December 14, 2016
Plan Sponsor Groups Call on DOL to Withdraw Proposed Form 5500 Changes
By David Slaughter, JD, Senior Legal Editor

Two major plan sponsor organizations urged the U.S. Department of Labor (DOL) to withdraw the revisions it proposed to the Form 5500 reporting requirements for group health and retirement plans.

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Benefits Forms“The most significant Proposed Revisions would expand the annual reporting requirements to all group health plans regardless of size, collect more information on the operations of health and retirement plans, increase the level of detail reported on each plan’s financial information, and expand the information collected with regard to service provider compensation,” according to written comments submitted December 5, by the American Benefits Council (ABC).

As such, the Form 5500 changes, proposed by the DOL and other agencies in July, could “create significant administrative burdens for employee benefit plan sponsors and service providers, unnecessarily increase the cost of operating employee benefit plans, and reduce the appeal of plan sponsorship,” ABC warned. “Further, we are concerned that many of the Proposed Revisions would require plan administrators, under penalty of perjury, to answer questions for which they do not have readily available information.”

“Given the overwhelming number of changes included in the Proposed Revisions and the volume of comments we expect the Agencies to receive, we believe that a withdrawal and reproposal will be necessary in order to address all of the feedback in a meaningful way,” ABC continued. “Those steps would allow the Agencies to carefully consider all of the comments they have received, make appropriate changes, and receive feedback on a more appropriate and cost-conscious package.”

The notice of proposed revision was published July 21 (81 Fed. Reg. 47534) by the DOL, along with the Internal Revenue Service (IRS) and the Pension Benefit Guaranty Corporation (PBGC). The DOL also posted a separate notice of proposed rulemaking at the same time that was related to Forms 5500 and their submission to the agencies. The changes were scheduled to be implemented in 2020 for the 2019 plan year.

Change of Administration

The upcoming change in presidential administration is another good reason for the DOL to take a step back, according to the ABC and the ERISA Industry Committee (ERIC). “It seems inappropriate to rush through such significant changes to reporting requirements while a new Administration is preparing to take over,” especially given the proposal’s relationship to the Affordable Care Act, ERIC argued. “We urge the Departments to delay making wholesale changes to the Form 5500 in anticipation of complying with a law that may be about to experience drastic change.”

ABC agreed that, given the proposal’s potential implementation costs, “any incoming administration would want to review all of the public comments submitted and determine which reporting changes should be retained or abandoned in accordance with its own policy preferences.”

Even if the DOL, IRS, and PBGC refuse to withdraw the proposal altogether, they should delay its effective date until at least the 2020 plan year, ABC suggested. Implementing it for 2019 “would not give the parties who are responsible for collecting and reporting all of the newly requested information enough time to thoroughly implement all of the changes,” given that the revisions could not be finalized until mid-2017 at the earliest, according to the group. “Given the scope and breadth of the Proposed Revisions, eighteen months does not provide enough time to implement any final revisions.”

The Forms 5500, filed to satisfy the annual reporting requirements of the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code, are the primary source of information for both the federal government and the private sector on employer-sponsored benefit plans. The proposed revisions are designed to address changes in the applicable laws, the employee benefits environment, and the financial markets.

ERISA Section 104(a)(2)(B) authorizes the DOL to gather information that is necessary to protect employee benefits or relates to financial or other information on ERISA plans. However, “the amount of information sought by the Proposed Revisions extends far beyond the authority permitted under ERISA Section 104(a)(2)(B),” ABC stated. “Specifically, much of the information proposed to be collected seems intended to further the DOL’s audit and enforcement efforts outside of a formal audit or enforcement action.”

Schedule J

The proposal for a new Schedule J was cited as a particular concern from the health plan perspective. “The proposed Schedule J would impose significant new and, we believe, unnecessary burdens on plan sponsors with little, if any, benefit,” according to ERIC’s comments.

“Plan sponsors have significant questions and trepidation about the purpose” of the detailed questions on claims payment and adjudication and regulatory compliance, ERIC added. “Beyond a general concern that the Departments are engaged in a ‘fishing expedition,’ looking for ways to penalize plans that are operating in good faith but may have produced paperwork errors, there are concerns over the portrayal of data that would be reported.”

Because plan sponsors usually rely on their insurers or third-party administrators (TPAs) to process claims and appeals, “the plan sponsor of a single ERISA health and welfare plan would need to gather information from potentially a myriad of different insurers or [TPAs] in order to complete Schedule J reporting, which would significantly increase the time and cost associated with completing the Form 5500,” ABC noted. Tracking and compiling all of this data would likely require employers to add benefits staff and expand TPA services, and would create new Health Insurance Portability and Accountability Act (HIPAA) privacy compliance challenges.

“Claims under the pharmacy, mental health, dental and vision benefits could be in the hands of different vendors, in different formats, and could be very complicated to obtain, promulgate, and convey to the Departments in a uniform and meaningful manner,” according to ERIC. “ERIC members have learned through experience with shared responsibility reporting that these vendors often refuse to cooperate, do not share data in the same formats, and charge handsomely for additional information and report generation.”

Recommended Changes

If the DOL and other agencies do not withdraw the proposal outright, ABC urged them at least to make the following changes:

  • Eliminate the proposed requests for information that exceed the scope and purpose of ERISA’s annual information reporting requirements.
  • Eliminate information requests that will create unnecessary administrative burdens and increase costs without providing meaningful benefits for plan sponsors, participants, or the public.
  • Eliminate duplicative reporting, where possible, to reduce administrative burdens, costs, and confusion.
  • Adopt final revisions that are structured and defined consistently with other state and federal regulatory regimes.
  • Remove information requests that plan administrators cannot consistently and accurately complete under penalty of perjury.
  • Provide clarification on new and existing Form 5500 series elements that are unclear or for which filers would be unable to produce information that is accurate, consistent, and reliable.
  • Remove information requests that will drive up the cost of plan sponsorship by unnecessarily increasing litigation risks for plan sponsors and service providers.
  • Adopt final revisions that clearly distinguish the operational and reporting responsibilities of plan administrators and service providers.
  • Eliminate information requests that are structured in ways that will not accurately reflect plan operations.
  • Adopt final revisions to the Form 5500 series that will allow plans and service providers to complete the annual return/report in a manner that is efficient and supports the interest of plan sponsors and participants.

David Slaughter David A. Slaughter, JD, is a Senior Legal Editor for BLR’s Thompson HR products, focusing on benefits compliance. Before coming to BLR, he served as editor of Thompson Information Services’ (TIS) HIPAA guides, along with other writing and editing duties related to TIS’ HR/benefits offerings. Mr. Slaughter received his law degree from the University of Virginia and his B.A. from Dartmouth College. He is an associate member of the Virginia State Bar.

Questions? Comments? Contact David at for more information on this topic

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