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04.05.16

Understanding Welfare Plan Form 5500 Filing Requirements
Larry A. Ruff

Welfare plans commonly provide employee benefits, such as medical, dental, life insurance and disability benefits. All welfare plans covered by ERISA are subject to the annual Form 5500 reporting and filing requirements. However, not all ERISA welfare plans must file Form 5500 if they meet one of the exceptions under the law.

Which Welfare Plans Must File Form 5500?

All “funded” welfare plans covered by ERISA must file a Form 5500. A “funded” plan is one where funds are set aside in a custodial account or trust fund for the exclusive benefit of plan participants. The type of Form 5500 (Form 5500 vs. Form 5500-SF) filed is determined by the number of plan participants in a funded welfare plan. In other words, all funded welfare plans must file a Form 5500, regardless of the number of plan participants.

Most welfare plans covered under ERISA, however, are not funded.  The greater majority of welfare plans are either fully insured or partially insured through a stop-loss insurance policy. The Department of Labor (DOL) has an exception for unfunded and insured welfare plans.  If a welfare plan covers fewer than 100 participants at the beginning of a plan year and is unfunded and/or insured, then the plan sponsor is not required to file a Form 5500.

Also, a plan sponsor does not need to file a Form 5500 for a self-insured welfare plan if the plan has less than 100 participants at the beginning of the plan year and is not funded.  However, oftentimes self-insured welfare plans hold funds in a trust fund (such as, a “Voluntary Employees’ Beneficiary Association”) or hold employee contributions in a separately maintained fund, which then makes them funded and subject to annual Form 5500 filings.

If a plan sponsor of a self-insured welfare plan simply funds the plan out of their general assets and covers less than 100 participants, then no Form 5500 filing is required.  When a welfare plan does cover 100 or more participants at the beginning of the plan year, the plan sponsor must file a Form 5500 regardless of how the plan is funded or what insurance arrangement is in place.

In summation:

  • All “funded” welfare plans must file a Form 5500
  • All unfunded (self-insured) and/or insured welfare plans must file a Form 5500 if the plan covers 100 or more plan participants as of the beginning of the plan year

The bottom line is that plan sponsors need to understand when to file a Form 5500 for a welfare plan. The penalties ($1,100 per day) for not filing are severe, so take notice of these requirements. The DOL has also learned how to find out if a plan sponsor is not filing a Form 5500 for a welfare plan. If your organization sponsors any kind of retirement plan, the DOL may send you a letter asking for your welfare plan filing. If your organization may be in this situation, take the time now to review your welfare plan filing obligation.

If you need any assistance determining your filing requirements or are seeking help with your filings, contact Larry Ruff at lruff@orba.com, or call him at 312.670.7444. Visit ORBA.com to learn more about our Employee Benefit Plans Services.

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