DOL proposes changes to Form 5500

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The U.S. Department of Labor plans to revise Form 5500 to require insurers and health plans to report more information. The proposed changes focus on five broad goals: modernizing financial reporting, providing greater information regarding group health plans, enhancing data mineability, improving service provider fee information, and enhancing compliance with ERISA and the tax code. One element that is sure to attract the attention of smaller employers is a proposal to eliminate the exemption that excused many from filing the form.

Form 5500 was created by the US Department of Labor (DOL), Internal Revenue Service (IRS), and Pension Benefit Guaranty Corporation (PBGC) for employee benefit plans to report on their operations as required by ERISA. Currently, most employers are not required to file Form 5500 for their welfare benefit plans because of an important exemption. Under this exemption, companies do not need to complete Form 5500 for benefit plans that covered fewer than 100 participants as of the beginning of the plan year and are unfunded, fully insured, or a combination of the two. If the DOL eliminate this exemption, all group health plans may be required to file Form 5500 each year.

ACA Quality Reporting

The proposed changes would also add a Schedule J to Form 5500 to satisfy two ACA reporting requirements that have only been partially implemented. Section 2715A of the Public Health Services Act (PHSA) requires non-grandfathered group health plans and health insurers to report certain information concerning certification as a Qualified Health Plan, or QHP. This includes claims payment policies and practices, financial disclosures, and data on enrollment and disenrollment, to name just a few. Section 2717 of the PHSA requires group health plans and insurers to report on benefits and reimbursements to improve health outcomes. These items include quality reporting, case management, disease management, care coordination, and other activities.

Provider Service Fees

In addition, the proposal will call for revising how service provider fees are reported on Form 5500 Schedule C. The DOL believes the changes will be a “powerful tool” that will aid in the evaluation of provider service agreements. The proposal will also make the Schedule C reporting requirements for employee benefit plans more similar to the information service providers are required to disclose to plan fiduciaries.

Effects on Employers

The proposed changes may be both a blessing and a curse for employers. On the one hand, eliminating the small plan exemption and implementing the ACA quality reporting requirements will create new costs by increasing small employers’ already substantial compliance burden. On the other hand, shining light on provider service fees for all employers should help employers (especially those with 51-99 employees) to identify opportunities to eliminate excessive fees and lower costs.

The DOL will publish its proposal to revise Form 5500 reporting on July 21, 2016 and will invite the public to comment on it. Comments are due no later than October 4, 2016. More information on Form 5500 is available at https://www.dol.gov/ebsa/5500main.html.

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