With the growing importance of defined contribution (DC) plans like 401ks and 403bs as well as the growing use of technology for data mining, the DOL announced their intent to make significant changes to retirement and healthcare plan’s 5500 form. The changes will also enhance the DOL’s ability to uncover issues and conduct audits as well as improve publicly available information to third parties.
The five broad goals for the enhanced 5500 form proposal due out July 21, 2016 include:
- Modernize Financial Reporting – In order to foster ongoing monitoring of investments and improve DOL oversight, there will be greater information required on:
- Alternative assets
- Hard to value assets
- Collective trusts
- Group Health – Focused on smaller and self-insured plans.
- Data Mining – Changes will affect the data formatting and structure making it more computer accessible for data mining.
- Provider Fee Information – To help fiduciaries better evaluate service arrangements and harmonize with the prospective fee disclosure under 408b2.
- Compliance – New questions will be added to:
- Improve operations
- Protect participants
- Educate plan fiduciaries
While plan sponsors rely on their providers like TPAs to monitor the changes and make sure the form 5500 is properly completed, there are overall concerns and opportunities inherent with the tenor of the proposal. On the one hand, more data, especially around investments, that is easier to access may enable plan sponsors and their vendors better opportunities to assess their plan and make changes to improve retirement readiness. On the other hand, enhanced data and formatting also gives the DOL greater ability to determine if a plan should be audited and for plaintiff’s attorneys on whether a lawsuit would be successful.
Either way, the proposed changes, increases in DOL audits and lawsuits, as well as growing concern about stagnant workforces with higher labor costs should put even a greater spotlight on DC plans.
