The IRS and Department of Labor have proposed significant changes to be made to the Forms 5500 filings, including requiring all employers who provide health coverage to file a Form 5500 of some sort beginning with the 2019 filings. The Proposed Regulations [FR Doc 2016-14893] have been published for comments.
The Forms 5500 reports deal with various employee benefit programs (including qualified retirement plans, welfare benefit plans, etc.) that are subject to regulation by both the IRS and Department of Labor. Generally filing requirements vary based on the type of benefit provided and size of the plan, with small plans in certain cases exempted from the filings.
The proposed regulations would revise the information required. The agencies note that laws have changed since the original filings under EFAST2 were begun, and that the General Accountability Office has issued reports indicating that the agencies have failed to obtain information necessary for administration of the laws in question.
For small businesses one of the most significant changes is the proposal to require reporting for all employer provided health coverage on a Form 5500. Currently health care plans with fewer than 100 participants that are completely unfunded, partially funded by insurance and partially unfunded or fully insured are exempt from filing an annual Form 5500.
The preamble to the proposed regulations provide:
Plans that provide group health benefits that have fewer than 100 participants currently exempt from filing an annual report under 29 CFR 2520.104-20 because they are either completely “unfunded” or partially insured and partially unfunded now would be required to file a Form 5500 (except for those questions applicable only to pension plans) and the new Schedule J. Under the proposal, plans that provide group health benefits that have fewer than 100 participants that currently are exempt from annual reporting under 29 CFR 2520.104-20 because they are fully insured would be required to file with answers to certain questions on the Form 5500 and the Schedule J.
The preamble notes that most plans with fewer than 100 participants meet the requirements to be exempt from filing under current law as only a minority have benefits funded via a trust. So this expansion of the filing requirements would impose a new filing requirement on the vast majority of such plans.
The preamble describes the nature of the proposed filings for small, fully insured plans as follows:
As indicated above, small, fully insured group health plans would be required to answer only certain questions on the Form 5500 and on the Schedule J. This limited filing, which would be similar in scope to the limited pension plan reporting for plans established under section 408 of the Code that requires such plans to complete certain Form 5500 questions and no schedules, see, e.g., 2015 Form 5500 Instructions, Limited Pension Plan Reporting, is intended to serve as an annual registration statement with basic identifying and insurance information. The DOL considered whether to have small, fully insured group health plans file a separate registration statement either annually or based on certain events following the establishment of the plan (e.g., initial, final, change in insurance carrier). However, we believe that it will be less burdensome to have such plans file limited information through EFAST2, using the Form 5500, particularly for those small employers that already use the system to report for their pension plans.
Those current exempt from filing a Form 5500 under the Group Insurance Arrangement rules, but the GIA would require to separate Schedule J for each group health plan participating in the arrangement.
The type of information to be provided on the new Schedule J is described in the preamble to the proposed regulations:
The proposed Schedule J would collect information on the characteristics of the plan that is providing group health benefits, including the approximate number of participants and beneficiaries covered under the plan at the end of the plan year, and the number of persons offered and receiving coverage under the plan through COBRA, Consolidated Omnibus Budget Reconciliation Act of 1985 (Pub. L. 99–272, 100 Stat. 82), 29 U.S.C. 1161, et seq., whether the plan offers coverage for employees, spouses, children, and/or retirees, and what type of group health benefits are offered under the plan, for example, medical/surgical, pharmacy or prescription drug, mental health/substance use disorder, wellness program, preventive care, vision, dental, or various other types of benefits.
...The DOL also proposes that plans that provide group health benefits provide information on whether their health plan funding and benefit arrangement is through a health insurance issuer and whether benefits are paid through a trust or from the general assets of the employer. Schedule J would also ask whether there were participant and/or employer contributions. With respect to plans that use a prototype health insurance policy or arrangement (sometimes referred to as “off-the-shelf” plans/policies), the DOL is also requesting that such plans provide, if applicable, the relevant unique identifying information (such as a state assigned policy identification number) of the prototype/off-the-shelf policy or arrangement.
...Additionally, plans that provide group health benefits are asked to report whether one or more of the plan’s benefit package options are claiming grandfathered status under the Affordable Care Act, whether the plan is a high deductible health plan, a health flexible spending account (FSA) (or includes a health FSA as a component), or a health reimbursement arrangement (HRA) (or includes an HRA as a component).
...The proposed Schedule J also would ask whether the plan received rebates, refunds, or reimbursements from a service provider such as a medical loss ratio (MLR) rebate under the Affordable Care Act and offset rebates from favorable claims experience. If so, filers would be required to report the type of service provider, the amount received and how the rebates were used (e.g., returned to participants, premium holiday, payment of benefits, or other). In addition, the proposed Schedule J would request that group health plans identify any service providers to the plan (not already reported on Schedule A (Insurance Information) or Schedule C (Service Provider Information)) by providing the name, address, telephone number, employer identification number, and, if applicable, the National Insurance Producer Registry – National Producer Number (NPN) as established by the National Association of Insurance Commissioners
(NAIC). Such service providers include a third party administrator/claims processor, including an issuer subject to an “administrative services only (ASO)” contract, mental health benefits manager, wellness program manager, 39 substance use disorder benefits manager, pharmacy benefit manager/drug provider, or independent review organization. Schedule J also asks for the total premium payment made for any “stop loss” coverage, as well as information on the attachment points of coverage, individual claim limits, and/or the aggregate claim limit contained in the policy.
