Changes to the Form 5500 continue to be relatively small on the health and welfare side. Nevertheless, we want to keep you informed and ready to dispel any concerns from your clients. Often, when headlines include the phrase, “Proposed Changes from the DOL,” one has a foreboding feeling. For now, that feeling is not warranted.
On a separate front, be sure to read to the end of this blog for information on Covid refunds from carriers to Plan Sponsors that are starting to pop up on the Schedule As.
2021 FORM 5500 – LOCKED IN
On the surface, the specific changes to the 5500 and its Schedules are for retirement plans. However, there is information that you need to know for clients that have large health and welfare trusts.
Effective December 2021, the auditing standards for CPAs are to change as noted under SAS 136. Since the ERISA plan’s financials under a large trust are to be audited by an independent qualified public accountant (IQPA), the changes under SAS 136 are to be applied and a report on the audit is to be attached to the Form 5500 at the time it is efiled. In addition, with changes to the audit, the financial Schedule H also had some modifications.
Once we were aware, at the beginning of 2021, of SAS 136, we modified our protocols on handling trusts for our clients. Starting this year, we expeditiously draft the report as soon as all of the Schedule As are in house. In addition, we add the beginning Plan year numbers for the Schedule C, H, or I and then send the draft to the CPA who in turn can work their next set of tasks.
For specific details on how SAS 136 affects the Form 5500, particularly the Schedule H for health and welfare, see below. [Note – this actually took effect with the 2020 Form Year Schedule H; SAS 136 was originally to be in effect in 2020 but was delayed a year due to the Covid pandemic].
PER THE 5500 INSTRUCTIONS
Schedule H Part III – Accountant’s Opinion. Among other improvements, SAS 136 permits the IQPA to issue a form of an unmodified opinion when the IQPA has performed an audit pursuant to 29 CFR 2520.103-8 and/or 29 CFR 2520.103-12 (an ERISA section 103(a)(3)(C) audit). Schedule H, Line 3b now replaces a “yes”/“no” question with the appropriate checkboxes to indicate whether the ERISA section 103(a)(3)(C) audit supporting the Accountant’s Opinion was performed pursuant to 29 CFR 2520.103-8 or 29 CFR 2520.103-12, pursuant to both, or not performed pursuant to either of those sections. The instructions for the questions on the Accountant’s Opinion have also been revised to reflect SAS 136.
2022 FORM 5500s – PROPOSED [COMMENT PERIOD ENDS NOVEMBER 1, 2021]
The proposed changes for the 2022 Form 5500 stem from the amendments to ERISA due to the Secure Act of 2019. Most of the changes apply to pension plans; however, there are a few that apply to health and welfare plans.
Change #1: Currently, Multiple Employer Welfare Arrangements – MEWAS file a Form M1 to register with the DOL. Under the proposed changes, if the ERISA Plan is a medical-only plan for the MEWA, the list of participating employers and their EIN no longer need to be attached to the Form 5500 (they will be included with the Form M1 instead). Please note: many MEWAs include other benefits besides medical. For those in this arrangement, they are to still include the list of participating employers with their 5500.
Change #2: If the Schedule H – currently in place, if the Plan has investments, the Plan Sponsor is required to attach a schedule of the assets. The proposed changes provide more standardization.
Change #3: Finally, trust questions would be added to the Form 5500 in regard to the name of the plan’s trust, the trust’s EIN, the name of the trustee or custodian, and the trustee’s or custodian’s telephone number.
Wrangle will continue to monitor the changes as they are released from the DOL and other federal agencies. Please continue to monitor these bi-monthly blogs to stay in tune with upcoming developments. For any questions, feel free to contact Ann McAdam at firstname.lastname@example.org.
COVID REFUNDS ON SCHEDULE AS
We have seen Schedule As from carriers that list COVID premium refunds. For experienced-rated policies where the carrier breaks out the individual components of the premium, the refund will be listed on the Schedule A under 9c(2). For non-experience rated policies, the refund will be subtracted from the total premium reported. This approach has been approved by our contact at the DOL.