Welfare Benefit Plans Form 5500 - Requirements

Many companies are unaware of the Form 5500 filing requirements for their employee benefit plans. The Employee Retirement Income Security Act of 1974 (ERISA) was enacted to protect the benefit rights of participants and beneficiaries of employee benefit plans. To this end, ERISA imposes numerous complex reporting and disclosure requirements. Such rules require financial and other information to be reported to various federal agencies, including the Internal Revenue Service and the Department of Labor.

A welfare benefit plan is any plan or program established or maintained by an employer for the purpose of providing for its participants (or their beneficiaries) benefits. Examples include, but are not limited to:

1. Medical insurance.
   
2. Sickness, accident or disability coverage.
   
3. Life insurance.
   
4. Vision and dental insurance.
   
5. Day care assistance.
   
6. Scholarship funds.

Not all welfare benefit plans are required to file a Form 5500. Fully insured and unfunded welfare benefit plans with fewer than 100 participants as of the beginning of the plan year do not have to file a Form 5500. To be fully insured, plan benefits must be provided exclusively through insurance policies issued by a qualified insurance company. The insurance premiums must be paid directly by the employer, thus, a plan that provides for employer reimbursement of employee paid insurance premiums is not a fully insured plan. To be unfunded, plan benefits must be paid as needed directly and exclusively for the general assets of the employer that sponsors the plan. For welfare benefit plans, to be a participant, the employee must actually be covered by the plan. Plans that are not fully insured and unfunded with 100 or more participants will also be required to have an audit of their welfare benefit plan.

Plans with less than 100 participants at the beginning of the plan year are considered small plans. Plans meeting the small plan exception should carefully monitor the participant count each year to ensure that the plan still meets the exception. Careful monitoring of the participant count will help companies that exceed the 100 participant threshold keep from incurring substantial penalties imposed for failure to file the required return.

Please contact Feeley & Driscoll's Boston Accounting team by Email or call us at 1 (888) 875-9770.

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