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Form 5500 Filing Requirements
Presented by:Randy Limbeck (Omaha)Tyler Philippi (Omaha)
May 13, 2014
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About the Firm
Represents management exclusively in every aspect of employment, benefits, labor, and immigration law and related litigation
Over 770 attorneys in 55 locations nationwide
Current caseload of over 5,000 litigations and approximately 300 class actions
Founding member of L&E Global
Disclaimer
This presentation provides general information regarding its subject and explicitly may not be construed as providing any individualized advice concerning particular circumstances. Persons needing advice concerning particular circumstances must consult counsel concerning those circumstances. Indeed, health care reform law is highly complicated and it supplements and amends an existing expansive and interconnected body of statutory and case law and regulations (e.g., ERISA, IRC, PHS, COBRA, HIPAA, etc.). The solutions to any given business’s health care reform compliance and design issues depend on too many varied factors to list, including but not limited to, the size of the employer (which depends on complex business ownership and employee counting rules), whether the employer has a fully-insured or self-funded group health plan, whether its employees work full time or part time, the importance of group health coverage to the employer’s recruitment and retention goals, whether the employer has a collectively-bargained workforce, whether the employer has leased employees, the cost of the current group health coverage and extent to which employees must pay that cost, where the employer/employees are located, whether the employer is a religious organization, what the current plan covers and whether that coverage meets minimum requirements, and many other factors.
IRS Circular 230 disclosure: Any tax advice contained in this communication (including any attachments or enclosures) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed in this communication. (The foregoing disclaimer has been affixed pursuant to U.S. Treasury regulations governing tax practitioners.)
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Topics for Discussion
Which plans must file Form 5500
Combining benefits for filing purposes
Filing due dates
Electronic filing
Basics for completing the Form 5500 and commonly used schedules/frequent errors
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Topics for Discussion
Correcting Form 5500 compliance failures/delinquent filer program
Areas of DOL and IRS emphasis in examining Form 5500
Areas of Form 5500 that increase audit exposure/strategies to reduce risk
More emphasis on the welfare plan side
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Purpose of Form 5500
Annual report to government by ERISA employee benefit plans
DOL enforcement and research tool
IRS and DOL use the Form 5500 as part of a process to determine which plans to audit
Posted on DOL website
o Don’t use SSN or portion of SSN
ERISA reporting and disclosure requirement; not an Internal Revenue Code filing requirement
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What Plans are Subject to ERISA
Employer maintained plan providing certain listed benefits to at least one employee
Employee pension benefit plans
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What Plans are Subject to ERISA (cont.)
Employee welfare benefit plans – common examples
o Health, dental, vision, prescription drug
• Include FSAs and HRAs
o Many wellness and employee assistance programs (EAPs)
o Life insurance, LTD, AD&D insurance
o Severance plans
Not required for the cafeteria plan itself, but required for underlying plans
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Benefit Plans Specifically Exempt from ERISA (5500 filing)
Government and church employer plans
Most short-term disability plans
Sick pay
Voluntary employee pay all insurance
o Minimum employer involvement/sole function of employer is:
• Permit the insurer to publicize the program to employees,
• Collect premiums through payroll deductions, and
• Remit premiums to the insurer
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Benefit Plans Specifically Exempt from ERISA (5500 filing) (cont.)
Most Health Savings Accounts (HSAs)
o Voluntary for employees and limited employer involvement
Vacation pay
Educational assistance plans
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Which Plans Must File Form 5500?
Form 5500 filing required unless meet an exception
o Unfunded excess benefit plan
o Top-hat plan using alternative compliance method
o Small employer welfare plans
o Not subject to ERISA
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When is a Small Employer Welfare Plan Exempt from the Form 5500 Filings?
Less than 100 participants at beginning of plan year
o Participant equals covered employee or former employee (not spouse or dependents)
o Individual must be covered, not merely eligible to elect coverage
AND
Not funded – paid from the general assets of employer or by insurance company (insurance is not funded!)
Less than 2% of welfare plans file a Form 5500
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Combining Plan’s Benefits for Filing Purposes
One Form 5500 is required for each “plan”
Plan documentation is important to determine what is a plan for welfare plans
o Plan documentation should match Form 5500
o 3 digit plan number
o SPDs
Default rules when documentation is not clear
o One plan per benefit
o One plan per insurance contract
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Form 5500 Filing Due Dates
7 months after end of plan year
2 1/2 month automatic extension with IRS Form 5558
o File extension by normal due date
Plan termination – 7 months after liquidation of plan assets
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Mandatory Electronic Filing
Electronic filing required by all filers under ERISA Electronic Filing Acceptance System (EFAST2)
o Beginning in 2009 forward (2010 transition is paper)
o The failure to file electronically is treated as a non-filing
Choice between: (i) DOL’s free system iFile, or (ii) EFAST2 approved third party software
Over 80% of filers use EFAST2 approved third party software
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Who Signs the Electronic Filing
Plan Administrator; not the Plan Sponsor
o No sharing of signing credentials e.g., do not give signing credentials to third party preparer
Preparer may sign on behalf of Plan Administrator if:
o Preparer uses preparer’s signing credentials
o Preparer receives written authorization from the Plan Administrator to submit the filing
o Manually sign a paper return
o PDF first two pages of manually signed form with electronic filing
o Note – manually signed will be part of publicly disclosed 5500
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Submitting the Electronic Form
Review and validate content before submission
o Step in EFAST2 system
Submit Form 5500 by midnight per Plan Administrator time zone
Check status of filing
o “Filing received” (not approval)
o “Filing unprocessable” or “processing stopped”
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Form 5500 Basics/Common Errors
Part I – Annual Report Identification Information
o Plan year (designated by Plan Sponsor and in SPD)
o Type of plan
o First/final return
• Zero out final return
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Form 5500 Basics/Common Errors (cont.)
