DOL proposes changes to reporting regulations; updates to Form 5500 series

The Department of Labor (DOL) has issued proposed revisions to modernize and improve the Form 5500 Annual Return/Report filed by private-sector employee benefit plans. If adopted, the changes generally would apply for plan years beginning on or after January 1, 2019.

The Form 5500 is the primary source of information about the operations, funding and investments of private-sector, employment-based pension and welfare benefit plans in the U.S. There are an estimated 2.3 million health plans, a similar number of other welfare plans and nearly 681,000 pension plans. Covering roughly 143 million private-sector workers, retirees and dependents, these plans have an estimated $8.7 trillion in assets.

The proposed changes to the Form 5500 Annual Return/Report and regulations are designed to: (1) modernize financial information filed regarding plans; (2) harmonize information on fees and expenses that plans pay to service providers with the information that service providers disclose to plans; (3) enhance mineability of data filed on the Form 5500 Annual Return/Report; (4) require reporting by all plans covered by Title I of ERISA that provide health benefits, including adding a new Schedule J (Group Health Plan Information); and (5) focus filers on compliance with certain ERISA and Code provisions through new questions on plan operations, service provider relationships, and financial management. These revisions are being proposed in conjunction with recompeting the contract for operation of the ERISA Filing and Acceptance System (EFAST2), which is expected to begin processing Plan Year 2019 forms, beginning January 1, 2020.

Modernize financial and investment reporting by pension plans. A key component of the proposal would expand and modernize financial and investment information reported by pension plans. Reporting on the financial operations and integrity of U.S. private pension plans (both defined benefit and defined contribution) is critical given the ongoing importance of such plans to the retirement security of America’s workforce. Moreover, improved transparency of financial products and investments acquired by plans is critical to the ability of the Agencies to fulfill their statutory oversight role. It is also important for ongoing monitoring of retirement plans by employers, plans, participants and beneficiaries, and policy makers. These proposed changes to financial reporting are specifically designed to improve reporting of alternative investments, hard-to-value assets, and investments through collective investment vehicles and participant-directed brokerage accounts.

Support oversight of group health plans. The proposed forms revisions and DOL implementing regulations would expand Form 5500 reporting by group health plans by eliminating exemptions for certain plans from Form 5500 reporting. Specifically, most private employer-sponsored group health plans with fewer than 100 participants that are fully insured, unfunded, or a combination of the two, currently do not file the Form 5500 Annual Return/Report. As a result, for policy formulation, research, and regulatory impact analyses, the DOL must rely on surveys, instead of Form 5500 Annual Return/Report data, to generate even basic estimates of the size of the ERISA group health plan universe that is a major part of the nation’s health care delivery system. The current lack of information collected on the Form 5500 Annual Return/Report from group health plans impairs the effectiveness of Employee Benefit Security Administration’s ability to develop health care regulations and complicates the DOL’s ability to enforce such regulations and educate plan administrators regarding compliance.

Reporting to satisfy PHSA Secs. 2715A and 2717. Section 2715A of the Public Health Service Act (PHSA) incorporates the transparency provisions of the Patient Protection and Affordable Care Act (ACA) to require nongrandfathered group health plans and health insurance issuers offering nongrandfathered group or individual health insurance coverage to make available to the DOL, the Department of Health and Human Services (HHS), Treasury, state insurance commissioner and the public a host of information on health plan enrollment and claims. This includes: (1) claims payment policies and practices; (2) periodic financial disclosures; (3) data on enrollment and disenrollment; (4) data on the number of denied claims; (5) data on rating practices; (6) information on cost-sharing and payments with respect to any out-of-network coverage; (7) information on enrollee and participation rights; and (8) other information as determined by the Secretary.

Sec. 2717 of the PHS Act generally requires nongrandfathered group health plans and health insurance issuers offering nongrandfathered group or individual health insurance coverage to report annually to the DOL, HHS and the Treasury and to enrollees under the plan whether the benefits under the plan: (A) improve health outcomes through the implementation of activities such as quality reporting, effective case management, care coordination, chronic disease management, and medication and care compliance initiatives for treatment or services under the plan or coverage; (B) implement activities to prevent hospital readmissions through a comprehensive program for hospital discharge that includes patient-centered education and counseling, comprehensive discharge planning, and post-discharge reinforcement by an appropriate health care professional; (C) implement activities to improve patient safety and reduce medical errors through the appropriate use of best clinical practices, evidence-based medicine, and health-information technology under the plan or coverage; and (D) implement wellness and health-promotion activities.

Comments requested. Written comments must be received by the Department of Labor on or before October 4, 2016. Comments may be submitted, identified by RIN 1210-AB63, via the Federal eRulemaking Portal at http://www.regulations.gov; or by mail: Office of Regulations and Interpretations, Employee Benefits Security Administration, Attn: RIN 1210-AB63; Annual Reporting and Disclosure, Room N-5655, U.S. Department of Labor, 200 Constitution Avenue NW., Washington, D.C. 20210.

SOURCE: DOL proposed rules, advance release, both scheduled to be published in the July 21 Federal Register.

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