By Jen­nifer Kupper
In-house Coun­sel & Com­pli­ance Offi­cer for iaCON­SULT­ING, a UBA Part­ner Firm

BenefitPlanForm 5500 is the annu­al report that group ben­e­fit plans use to report required infor­ma­tion about the plan’s finan­cial con­di­tion and oper­a­tions. Most group and pen­sion plans that are sub­ject to ERISA are required to file a Form 5500. With the July 31 dead­line for cal­en­dar year plans fast approach­ing, and high­er penal­ties for not fil­ing tak­ing effect in August, this is a good time to review this impor­tant plan filing.

What is a Form 5500?

Gen­er­al­ly, the Depart­ment of Labor (DOL), the Inter­nal Rev­enue Ser­vice (IRS), and the Pen­sion Ben­e­fit Guar­an­ty Cor­po­ra­tion (PBGC) all require an annu­al ben­e­fit plan report fil­ing, although there are many exemp­tions. A sin­gle annu­al report, known as a Form 5500 or Form 5500-SF, sat­is­fies all three. It includes basic plan, spon­sor, and admin­is­tra­tor iden­ti­fy­ing infor­ma­tion, the type of annu­al report being filed, and any relat­ed Sched­ules as attach­ments to the Form 5500.

Who must file the Form 5500?

Form 5500 is need­ed for both qual­i­fied retire­ment plans and group wel­fare plans. For this arti­cle, we’ll focus on group wel­fare plans, which include plans that pro­vide med­ical, pre­scrip­tion drug, den­tal, vision, long term and short term dis­abil­i­ty, group term life insur­ance, health flex­i­ble spend­ing accounts, acci­den­tal death and dis­mem­ber­ment ben­e­fits, long term care, for­mal sev­er­ance poli­cies, and tele­health. While oth­er plans may also be con­sid­ered wel­fare plans, these are the most common.

Group wel­fare plans gen­er­al­ly must file Form 5500 if:

  • The plan is ful­ly insured and had 100 or more par­tic­i­pants on the first day of the plan year (depen­dents are not con­sid­ered “par­tic­i­pants” unless they are cov­ered because of a Qual­i­fied Med­ical Child Sup­port Order).
  • The plan is self-fund­ed and it uses a trust, no mat­ter how many par­tic­i­pants it has.
  • The plan is self-fund­ed and it relies on the Sec­tion 125 plan exemp­tion, if it had 100 or more par­tic­i­pants on the first day of the plan year.
Are there exemptions?

Yes, there are sev­er­al exemp­tions to Form 5500 fil­ing. The most notable are:

  • Church plans defined under ERISA sec­tion 3(33)
  • Gov­ern­ment plans, includ­ing trib­al gov­ern­ment plans
  • “Top hat” plans that are unfund­ed or insured and ben­e­fit only a select group of man­age­ment or high­ly com­pen­sat­ed employees.
  • Small insured or unfund­ed wel­fare plans. This includes plans with few­er than 100 par­tic­i­pants (includ­ing qual­i­fied for­mer employ­ees and COBRA ben­e­fi­cia­ries) at the begin­ning of the plan year that are ful­ly insured, entire­ly unfund­ed, or a com­bi­na­tion of both. An unfund­ed plan has its ben­e­fits paid as need­ed direct­ly from the gen­er­al assets of the spon­sor­ing organization.
How many Forms 5500 must be filed?

Gen­er­al­ly, the num­ber of Forms 5500 depends on the num­ber of ERISA ben­e­fits the spon­sor main­tains, whether those ERISA ben­e­fits are com­bined into one plan, and whether the spon­sor is part of a con­trolled group or is part of a mul­ti­em­ploy­er wel­fare arrange­ment (MEWA).

The plan’s gov­ern­ing doc­u­ments and oper­a­tions deter­mine whether ben­e­fits are being pro­vid­ed under a sin­gle plan and can be report­ed on one Form 5500. The Sum­ma­ry Plan Descrip­tion (SPD), required by ERISA, is a doc­u­ment which des­ig­nates the ERISA plan num­ber and can be used to bun­dle mul­ti­ple ben­e­fit lines into a sin­gle plan for Form 5500 fil­ing purposes.

When must Form 5500 be filed?

A plan’s Form 5500 must be filed by the last day of the sev­enth month after the close of the plan year. The fil­ing date is based on the “plan year,” which is des­ig­nat­ed in the SPD or oth­er gov­ern­ing doc­u­ment. If a plan does not have a SPD, the plan year defaults to the pol­i­cy year.

For cal­en­dar year plans, the due date for the Form 5500 is July 31. Employ­ers may obtain an auto­mat­ic 2–1/2 month exten­sion by fil­ing Form 5558 by the due date of the Form 5500.

