EBIA Weekly Newsletter

Significant Changes Proposed for Form 5500

   July 21, 2016

Proposed Revision of Annual Information Return/Reports, 29 CFR Parts 2520 and 2590; 26 CFR Part 301; 29 CFR Part 4065, 81 Fed. Reg. 47533 (July 21, 2016); Proposed Rule: Annual Reporting and Disclosure, 29 CFR Parts 2520 and 2590, 81 Fed. Reg. 47495 (July 21, 2016)

Proposed form changes

Proposed regulations

The DOL, IRS, and PBGC have jointly proposed major changes to Form 5500 that would affect retirement, health, and other welfare plans. According to a DOL fact sheet, the proposals are intended to improve employee benefit plan reporting by requiring more detailed information on issues such as group health plan compliance, plan investments, and service provider fees. Here are highlights:

  • Increased Group Health Plan Filing Obligations. The proposal would require Form 5500 reporting by all ERISA group health plans (including those now covered by the filing exemption for small unfunded, insured, or combination unfunded/insured welfare plans), including a comprehensive new Schedule J (Group Health Plan Information). Schedule J would indicate the types of health benefits offered and the funding method, including information about participant and employer contributions, and whether the plan is insured, uses a trust, or pays benefits from the employer’s general assets. It would also require information about COBRA coverage and insurer refunds, and would ask whether the plan claims grandfathered status under health care reform or is a high deductible health plan, HRA, or health FSA. In addition, most filings (except those for small fully insured plans) would have to provide financial and claims information, and list TPAs, stop-loss carriers, and other plan service providers such as mental health or substance abuse benefit managers. These filers must also answer questions about compliance with HIPAA, GINA, the mental health parity rules, health care reform, and other mandates, including specific questions about SPD and SBC compliance.
  • Retirement Plan Changes That Would Apply to 401(k) Plans. The main body of the Form 5500 would request additional data about participant accounts, contributions, and distributions. Filers would have to indicate whether their plans use safe harbor or SIMPLE designs, or include Roth, investment education, or investment advice features. Information would also be requested about offset and 414(x) plans, default investments, rollovers used for business start-ups (ROBS), leased employees, and pre-approved plans. A separate Schedule E would be reinstated for ESOP reporting. Schedule R would include new questions about participation rates, matching contributions, and nondiscrimination.
  • Proposals for All Types of Plans. A separate Schedule C would be filed for each service provider, and revisions would more closely align the schedule with the service provider fee disclosure rules. Also, the Schedule C filing requirement would be extended to some small plans currently exempt from filing it. Schedule H would be expanded to include questions on fee disclosures, leveraged asset acquisitions, annual fair market valuations, designated investment alternatives, investment managers, plan terminations, asset transfers, administrative expenses, uncashed participant checks, SPDs, and other topics. It would also distinguish between assets held for investment and those that were sold during the year. Schedule I would be eliminated; small plans that currently file Schedule I would generally need to file Schedule H instead. And plans that invest through a direct filing entity (DFE) would no longer be required to file Schedule D; DFEs would still file Schedule D.

The changes are generally targeted to take effect with 2019 plan year filings, although some may be implemented earlier or later. Proposed revisions to the ERISA reporting regulations would conform them to the proposed Form 5500 changes. Similar changes are proposed for Form 5500-SF, which would no longer be available to group health plans.

EBIA Comment: The proposed changes would significantly increase Form 5500 reporting obligations for many employers—particularly those with group health plans. Comments, which are due by October 4, 2016, are specifically sought on a variety of issues, such as the cost and feasibility of providing the detailed group health plan data required under the proposal. Comments are also requested on the feasibility of treating the filing of Form 5500 (including Schedule J) as compliance with health care reform’s transparency in coverage and quality of coverage reporting requirements. The proposal also mentions IRS-only compliance questions to be added to the 2016 forms and schedules (described in an IRS proposal), along with additional IRS-only items proposed for subsequent years. Because these questions do not apply to welfare plans, the IRS seeks comments on whether to add the questions to the various forms and schedules based on subject matter or collect them on a single IRS-only schedule. For more information, see EBIA’s ERISA Compliance manual at Section XXII (“Annual Form 5500 Reporting to the DOL”), EBIA’s 401(k) Plans manual at Section XXXI.E (“Completing the Form 5500”), EBIA’s Cafeteria Plans manual at Section XXXIV (“Form 5500 and Other Reporting Requirements”), EBIA’s Self-Insured Health Plans manual at Section XXIX.B (“Annual Form 5500 Reporting”), and EBIA’s Health Care Reform manual at Section XXXVI (“Reporting, Fees, and Required Payments”). You may also be interested in our “Form 5500 Workbook for Health & Welfare Plans (2015 Plan Years)” and our recorded webinar, “Form 5500 for Health and Welfare Plans: Preparation and Filing(recorded on 4/28/16).

Contributing Editors: EBIA Staff.