For financial professionals who wish to prospect in the retirement plan market, the most valuable public data source is a Form 5500 that the U.S. Department of Labor requires plans to file annually under the Employee Retirement Income Security Act (ERISA).
The form must be filed by all pension plans covered by ERISA, including inactive plans with no contributions or benefit payments, within seven months from the end of the plan year. The report must be completed on a computer-scannable form or electronic filing system that facilitates public inspection.
Form 5500 data normally is released by the Department of Labor to FreeERISA.com within about 12-18 months of filings. Each filing contains a wealth of data that can be useful in identifying plan prospects and developing specific ideas for them.
Below is a quick guide to the most useful information you can obtain from Form 5500 and its various schedules, which are identified by letters of the alphabet:
Company identification: This data from Form 5500 itself includes the company’s Employee Identification Number (EIN), address, phone number and name of the plan administrator who signs the return.
Business code: A six-digit NAICS code (North American Industry Classification System), found on Form 5500, identifies the company’s line of business. For example, suppose you identify a company in your market called “Enterprise Solutions.” The name alone doesn’t tell you much about the company’s services. But a NAICS Code of 541519 identifies a company that is in the “Computer Systems Design and Related Services” category. A listing of all NAICS codes is contained on the back of the IRS Form 5500 Instructions.
# of participants and their status: Form 5500 requires plans to report the number of participants at the beginning and end of each plan year, so new participants added during the year can be determined by subtraction. Other data indicates the number of active participants, those with account balances, and those who are retired or separated. This offers a glimpse into the size of the company, while also indicating the composition of a plan’s participant base.
Benefits provided: Pension plans must identify by code the type of benefits that the plan offers. For example, a code of 2E indicates a profit-sharing plan and a code of 2J indicates a 401(k). A key to these codes can be found in the instructions to Form 5500.
Plan financial information: Plans are required to disclose financial details on a Schedule I attachment to Form 5500. This includes total plan assets at the beginning and end of the filing year, contributions received during the year, and other income (primarily investment returns).
Vendor relationships: Various schedules included with the 5500 filing can help to identify vendors who currently serve the plan. Schedule A identifies an insurance carrier that is providing a funding contract. Schedule R identifies by EIN a company that paid out distributions or benefits during the plan year. Schedule D identifies providers of common/collective trusts (CCTs), pooled separate accounts (PSAs), or master trust investment accounts (MTIAs). Schedule H identifies a CPA who has rendered an opinion on the plan’s tax status.
Total employees and HCEs: Schedule T provides information on plan coverage and nondiscrimination testing, including the total number of employees and the number who are considered Highly-Compensated Employees (HCEs).
Trust and Trustee (or Custodian): Schedule P is the annual return for the fiduciary of an Employee Benefit Trust, if there is one. This identifies the specific trust that holds investment assets and the trustee or custodian responsible for investment policy and due diligence.
Doing Your Homework
Many plans that file Form 5500 are not required to attach all schedules mentioned above. But once you’ve identified an attractive prospect in your market, it’s a good idea to briefly review its 5500 and all schedules. You also may want to download from FreeERISA the full filing and keep it in the prospect’s folder, for future reference during calls.
In calling on prospects, be sure to let them know that you’ve obtained this data from public information sources and aren’t prying into their affairs.
By learning all you can about a prospect before planning your appointment, you’ve done your homework as a professional. Most plans appreciate the fact that you have taken this time to understand their situation and needs.