Can the Form 5500 be amended?

Yes, it is rec­om­mend­ed that the plan spon­sor file an amend­ment for any of the fol­low­ing situations:

  • The orig­i­nal fil­ing omit­ted a benefit
  • The orig­i­nal fil­ing cre­at­ed a gap in ben­e­fit reporting
  • The Sched­ule A forms were updat­ed with a 10 per­cent or more increase in com­mis­sions or pre­mi­ums than orig­i­nal­ly report­ed by the carrier
  • Manda­to­ry infor­ma­tion crit­i­cal to the report was incor­rect or omitted
What happens if the plan has failed to file a Form 5500?

Penal­ties!! Under ERISA Sec­tion 502, the Sec­re­tary of Labor may assess civ­il penal­ties of up to $1,100 per day against a plan admin­is­tra­tor who fails or refus­es to file Form 5500. The DOL is able to assess penal­ties in con­nec­tion with Form 5500 fail­ures reach­ing as far back as the 1988 plan year. Penal­ties are based on whether the Form 5500 was incom­plete, defi­cient, filed untime­ly or nev­er filed, and if there was will­ful dis­re­gard for refus­ing to file.

The cur­rent penal­ty for fail­ure or refusal of a plan admin­is­tra­tor to file a Form 5500 is up to $1,100 per day. In August 2016, those penal­ties will increase from $1,100 per day to $2,063 per day, regard­less of whether the vio­la­tion occurred before or after August 2016. If an annu­al report is reject­ed for fail­ure to pro­vide mate­r­i­al infor­ma­tion, it is treat­ed as not hav­ing been filed.

In order to encour­age spon­sors to file, the DOL cre­at­ed the Delin­quent Fil­er Vol­un­tary Com­pli­ance Pro­gram (DFVCP). It was cre­at­ed as a means for spon­sors to “self-report” their non-com­pli­ance, and includes a mon­e­tary incen­tive. If a plan spon­sor qual­i­fies for the DFVC Pro­gram, the penal­ties are reduced sig­nif­i­cant­ly to $10 per day for the first 199 days. If the plan is with­in a year of being late, the penal­ty it is capped at $2,000 per plan. If the plan is more than a year late in fil­ing, there is a $4,000 per plan cap.

If the DOL noti­fies a plan spon­sor of its fail­ure to file a Form 5500 or of the assess­ment of penal­ties for fail­ure to file, the plan spon­sor is no longer eli­gi­ble to par­tic­i­pate in the DFVCP. Penal­ties may be assessed for the date the reports were ini­tial due, not the date the spon­sor was noti­fied of its delinquency.

It is impor­tant to note that crim­i­nal sanc­tions and impris­on­ment are also pos­si­ble for will­ful vio­la­tions of the report­ing and dis­clo­sure requirements.

As an exam­ple, Employ­er A and Employ­er B both spon­sor a ful­ly insured med­ical plan and group term life (GTL) plan for their employ­ees. Each employ­er has the same num­ber of par­tic­i­pants in their med­ical and GTL plans: 75 par­tic­i­pants in the med­ical plan, and 150 par­tic­i­pants in the GTL plan.

The plan year for Employ­er A’s med­ical plan is Decem­ber 1 through Novem­ber 30. The GTL plan is on a cal­en­dar year con­tract. Employ­er A does not have an SPD wrap doc­u­ment com­bin­ing these two plans. Employ­er A does not have to file a Form 5500 for the med­ical plan because it is ful­ly insured and has few­er than 100 par­tic­i­pants. How­ev­er, it must file Form 5500 for the GTL plan because it has more than 100 par­tic­i­pants. Since the GTL plan is on a cal­en­dar year (Jan­u­ary 1 to Decem­ber 31) con­tract, its Form 5500 is due by July 31, the end of the sev­enth month fol­low­ing the last day of the plan year.

Employ­er B, on the oth­er hand, has an SPD wrap doc­u­ment which com­bines the med­ical and GTL plans into the same ERISA plan year and plan num­ber. The employ­er chose that plan year to align with the med­ical plan’s Decem­ber 1 – Novem­ber 30 con­tract year. In this case, Employ­er B must file a sin­gle Form 5500 for both the med­ical and GTL ben­e­fits infor­ma­tion because at least one of the plans has more than 100 par­tic­i­pants. Its Form 5500 is due by June 30.

Employ­ers should note that gov­ern­ment agen­cies recent­ly pro­posed sig­nif­i­cant changes to Form 5500 report­ing, and should ensure they stay up to date on require­ments as they change.

Read more here …