An often overlooked compliance topic is ERISA's main reporting requirement - Form 5500 filing. Form 5500 filings are generally required for all health and welfare benefits subject to ERISA, although there is a broad exemption for small, fully insured or unfunded plans (discussed below).
A separate Form 5500 is required for each ERISA plan offered by the employer. The first step in analyzing the 5500 filing obligation for your company is to determine the number of ERISA plans maintained. Although plan sponsors are generally free to determine the number of plans offered, if the sponsor has not adopted a Consolidated Wrap SPD, the Department of Labor ("DOL") considers each benefit or each carrier contract a separate ERISA plan requiring a separate 5500 filing. Common benefits subject to ERISA include: health, dental, vision, life, disability, AD&D, Health FSA, HRA, and any other benefit that provides medical care. Common benefits not subject to ERISA include: Dependent Care FSA, HSA, and Section 125 flexible benefit plan (although ERISA likely applies to component benefits of the 125 plan).
Note: Some plans that provide ERISA benefits may nonetheless be exempt from ERISA if the plan meets ERISA’s voluntary plan exemption. Typically, a plan will meet this exemption if the employer’s participation in the plan is limited to (1) allowing the carrier to advertise the plan; (2) collecting premiums; and (3) remitting premiums to the carrier. The voluntary exemption will likely be lost if the employer is involved in any other way – allowing participants to pre-tax premiums, endorsing the plan in any way, or signing a group contract.
Once the number of ERISA plans is determined, the next step in the filing analysis is to count the number of employee participants covered by each plan at the beginning of the plan year. There is a large filing exemption for small, fully insured or unfunded plans (those with less than 100 employee participants on the first day of the plan year). A 5500 is not required for any small plan that meets the exemption, and most small plans do. Any plan with 100 or more participants at the beginning of the plan year will need to file for that year. Again, if no Consolidated Wrap SPD is in place, each plan over 100 participants will need to file separate 5500s.
Along with the base 5500 form, most filings require schedules from the plan’s insurance carrier or service provider. Although there are a number of possible schedules, Schedule A from the carrier of a fully insured plan and Schedule C from certain administrators of self-insured plans are by far the most common schedules attached to the base form. Carriers and certain administrators are required to provide the schedules to plans on an annual basis.
The statutory penalty for failure to file a 5500 is harsh - up to $1,100 per plan per day of non-compliance, although the DOL has discretion to assess a lesser fine. As an alternative, the DOL offers a Delinquent Filer Voluntary Compliance Program, which allows plan sponsors to voluntarily file delinquent 5500s and pay a reduced penalty capped at $10 per day, $2,000 per year, or $4,000 total per plan for a multi-year delinquency. Often, plan sponsors fail to recognize that a 5500 is necessary the first year the plan exceeds 100 participants. This oversight is the most common scenario leading to delinquent filings.
All forms must be filed through EFAST2, the DOL's online database. The filing is due for all plans on the last day of the 7th month after the plan year ends. As an example, plan years ending 8/31 are due 3/31, and calendar year plans are due 7/31. Employers may request a 2½ month extension by filing Form 5888. If the 5888 is filed prior to the original due date of the 5500, the extension will be automatically granted. After completing the 5500 filing, employers are required to provide a summary of the filing to all plan participants. The Summary Annual Report (“SAR”) is due to participants within 9 months of the close of the plan year or within 2 months of the conclusion of any extension of the original 5500 filing deadline.
Along with ERISA’s legal document requirements, the 5500 requirement is a simple, yet important, compliance step that can be easily satisfied and go a long way to ensuring ERISA compliance. Small plans should verify that the small plan exemption applies and should monitor participation levels at the beginning of each year to ensure that the exemption continues to apply and no filing is necessary. Large plans should develop a 5500 filing strategy consistent with the plan’s legal documents and file timely 5500s each year.
ProBenefits offers a full suite of compliance services, including Form 5500 preparation and assistance with the Delinquent Filer Voluntary Compliance program mentioned above. Learn more about these services by following this link.