Businesses have found deferred compensation plans to be highly effective in preparing their executives for retirement, and many offer NQDC plans primarily for this purpose, but they need to go a step further by tailoring plans to the unique needs of executives,” the report stated. 

NFP recommended that plan sponsors revisit their executive benefits early and often, look beyond traditional offerings to come up with more creative benefits that will set them apart and optimize their executive benefits package to counter rising costs in an unsettled economy.  

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