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Form 5500 Interim Final Regulation

Form 5500 Interim Final Regulation

NAPEO Files Comments on Form 5500 Notice of Proposed Rulemaking
On December 5, 2016, The Groom Law Group filed comments on behalf of NAPEO, the Society of Human Resource Management (SHRM), and ACCE Benefits Trust on the Proposed Revision of Annual Information Return/Reports (Form 5500) and Proposed Rules Regarding Annual Reporting and Disclosure. The comments requested that the Department of Labor revise its regulations to permit multiple-employer plans to separately submit their lists of participating employers and contribution percentage estimates in a manner in which the information remains confidential and is not made available to the public.

On November 10, 2014, the U.S. Department of Labor (DOL) issued an interim final regulation (IFR) requiring multiple employer plans (MEPs) to include on their Form 5500 filings a list of participating employers and a good faith estimate of the percentage of total contributions made by each participating employer. The IFR applies to multiple employer health, welfare, defined benefit, and defined contribution plans.

‚ÄčThis regulation could force some PEOs, when they file their Form 5500 with the DOL, to list their clients that participate in their PEO-sponsored plans. The DOL makes all Form 5500 filings available on their website, so these filings would include the listed participants in your PEO’s MEP. This rule will apply to plan years beginning after December 31, 2013.

PEO Impact

There is no definitive DOL guidance on whether a PEO-sponsored plan in which client employers participate is a MEP. (This applies to not only health and welfare plans sponsored by PEOs, but also defined benefit and defined contribution pension plans.) Some PEOs take the position that their plan is a MEP, while others do not. The determination of whether a particular PEO-sponsored retirement or healthcare plan is a MEP will have to be made by that PEO, presumably based on advice from legal counsel.

For those PEOs that determine their plans are MEPs, the reporting requirements described above could create significant consequences.

For PEO-sponsored MEP retirement plans, they may have to report the name of each participating employer (i.e., worksite employer) as well as the amount of contributions made by each worksite employer. For PEO-sponsored MEP health plans, as with retirement plans, the PEO-sponsored health plan could be required to disclose the names of participating worksite employers.

For PEO-sponsored MEP health plans, the additional disclosures required by the CSEC Act and regulation come on the heels of other recent changes to the Form 5500 requiring multiple employer welfare arrangements (MEWAs) to report information on compliance with the M-1 filing requirement. This additional requirement applying to MEWAs went into effect for the first time with the 2013 Forms 5500.

The new reporting requirements could implicate existing contractual provisions regarding confidentiality that may run from a PEO to a worksite employer. If so, affected PEOs will need to/should review their CSAs and other documents governing the client relationship to determine what, if any, changes may need to be made.

Go to Form 5500 Resources