Handling IBNR on 1999 Sch H?

[Guest tompga]

How have you been handling the reporting of IBNR claims on 5500 Sch H? The 1999 Form 5500 instructions were changed to include IBNR claims on line 1g, benefit claims payable. In prior years the IBNR claims were not to be included in benefit claims payable, only claims processed and approved for payment were included. The instructions are silent on how to handle the adjustment caused by the change in presentation.

It would seem our choices are to change the prior years claims payable to include IBNR, which even if explained will probably result in a notice from the DOL, or to run the prior year change through the current year expense, which I am not in favor of since it can result in a large loss for the current year.

The DOL help desk told me it is an issue that has not been addressed yet and they suggested amending the prior year 5500 to include IBNR and showing the new amount in the beginning of year column on the 1999 Sch H. This results in increased fees for the plan to have the amended return prepared.

How have you been handling this?

[Kristina]

Since your beginning of the year numbers should match what was reported on the 1998 5500, the only adjustment you would make would be to include your IBNR claims in the plan expense section as well as the end of the year payable on line 1g.