UBA’s com­pli­ance team lever­ages the col­lec­tive exper­tise of its inde­pen­dent part­ner firms to advise 36,000 employ­ers and their 5 mil­lion employ­ees. Late­ly, a com­mon ques­tion from employ­ers is: If a health and wel­fare ben­e­fit plan has few­er than 100 par­tic­i­pants, then does it need to file a Form 5500?

If a plan is self-fund­ed and uses a trust, then it is required to file a Form 5500, no mat­ter how many par­tic­i­pants it has.

Whether the plan must file a Form 5500 depends on whether or not the plan is “unfund­ed” (where the mon­ey comes from to pay for the self-fund­ed claims).

Cur­rent­ly, 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” for this pur­pose 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.

There are sev­er­al exemp­tions to Form 5500 fil­ing. The most notable are:

  • Church plans defined under ERISA Sec­tion 3(33)
  • Gov­ern­men­tal plans, includ­ing trib­al gov­ern­men­tal plans
  • Top hat plans which are unfund­ed or insured and ben­e­fit only a select group of man­age­ment or high­ly com­pen­sat­ed employees
  • Small insured or unfund­ed wel­fare plans. A wel­fare plan with few­er than 100 par­tic­i­pants at the begin­ning of the plan year is not required to file an annu­al report if the plan is ful­ly insured, entire­ly unfund­ed, or a com­bi­na­tion of both.

A plan is con­sid­ered unfund­ed if the employ­er pays the entire cost of the plan from its gen­er­al accounts. A plan with a trust is con­sid­ered funded.

For small­er groups that are self-fund­ed or par­tial­ly self-fund­ed, you’d need to ask them whether the plan is fund­ed or unfunded.

If the employ­er pays the cost of the plan from gen­er­al assets, then it is con­sid­ered unfund­ed and essen­tial­ly there is no trust.

If the employ­er pays the cost of the plan from a spe­cif­ic account (in which plan par­tic­i­pant con­tri­bu­tions are seg­re­gat­ed from gen­er­al assets), then the plan is con­sid­ered fund­ed. For exam­ple, under ERISA, pre-tax salary reduc­tions under a cafe­te­ria plan are par­tic­i­pant con­tri­bu­tions and are con­sid­ered plan assets which must gen­er­al­ly be held in trust based on ERISA’s exclu­sive ben­e­fit rule and oth­er fidu­cia­ry duty rules.

Orig­i­nal­ly pub­lished by www.ubabenefits.com