DOL’s Form 5500 Modernization Proposal Faces an Uncertain Future

By John Ortman • October 23, 2017 • 0 Comments

Work on the Labor Department’s effort to expand, streamline and modernize the Form 5500 Series has been halted until a new head of the DOL’s Employee Benefits Security Administration (EBSA) is in place, according to ERISA attorney S. Derrin Watson.

Leading a workshop session at the 2017 ASPPA Annual Conference Oct. 23, Watson noted that Preston Rutledge, senior tax and benefits counsel on the Republican tax staff of the Senate Finance Committee, has been nominated to serve as head of the EBSA. However, even assuming that Rutledge’s nomination is approved and he fills the leadership vacuum at EBSA, “it is not likely the [5500 modernization] effort will be be high on his list of priorities,” said Watson, noting that the fiduciary rule will likely be his primary focus.

And of course, the Trump administration’s restrictive view of the role of the federal government in general, and of federal regulation especially, is essentially the polar opposite of the view of the Obama administration, under which the Form 5500 modernization effort was conceived and promulgated. “There are a number of things I think the new political leadership will want to take in a different direction,” Watson told attendees.

ARA General Counsel Craig Hoffman, who moderated the session, noted one factor that may exert pressure on the EBSA to shuffle the Form 5500 effort higher on its list of priorities: the impending need to renew the vendor contract for administration of the EFAST electronic filing system. Hoffman also suggested that even if the modernization proposal is withdrawn or reconsidered after new leadership is in place at EBSA, “some pieces of it may be broken out and moved separately,” including several provisions that ASPPA supports.

For the most part, the significant expansion of the scope of the information collected on the 5500 Series proposed by the EBSA would create significant new burdens on those who prepare the forms, and the emphasis on greater public accessibility would be a boon to plaintiffs’ attorneys. But Watson did highlight some good news, and even a possible business growth opportunity.

The Good News

Watson noted a significant improvement in the way small DC plans are distinguished from large ones: Under the proposal, the definition would be based on the number of active participants with account balances.

In addition, 5500-EZs and Form 5558 extension requests could be filed electronically (paper filing would still be available). The latter could be a long-sought solution to the problem encountered by filers who submitted a 5558 but found that the form had not been processed by the DOL by the end of the extension, resulting in a “late” filing that wasn’t actually late.

To accommodate a new reporting requirement for health plans created by the Affordable Care Act (ACA), the EBSA’s Form 5500 modernization proposal includes a mandate that all health plans must report ACA-mandated data on a new Schedule J. Noting that the DOL estimates that this new reporting requirement will add about 2 million new 5500s, Watson asked: “Do you see an opportunity to expand your business?” 




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