Form 5500 Filing Requirement for Employee Health and Welfare Benefit Plans

Plans with more than 100 participants on the first day of the plan year must file Form 5500 with the Department of Labor (DOL) each year whether funded or unfunded. Funded plans must file regardless of the participant count.

An unfunded plan is one in which benefits are paid solely from the general assets of the employer. For instance, a self-insured plan where benefits are paid directly from the assets of the plan sponsor is an unfunded plan. Cafeteria plans may file as unfunded if benefits are paid solely as needed from the general assets of the plan sponsor and if benefits are provided exclusively through insurance contracts or policies.

Cafeteria plans are generally exempt from the filing requirement, but if a cafeteria plan includes a medical reimbursement feature and has more than 100 participants on the first day of the plan year, a Form 5500 must be filed.

  1. Who is considered a participant when determining if a Form 5500 is required?
  • Active participants – those currently employed and covered by the plan.
  • Participants retired or separated from service receiving benefits – includes former employees receiving group health continuation coverage (COBRA).
  • Other participants retired or separated from service and entitled to future benefits: – employees who have separated from service and are entitled to benefits in the future.
  • Deceased participants whose beneficiaries are receiving or are entitled to receive benefits – beneficiaries of former employees that are receiving or are entitled to receive benefits.

It is important to note that dependents are not considered participants. In addition, unlike retirement plans, the term participant in the context of employee welfare benefit plans includes only those actually covered under the plan, not all those that are eligible to be covered.

  1. Is a Form 5500 due for each benefit offered to employees?

If benefits are not contained within a single plan (recommend creating a Wrap Plan – considered 1 plan covering all applicable welfare benefit programs), a Form 5500 must be filed for each benefit plan with more than 100 participants on the first day of the plan year. It should be noted that the plan year and the policy year for benefits provided under insurance contracts are not necessarily the same. Form 5500 should be filed in accordance with the plan year.

Employers can use a “wrap” document to pull all employee benefits into a single plan in order to reduce the number of Form 5500 filings required. The wrap document does not take the place of other plan documents, such as the cafeteria plan document, but it simply wraps all of the other documents into one plan allowing all benefits to be reported within a single Form 5500 filing.

5500 Wrap plans must include all benefits under the plan. Even plans with less than 100 participants on the first day of the plan year are to be reported on the Form 5500 since all benefits contained therein are considered one plan.

  1. Delinquent Filing – How to correct a failure to file

It is not uncommon for employers to realize that a Form 5500 was due on their employee welfare benefit plan until after the filing deadline has passed (sometimes even several years after the filings were due). The DOL has a program that allows employers to bring their filings up to date.

The DOL’s Delinquent Filer Voluntary Compliance Program (DFVC) encourages voluntary compliance with the annual reporting requirements and gives plan administrators the opportunity to avoid potentially higher civil penalties by paying a reduced penalty amount and bringing the plan into compliance with past filings. DFVC provides for a penalty of $10 per day past the filing deadline up to a maximum of $2,000 per filing for a large plan. There is a maximum penalty of $4,000 per large plan regardless of the number of years filed at one time under the program.

Despite the DFVC penalties, it is better and less expensive than the alternative – waiting for the DOL to send a notice regarding a failure to file. If an employer fails to file, the penalties can be cumulative if you receive a notice from the DOL or are subject to a DOL audit.   Penalties accrue separately on each Form 5500 that is due.

If you are filling a 5500 for a large retirement plan and not for your Health and Welfare Benefit program(s), this may be scrutinized by either the DOL or the IRS. 

BASIC can offer relief to the already overwhelming amount of mandatory notices and documents required for employers to remain compliant with the ACA. BASIC’s ERISA Essentials package guarantees compliance, including important documents like the WRAP SPD, SMM and the Form 5500 preparation when required. All of these services ultimately reduce your risk and free up valuable time and resources, allowing you to focus on your active employees and operations.

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