Have you taken advantage of your chance to review advance copies of the 2016 Form 5500 to discover how the U.S. Department of Labor’s (DOL’s) proposed changes will likely impact your company’s reporting requirements with regard to its retirement plan and/or health and welfare plan? While these advance copies of the form are only to be used for informational purposes, they effectively provide plan sponsors with valuable insight with regard to the responsibilities they will likely face in the months and years ahead.
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Why Filing Matters
A company’s reporting obligations under ERISA are satisfied when a company files Form 5500 for its retirement, health and other welfare plans. Not only does this form promote the disclosure of important information to plan participants and beneficiaries, it’s an essential compliance and research tool for the DOL, IRS and the Pension Benefit Guaranty Corporation. Furthermore, the information included on Form 5500 is used by other federal agencies as a source for employee benefit, tax and economic trends and policies.
Proposed Regulations
In July of this year, a proposal known as the Form 5500 Modernization Initiative was introduced. This initiative is a collaboration of proposed changes relating to the Form 5500. There were five major goals of this initiative:
- Modernize the financial statements and investment information filed about employee benefit plans.
- The changes under the proposal are intended to improve transparency and reliability of financial reporting, including better information on plan terminations, mergers and consolidations and also include questions to derive information relating to areas where the regulatory agencies have commonly found compliance issues..
- Update reporting requirements for service provider fee and expense information.
- The intention of the proposal is to update the reporting of fees and expenses to allow the data included on the Schedule C to be better utilized in evaluating the reasonableness of cost for services provided.
- Enhance accessibility and usability of data filed on the forms.
- The proposal would initiate improved usability of Form 5500 data by converting more elements of the Form 5500 into computer-processable data. In addition, the proposed changes would allow the development of more individualized tools to aid employers and employees alike in evaluating retirement savings at the plan and individual levels.
- Require reporting by all group health plans covered by Title I of ERISA.
- To establish better compliance awareness among plans, current small insured/unfunded group health plans would now be required to file a Form 5500. This has been estimated to result in almost two million more required filings. In addition, a new schedule, Schedule J, would be required to be included in the filing, providing information about the group health plan operations and ERISA compliance.
- Improve compliance through new questions on plan operations and financial management of the plan.
- The goal under this part of the proposal is to enhance reporting on compliance in an effort to improve plan operations and protect participants/participant benefits. Among additional questions would be some additional disclosures, including a list of additional required informational pieces in respect to the plan audit report for audited plans.
Proposal to Final Regulations
As with any proposed regulations, a comment period was allowed for interested parties to essentially provide feedback on the proposed changes. The initial deadline for this comment period was Oct. 4, but was extended until Dec. 5. While we can’t look into our crystal ball and say for certain what the final regulations will hold as compared to the proposed regulations, we expect the final regulations to be available in the very near future. Watch for a follow-up article outlining the changes under the final regulations.
Email Rea & Associates to learn more about how these changes will impact you as the fiduciary of your retirement and/or health and wellness plan, especially if you’ve never had to file Form 5500 in the past.
By Darlene Finzer, CPA, QKA, CSA (New Philadelphia office)