Part II – Basic Plan Information
o Plan name – be consistent/abbreviations ok
o Plan number – Plan Sponsor designation
o Note – change of name and/or EIN of Plan Sponsor
o Match number of plan participants at beginning plan year with prior year 5500
o Line 8b – identify all benefits provided by the plan
o 9a and 9b – don’t mark trust unless you are 100% sure of the trust
• “Unfunded” means “general assets of the Plan Sponsor”
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Form 5500 Basics/Common Errors (cont.)
Form M-1 Filing Attachment
o New for 2013
o M-1 is for MEWAs and ECEs
o Must indicate whether plan is required to file Form M-1
o Failure to include may result in rejection of 5500
o Trap for unwary – no prompt on Form 5500 or EFAST2
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Form 5500 Schedules
Schedule A – Insurance Information
o Most common for welfare plans
o Required if benefits paid by insurance company
o Not required for stop loss insurance purchased by employer
o Insurance company legally required to provide the information
o Separate Schedule A for each policy
o If insurer is late providing the information, timely file and deal with implications
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Form 5500 Schedules (cont.)
Schedule C – Service Provider Information
o Most welfare plans do not file
o Not required if no formal trust required, i.e.,
(a) Employer contributions only, or
(b) Cafeteria plan, or
(c) Insured
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Form 5500 Schedules (cont.)
Schedules H and I – Financial Information
o Schedule H – large, funded plans
o Schedule I – small, funded plans
o Very rare with welfare plans
Form 5500 Enforcement
Plan Sponsor and Plan Administrator are ultimately responsible
For Welfare/Fringe Benefit Plans, only DOL will assess penalties
DOL Enforcement Programs (Office of the Chief Accountant):o Directed at service providers and quality of audits being
performedo Late, non-filers, and deficient informationo MEWAs have their own enforcement programo Delinquent Filer Voluntary Compliance Program
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Form 5500 Penalties
Penalties imposed on Plan Administrator, may not be covered by E & O
Why Penalties are Imposed:o Form 5500 has not been filed or filed lateo The filing does not include all of the required forms and
schedules
• Incorrect or incomplete forms/schedules
If timely filed but incomplete/inaccurate, can re-file complete and accurate form within 45 days without penalties
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Form 5500 Penalties (cont.)
Administrative Penalties:o Statutory penalties up to $1,100 each day (cumulative back to
1988) o Late filers - $50 per dayo Non-filers - $300 per day with $30,000 per year max
• Penalties imposed on Plan Administrator, not Plan Sponsor
– Personal liability which may not be covered by E & O coverage
o Reduction of penalties possible under enforcement programs
Criminal Penalties – very rare if ever
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Delinquent Filer Voluntary Compliance Program (“DFVCP”)
What is the DFVCP?o Meant to encourage Plan Administrators to file any unfiled Form
5500so Reduced civil penalties in exchange for voluntary compliance
Who can participate?o Must be an ERISA plan (Title I)o May participate as long as have not received notice in writing
from DOL that there has been a failure to timely file the Form 5500
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DFVCP (cont.)
What are the requirements?o Electronically file complete Form 5500s – check box labeled
“DFVC Program”o Calculate penalty using online calculator and submit payment
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DFVCP (cont.)
Version of the Form 5500 to be filed:o Generally, you file the annual report from the year missedo There are exceptions - can use DOL’s online tool to determine
which to file
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DFVCP (cont.)
Reduction of penalties available:o Reduced civil penalty under ERISA § 502(c)(2)
• Large Plans - $10/day up to $2,000 per filing or $4,000 per plan
• Small Plans - $10/day up to $750 per filing or $1,500 per plan
• Small 501(c)(3) Plans - $10/day up to $750 per filing or $750 per plan
o IRS will not impose penalties if the filer satisfies DFVCP requirements
Always better to volunteer mistakes than to be caught in one
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How Agencies Use the Form 5500
Compile information about employee benefit plans
o Identify benefit, tax, and economic trends in the private sector
Identify potential investigative targets
o Targeting is the process the DOL and IRS use to identify plans and service providers with the highest potential for abuse
o Targeting can be based upon specific enforcement strategies and priorities of the National and Regional Offices
o Targets may share service providers, be of a specific size or type of plan, or other criteria
Accuracy will be verified during the course of an investigation34
Common Mistakes/Trigger Areas
Missing attachments
Accountant’s Report (IQPA) – read and critique it!
Schedule H, Part IV - “Compliance Questions”o Line 4a – the failure to transmit participant contributionso Line 4d – nonexempt transactions with a party-in-interesto Line 4f – a loss due to fraud or dishonestyo Line 4l – the failure to provide benefits when due
Schedule A, Part III – Welfare Benefit Contract Information
Service Provider information, especially the IQPA
MEWAs!!35
Common Mistakes/Trigger Areas
Accountant’s/auditor’s reporto Only required for retirement plans and funded welfare planso DOL began a program in November 2013 to review the
Accountant’s Report that accompany 5500so DOL is asking and requiring more than the tasks many auditors
perform, e.g., audit work papers, discrimination testing, audit tests unique to employee benefit plans
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