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Congress Considers Commonsense Reporting Act; to Streamline ACA Filings

Congress Considers Commonsense Reporting Act; to Streamline ACA Filings

Legislation introduced in the U.S. House of Representatives on Sept. 21, if enacted, could simplify employers’ annual Affordable Care Act (ACA) reporting of health plan information to the IRS. The bipartisan Commonsense Reporting Act of 2021 (H.R. 5318) was introduced by Reps. Mike Thompson, D-Calif., and Adrian Smith, R-Neb. A Senate version of the legislation is expected to be introduced shortly, sponsored by Sens. Mark Warner, D-Va., and Rob Portman, R-Ohio.Reducing Reporting BurdensUnder current law, employers must report annual data to the IRS under tax code Sections 6055 and 6056 during the year-end tax filing season. These provisions require HR professionals to track data each month.The Commonsense Reporting Act would allow reporting to be done prospectively before the beginning of a new coverage year, based on employee coverage during the current plan year.Research by the Society for Human Resource Management (SHRM) shows that fulfilling these requirements comes at great time and expense to employers. If an employer is unable to submit IRS forms, they may face serious financial penalties. On Sept. 9, during the SHRM Annual Conference & Expo 2021, more than 3,000 SHRM members called on Congress to act on legislation to streamline and modernize IRS reporting requirements for employers.”With 300,000-plus HR professionals and business executives as members, SHRM appreciates congressional efforts to streamline and modernize health care benefit reporting requirements,” said Emily Dickens, SHRM’s chief of staff, head of government affairs and corporate secretary. “Our membership’s expertise includes administering and reporting on health care benefits. This effort will directly impact their work.” According to a SHRM position statement:”A more streamlined, proactive reporting system would reduce burden on employers and the IRS. Additionally, such an approach would provide compliance relief by allowing employers participating in to transmit Form 1095 to employees electronically rather than requiring each form be printed and mailed.” [SHRM members-only toolkit: Complying with the Affordable Care Act]What the Bill Would DoAs summarized by the Partnership for Employer-Sponsored Coverage (P4ESC), which is made up of 16 professional associations including SHRM, the Commonsense Reporting Act would: Create a voluntary prospective reporting system. Allowing employers to voluntarily report coverage information to the IRS prospectively about their health plan, using data for the current plan year, could increase the accuracy of eligibility determinations for ACA marketplace exchange tax credits. State and federally facilitated exchanges would access information securely through a data services hub. The IRS would use the information to issue Letter 226-J tax penalty notices more accurately. Protect consumer financial security and individual privacy. ACA exchanges would have a better verification tool and real-time employer plan information for tax credit determinations, which could reduce the threat of an individual having to pay the IRS back for the value of the exchange plan. The bill also clarifies that the IRS can accept full names and dates of birth in lieu of dependents’ and spouses’ Social Security numbers and requires the Social Security Administration to assist in the data-matching process. Protects employers and streamlines compliance burdens. By enabling the employer to …

Agencies Seek Input on Form 5500 Revisions

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Agencies Seek Input on Form 5500 Revisions

Federal agencies are seeking public comments on proposed revisions to the Form 5500 Annual Return/Report filed by private-sector employee benefit plans to comply with statutory changes under the Setting Every Community Up for Retirement Enhancement (SECURE) Act, which became law in 2019.”The proposed form changes and related regulatory amendments address [SECURE] Act changes, especially for multiple employer plans, and improve [Form 5500 as a] critical enforcement, research and public disclosure tool,” said Ali Khawar, Department of Labor (DOL) acting assistant secretary for employee benefits security.On Sept. 15, the DOL’s Employee Benefits Security Administration (EBSA), the IRS and the Pension Benefit Guaranty Corporation (PBGC) published two proposed rules in the Federal Register: Annual Reporting and Disclosure, to conform Form 5500 reporting regulations under the Employee Retirement Income Security Act (ERISA) with the proposed Form 5500 revisions.The agencies also released a fact sheet summarizing the proposed changes.SECURE Act ChangesWhile employers in the same industry had previously been allowed to form multiple employer plans, known as MEPs, the SECURE Act permits unaffiliated employers, as of January 2021, to join together in a single 401(k) pooled employer plan (PEP).”A PEP has a single plan document, a single Form 5500 filing and a single independent plan audit,” noted Craig P. Hoffman, an attorney with San Francisco-based Trucker Huss, when the SECURE Act became law. A pooled plan provider, whether a financial services firm, insurance company, third-party administrator or similar entity, “must serve as the ERISA section 3(16) plan administrator, as well as the named fiduciary for the plan,” he explained.Defined Contribution Group PlansThe SECURE Act also established another new type of plan arrangement, often referred to as a group of plans (GoP) but which the proposed rules now call a defined contribution group (DCG).A DCG allows employers, whether unrelated or related, to file a single Form 5500 for multiple defined contribution plans if the plans have the same trustee, administrator, fiduciaries, investments and plan year. However, unlike PEPs, plans in a DCG remain distinct entities. While they can file a single consolidated Form 5500, individual plans participating in a DCG arrangement with a consolidated Form 5500 filing remain subject to audit requirements, the proposed revisions clarify.After considering multiple issues, “the departments decided to propose that a large plan that elects to participate in a DCG must continue to be subject to an IQPA [independent qualified plan accountant] audit and that the audit report for the plan would have to be filed with the consolidated Form 5500 of the DCG reporting arrangement,” the Proposed Revision of Annual Information Return/Reports states.Pete Swisher, president of Waypoint Fiduciary, a consultancy in Versailles, Ky., focused on group retirement plans, wrote that “as part of the package of guidance, the Departments addressed the audit requirement in GoPs by killing the hopes of those who expected a GoP to have a single consolidated audit like that of multiple employer plans.”MEWAs Also AffectedAs an ancillary matter, some of the proposed Form 5500 revisions would apply to multiple employer welfare arrangements (MEWAs) that offer …

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