The proposal will also require additional information on Schedule J for plans not required to file Schedule H of Form 5500:
For group health plans that are not required to complete a Schedule H (generally, fully insured, unfunded plans, or combination insured/unfunded plans), the proposal would require that information regarding employer and participant contributions be reported on the Schedule J, including employer contributions received, participant contributions received, employer contributions receivable, participant contributions receivable, other contributions received or receivable (including non-cash contributions) and the total of all contributions. Filers would also be required to report whether there was a failure to timely transmit participant contributions to the plan.
As well, information on claims will be required:
The proposed Schedule J also would seek claims payment data, including information on how many post-service benefit claims (benefit claims) were submitted during the plan year, how many benefit claims were approved during the plan year, how many benefit claims were denied during the plan year, 40 how many benefit claim denials were appealed during the plan year, how many appealed claims were upheld as denials, how many were payable after appeal, and whether there were any claims for benefits that were not adjudicated within the required timeframes. The proposed Schedule J would also seek data on how many pre-service claims were appealed during the plan year, and how many of those appeals were upheld during the plan year as denials and how many were approved during the plan year after appeal.
...In addition, plans would be asked to report whether the plan was unable to pay claims at any time during the plan year and, if so, the number of unpaid claims. Plans would also be asked to report the total dollar amount of claims paid during the plan year, and if the plan provides benefits through an insurance policy, to identify any delinquent payments to the insurance carrier within the time required by the carrier, and whether any delinquencies resulted in a lapse in coverage.
The form will also ask about certain compliance issues:
The proposed compliance section of the Schedule J asks if all plan assets were held in trust, held by an insurance company qualified to do business in a State, or as insurance contracts or policies issued by such an insurance company consistent with section 403 of ERISA and 29 CFR 2550.403a-1 and 2550.403b-1, whether plan assets are not held in trust based on reliance on Technical Release 92-01, whether the plan’s summary plan description (SPD) and summaries of any material modifications (SMM), and summary of benefits and coverage (SBC) are in compliance with the applicable content requirements, whether coverage provided by the plan is in compliance with applicable federal laws and the DOL’s regulations thereunder, which may include the portability and nondiscrimination provisions of the Health Insurance Portability and Accountability Act of 1996, Title I of the Genetic Information Nondiscrimination Act of 2008, the Mental Health Parity Act of 1996, the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008, the Newborns’ and Mothers’ Health Protection Act of 1996, the Women’s Health and Cancer Rights Act of 1998, Michelle’s Law, and the Affordable Care Act.
As noted, plans with fewer that 100 participants and that are fully insured will only answer a subset of the questions, specifically those found in Part I of the proposed Schedule J (Group Health Plan Characteristics).
The proposed regulations list those questions as follows:
1 Approximate number of persons (including participants, beneficiaries and dependents of participants) covered under the plan at the end of the plan year?
2 The plan offers health coverage to the following (check all that apply):
 retirees only
3 Indicate which of the following types of benefit(s) and design characteristics are included under the plan. (Check all that apply):
 medical/surgical benefits
 mental health/substance use disorder benefits
 pharmacy or prescription drug benefits
 wellness program
 preventive care services
 emergency services
 pregnancy benefits
4 Health funding and benefit arrangement (check all that apply):
4a(1)(a)  health insurance issuer.
If you check this box, enter name(s), EIN, and National Insurance Product Registry Number of insurance carriers providing benefits under the plan.
4a(1)(b) If the health funding or benefit arrangement is through a prototype/off-the-shelf insurance product, enter the identification number of the prototype/off-the-shelf insurance product.
4a(1)(c) Please check whether one or both of the following are used to pay premiums:
 employer contributions
 participant contributions
4a(2)  benefits paid from general assets of the employer
 employer contributions
 participant contributions
4a(3)  trust
 employer contributions
 participant contributions
5 Check all that apply to the plan:
 one or more benefit package options claiming grandfathered status under the Affordable Care Act
 high deductible health plan
 health reimbursement arrangement (HRA) or plan includes an HRA
 health flexible spending account (FSA) or plan includes an FSA
6a How many persons were offered COBRA benefits during the plan year?
6b Of the persons counted in line 6a, how many persons elected COBRA benefits?
6c How many persons were receiving coverage under the plan through COBRA during the plan year?
7a Did the plan or plan sponsor receive any rebates, reimbursement, or refunds other than those reported on Schedule A from service providers during the plan year?  Yes  No If “Yes,” you must complete Line 7b. If “No,” skip to Line 8.
7b(1) If you answered “Yes” to Line 7a, enter separately the amount and date received of each rebate, reimbursement, or refund. For each rebate, reimbursement, or refund listed, complete elements 7b(2) and 7b(3).
(2) Type of service provider that provided each rebate, reimbursement, or refund
 health insurance issuer
 third-party administrator
 pharmacy benefit manager
 other (specify)
(3) How each rebate, reimbursement, or refund was used (Check all that apply):
 amount returned to participants
 premium holiday
 payment of benefits
8a If any benefits were provided pursuant to an insurance policy that was not reported on Schedule A, were there any premium payment delinquencies for premiums due but unpaid during the year ?  Yes  No If “Yes,” enter number of times delinquent and for each delinquency enter the number of days delinquent.
8b. If you answered “Yes” to line 8a, indicate whether any premium delinquency resulted in a lapse in coverage. If you answered “No” to line 8a, enter “N/A”.  Yes  No  N/A
The proposed regulations would also make other changes to the EFAST2 and 5500 filing system, including allowing for electronic filing of the Form 5500EZ via EFAST2 along with other “IRS only” information forms.
The good news is that any change won’t take place until 2019, but the expanded health care filings would likely impact most business clients of CPA firms.