I forgot to file my Form 5500 that was recently due. Can I file late and avoid trouble, using a "reasonable cause" letter?
Informal IRS/DOL guidance & most practitioners say that reasonable cause letters stopped being accepted when the Department of Labor introduced their Delinquent Filer Voluntary Compliance Program (“DFVCP”) several years ago.
The DFVCP is designed to encourage voluntary compliance with the annual reporting requirements of ERISA & gives delinquent plan administrators a way to avoid potentially higher civil penalties and pay considerably lower fines by satisfying the program’s requirements. The voluntary fines are a reduced amount ($10 per day for noncompliance, up to a maximum of $2,000 per year, with a $4,000 cap)
If you file a late form without DFVCP, then you lose DFVCP eligibility and you are left in the position of negotiating penalties with the DOL or IRS when audited ($300 per day, per plan, up to $30,000 per year, per plan)
To learn more about this special program and your particular situation, visit the “Contact Us” section of our website.
What is the likelihood of an IRS or DOL penalty if we failed to file a Form 5500 & we go ahead and file it now?
There is no definitive answer regarding the likelihood of penalty. Historically, DOL enforcement on welfare plans has been slight, but recently they’ve added staff for welfare plan audits and frankly, the government is under pressure for cash. If you or your client is audited, discovery of such an oversight is highly probable.
For this reason, we recommend taking advantage of the Delinquent Filer Voluntary Compliance Program (DFVCP) if you have missed prior filing deadlines. There is a considerable difference between penalties assessed under the DFVCP ($10/day) and those penalties imposed by the DOL ($1,100/day). Furthermore, you’ll lose eligibility for the DFVCP if the DOL or IRS discovers the error before you submit for the program.
We adopted a new wrap document for all of our welfare benefit plans earlier this year and already have changes to make to the plan. We haven't even distributed the original SPD. Can we wait to distribute the SPD until after the changes are made?
Realistically, if you are going to modify benefits soon, you can wait to distribute the SPD without violating any DOL deadlines since you have 210 days from the close of the plan year to distribute the SPD.
Are health plans subject to nondiscrimination testing? What is IRC Sec. 105(h)?
Yes, health plans are subject to nondiscrimination testing for medical, dental and vision benefits that are essentially self-funded and ASO paid. IRC Section 105(h) governs this testing.
The test focuses on disparity in offerings between Highly Compensated Employees (earning above $110,000 for 2009 or 2010) and all other employees. The test has two parts, an eligibility test or a benefits test. To pass the eligibility test, the plan has to pass one of three (3) coverage tests. Many insurance companies will not perform these tests (for their ASO clients) but some TPAs will. ABV can also assist with these tests.
What are the filing requirements for welfare benefit plans?
A “funded” welfare plan (a plan with assets held in trust, such as a VEBA) is always required to file Form 5500, regardless of the number of employee participants.
An “unfunded” welfare plan (a plan with no assets, which pays benefits from the general assets of the plan sponsor, from an insurer or a combination thereof) must also file Form 5500 unless it qualifies for an exemption.
There is an exemption for unfunded plans with fewer than 100 employee participants. If a plan qualifies for this exemption on the first day of the plan year, then no Form 5500 is required.
Can we file an extension for our plan's "short plan year"Form 5500 filing?
Yes, the two and a half month extension is available for any filing period as long as it (Form 5558) is submitted prior to the original deadline.
I keep hearing about EFAST2 for Form 5500 filings. What is this?
EFAST2 is the Department of Labor’s all-electronic filing system that eliminates paper 5500 filings, beginning with the 2009 Plan Year. It’s already “live” now in 2010 and the transformation is a significant procedural changes.
A plan sponsor will have 3 electronic filing options: 1) a private web-based system; 2) a third-party software application, transmitted via the internet, or 3) the DOL’s “IFILE” web-based system.
Check out our News, “Ring in the New Year with EFAST2!” or watch the DOL’s screen cast @ http://earthcache.net/htc-01.media.qualitytech.com/COMP008760MOD1/EBSA2_en/index.htm
Who is responsible for signing our welfare plan's Form 5500? How about our retirement plan's Form 5500?
For a welfare plan, only the plan administrator is required to sign the form. Technically, the “plan administrator” is the person or entity specifically identified as such in the plan’s SPD (Summary Plan Description). If the plan administrator is the employer, then the person who signs the form should be the individual acting in a fiduciary capacity on behalf of the employer.
For a retirement plan, both the plan administrator and the plan sponsor are required to sign the form. The “plan sponsor” is typically the employer. Accordingly, the form should be signed by a plan fiduciary or an officer of the company with some level of responsibility for the plan.
Our company has multiple locations. We have fully-insured policies for our health plans & each location has its own policy. How many plans do we maintain for Form 5500 reporting purposes?
Unless they are part of a “wrap” plan, each separate policy offered by the employer would be viewed by the DOL as a separate welfare benefit plan. It does not matter that all locations offer the same type of benefit (i.e., medical). Separate policies constitute separate plans, unless combined in a single “wrap” plan document. For more information on “wrap” documents, visit the Contact Us section of this site and let us know your situation.
We have a Section 125 plan with flexible spending accounts. Do we have to file a Form 5500 for this plan?
Yes. If your Section 125 plan has a health care flexible spending account (“health FSA”) “component plan” with 100 or more employee participants (at the beginning of the plan year), a Form 5500 is required for this plan.