5500 tweaks cast light on small-business exemption
The so-called Form 5500 modernization is seen as an opportunity for the incoming Trump Administration to make good on one of its campaign promises to the delight of employee benefit practitioners across the industry.
“Even though the revised forms wouldn’t be used until the 2019 plan year, if Trump keeps his position on reducing regulatory burdens, this would be a good set of proposed regulations for the administration to focus on eliminating,” observes Kirsten Stewart, a member of Sherman & Howard’s employee benefits group.
A tri-agency notice of proposed changes to annual reporting regulations under Title I of ERISA was published last July. The effort, which seeks to harmonize reporting on Form 5500 Schedule C with final disclosure requirements in service provider disclosure regulation, involves the U.S. Department of Labor’s Employee Benefit Security Administration, Internal Revenue Service and Pension Benefit Guaranty Corporation.
Christopher Condeluci, a principal with CC Law & Policy and former counsel to the Senate Finance Committee, says Trump and his troops could pull back the proposed modifications and simply rebid the contract for an upgraded ERISA Filing Acceptance System (EFAST) with the same information that is currently requested on the 5500 form with no changes.
While not necessarily banking on that happening because anything is possible, he believes there’s a strong likelihood of this outcome. “If that doesn’t happen,” Condeluci surmises, “the broker community could take some solace in the fact that it is highly likely that even if the regs are finalized, that the small plan exemption will not be eliminated.”
Also hanging in the balance are modifications to 5500 forms pertaining to the Affordable Care Act, whose days, Condeluci says, are numbered. One purpose of Schedule J under the proposed rules was to collect information that would comply with two new notice requirements under the ACA over which the Department of Health and Human Services has authority. If the ACA is repealed, Condeluci says those notice requirements will not go into effect, which would negate the need for Schedule J.
“I think the broker community can breathe a sigh of relief that it’s not likely they will have to comply with all of the rules in the proposed regs due to the administration change,” he says.
Good faith compliance
The National Association of Health Underwriters considers government estimates that new Schedule J filing costs for 2.2 million group health benefit plans of all sizes would increase by $202.6 million to be “very low” and “do not take into account the development of systems to track data that will be required.” The group recommends imposing “a good-faith compliance standard for at least the entirety of each plan year for the first full new compliance period.”
Hundreds of comments on the 5500 form proposal were sent by the recent Dec. 5 deadline “from groups all over the U.S., many requesting that the proposals be withdrawn and reissued,” according to Stewart. In terms of procedure, she says any regulation that is designated a major rule has to be issued at least 60 days before it goes into effect. Many of the comments expressed concern about complying with significant reporting changes.
NAHU argues that requiring 5500 reporting without a small group exemption represents an “unprecedented expansion of federal requirements on employer-sponsored health benefit plans that could dissuade thousands of employers from continuing to provide health coverage to their employees.” The group estimates that more than 2 million new American businesses with few compliance resources would find this proposal “extraordinarily costly and burdensome.”
Other industry groups that have asked regulators to ease these proposed requirements include The American Benefits Council, ERISA Industry Committee, Committee on Investment of Employee Benefit Assets and Society for Human Resource Management.
No matter what happens, Stewart says 5500 forms need to be updated, and that moving forward, “they will remain a good way for the DOL and IRS to monitor plans and select plans for audit.”