Groups Say Form 5500 Proposed Updates Too Burdensome

Retirement industry groups ask agencies to scale down reporting requirements for investments, fees and compliance.

The American Benefits Council, the Committee on Investment of Employee Benefit Assets (CIEBA), the Society for Human Resource Management (SHRM) and the ERISA Industry Committee (ERIC) have asked regulators to lighten up on some of the requirements that would be imposed on plan sponsors by proposed modifications to Form 5500.

Last July, the U.S. Department of Labor’s (DOL) Employee Benefit Security Administration (EBSA), along with the Internal Revenue Service (IRS) and the Pension Benefit Guaranty Corporation (PBGC) published a notice of proposed changes to its annual reporting regulations under Title I of the Employee Retirement Income Security Act (ERISA).

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The proposal included improvement on reporting regarding alternative investments, hard-to-value assets, and investments through collective investment vehicles. “The proposed changes are designed to foster ongoing monitoring of employee benefit plans by employers, plan fiduciaries, and participants and beneficiaries, and improve the ability of the Agencies to fulfill their statutory oversight roles,” the agencies said in a fact sheet

In their letter, CIEBA, SHRM and ERIC suggested the agencies should make investment disclosures consistent with other reporting requirements. They noted that in Accounting Standards Update 2015-12, the Financial Accounting Standards Board (FASB) changed its reporting requirements so that employee benefit plans only have to report their investment holdings by their general type, not by other, hard-to-measure information such as the nature of the investments and their risks. “The Agencies are now proposing to create a new, more burdensome system for investment-related disclosures. As a result, employers will have to expend resources to report the same assets in two separate ways. Not only is that costly and confusing, but it is also redundant to what is already being disclosed in the plan financial statements under the FASB requirements,” the groups argue.

NEXT: Schedule C reporting of fees

The agencies’ proposal would harmonize reporting on Form 5500 Schedule C with the now final disclosure requirements in DOL’s service provider disclosure regulation. “The proposed updates are intended to provide a powerful tool for improved evaluation of service arrangements involving investments, recordkeeping, and other administrative services. The Schedule C reporting requirements for employee benefit plans would also more closely track the information that plan service providers are required to disclose to plan fiduciaries,” the agencies said.

In their letter, the groups say they agree that this will help decrease the burden of having to report on a large number of entities. However, the large amount of information about the service providers that’s being required in Schedule C and in other parts of the revised form is still far too extensive, and it will only add to the high reporting burden, they say. Employers do not currently collect much of the data required to answer the new questions. They will have to develop new systems not only to collect information but also to process and verify it. Employers will also have to spend considerably more time soliciting information from dozens or even hundreds of vendors. Moreover, since many of the new questions are ambiguous or confusing, employers will need to engage legal counsel, which will increase costs. The organizations are concerned that employers will be forced to pass that increase in cost on to plan participants and that participants may actually see their fees increase.

Likewise, the American Benefits Council says the proposed revisions significantly increase the amount of information necessary to complete the forms, as well as the number of plans required to report and the way in which such plans must report. “Virtually all of the Council’s members would face substantial implementation costs and administrative burdens to meet the requirements of the proposed revisions,” it says.

NEXT: Compliance questions and health plan reporting

The proposal would also enhance reporting about plan compliance to improve plan operations, protect participants and beneficiaries and their retirement benefits, and educate and provide annual discipline for plan fiduciaries. The proposal would add selected new questions regarding plan operations, service provider relationships, and financial management of plans. These questions are intended to compel fiduciaries to evaluate plan compliance with important requirements under ERISA and the Internal Revenue Code and to provide the agencies with improved tools to focus oversight and enforcement resources.  

CIEBA, SHRM and ERIC respond that the questions focus heavily on costs and agency enforcement efforts rather than on providing stakeholders with a picture of the value that is being provided. “Given the one-sidedness of this focus, more frivolous litigation will inevitably follow, and this threatens to further undermine the retirement system,” they say.

The agencies’ proposal would increase data collection for a large sector of the health plan market made up of ERISA group health plans.  This includes eliminating for group health plans the current exemption from Form 5500 reporting for small insured and self-insured welfare benefit plans. In a separate letter, ERIC suggests the proposed amendments be withdrawn at this time. ERIC asked for the current proposal to be withdrawn, to wait for more certainty until the new Administration is in place, and if there must be changes, to take a less burdensome approach, including removing questions that would reveal confidential information.

“It is inappropriate to rush through such significant changes to reporting requirements while a new Administration is preparing to take over,” says James Gelfand, senior vice president of Health Policy, ERIC. “And, with much of the proposed Schedule J reporting being reliant upon provisions of the ACA, it would be prudent to delay making changes, since there is anticipation that the law may be drastically changed.”

Partnership Targets Adviser Education and Innovation

Voya and the American College of financial Services announced a new partnership aimed at directly supporting advisers and boosting client satisfaction and retention.

As part of its recently launched Voya Retirement University for Advisors program, Voya Investment Management is partnering with The American College of Financial Services to provide financial advisers with educational programs and resources to help them become better equipped to have retirement conversations with their clients.  

The American College of Financial Services is a nonprofit educational institution devoted to financial services. The college serves as a business partner and training specialist supporting banks, brokerage firms, insurance companies and others.

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Jake Tuzza, managing director and head of intermediary distribution at Voya Investment Management, says the educational services provided via the partnership will help advisers address the latest trends in interest rates, market risks, rising health care costs and changes associated with social safety nets.

“Advisers need access to informed and progressive ideas to truly differentiate themselves and demonstrate their value,” he notes. “We want to make sure we’re cultivating those best ideas and best practices as well as making them readily available to advisers.”

In addition to providing access to webinars, seminars and white papers, the partnership will offer a specific designation titled Retirement Income Certified Professional (RICP) to help advisers differentiate themselves in the retirement income space.

“The RICP designation focuses on relevant and practical content that helps advisers hone their skills in the retirement income planning process,” Tuzza concludes. “As part of this partnership, Voya is sponsoring a unique offer in which advisors can preview the type of education they will receive by enrolling in the RICP designation.”

Additional information is available at www.RetirementU.voya.com

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