5 major changes coming to Form 5500s

Register now

The Department of Labor has proposed major changes to Form 5500s, which the government requires all employee benefit plans with more than 100 covered lives to file annually.

The changes are not likely to begin until form year 2020 and Lynda S. Taylor, chief operating officer at Wrangle, a consultancy that focuses on Form 5500s, expects the Labor Department to announce the changes by early fall 2017. At that point, she explains, stakeholders will need to understand these amendments.

Through her recent meetings with DoL officials to discuss proposed changes, Taylor shares five major changes brokers need to be aware of now:

1. Firms must ensure that filed information is transparent to the DoL: The information will include who the money is invested with and what the fees are like, including if they are reasonable. “It will also provide more insight on the numbers of enrolled participants, employees, dependents, COBRA and COBRA dependents, as well as information on how rebates are handled, past due premium payments, and TPA payments for Stop Loss and Self-insured benefits,” Taylor explains.

2. Forms must provide greater information regarding group health plans: This will require new forms and will require employers with two covered lives to now file a Form 5500, which could cause nearly 2 million more plans to file, a 23x time jump. “The only exceptions are multiple employer welfare arrangements and plans that hold their assets in trust,” Taylor says. “Those types of plans already have to file regardless of their enrolled count.”

3. The new schedule J has more than 30 questions that must be answered: The schedule covers rebates, fees, premiums, self-insured benefits, compliance questions and more. While many are yes/no questions, some dig “deeply, especially in terms of compliance,” Taylor explains

4. Data must be "mine-able" so that it is data machine readable: “This is significant for the DOL who has stressed in their most recent report to Congress that there are significant areas where they do not have full information, e.g. plans with less than 100 enrolled, plans with self-insured medical benefits,” Taylor says.

5. Information of service provider fees has been updated: The proposed Schedule C lowers the reporting threshold from fees paid of $5,000 or more down to $1,000 or more for vendors providing services to plans that hold their assets in trust.

The changes mean advisers are going to have to be on top of the additional information that is supplied by an employer, carrier and TPA, Taylor explains. “It is going to be a game changer in many ways for the 5500,” she adds.

What it means
These proposed changes will be more work for everybody involved, including employers, brokers and companies that prepare and produce the forms, Taylor explains.

Also see: "10 key 5500 facts benefit pros need to know."

Although the changes are not likely to be implemented until form year 2020, advisers and stakeholders should start preparing now.

“It is always good to be prepared when it comes to compliance questions and proposed compliance changes,” Taylor says. “One area in [the new] Schedule J, asks for more detail and responses if company has proper documentation in their place for their plan, which is something that DoL has been pushing.”

In her conversations with the Labor Department, she has discussed how these changes will be shared. The DoL indicated companies should check its website, “which is not high to do on a daily or weekly basis,” Taylor quips.

As a result, it will fall on brokers to educate themselves on the changes and companies like Wrangle, which plans to produce education pieces, white papers and webinars.

For reprint and licensing requests for this article, click here.