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Commentary

The Most Important Form Investors Have Never Heard Of

How an obscure proposal could help investors judge their 401(k)s.

The Form 5500 Annual Return/Report of Employee Benefit Plan sounds unexciting, at best. Most retirement savers probably would rather spend their time reviewing the fine print in their credit card agreements or perusing their iTunes user agreements. And the form is meant for regulators, not the public, so perhaps its technical name (and technical, dry format) should not be a surprise, nor should the fact that the Form 5500 does not have much of a constituency arguing for its improvement.

And yet the Form 5500 tracks the most important sector of the financial industry for ordinary investors. About 75% of individual investors in the United States exclusively invest in a retirement account. In that context, the Form 5500, which provides data on more than 685,000 retirement plans, including more than 132 million participating Americans, starts to seem very important. Moreover, the Form 5500 helps track more than $8 trillion in assets held for these savers to help support their retirement.