Funded Plans:
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. Self-insured welfare plans that hold funds in a trust fund (such as, a “Voluntary Employees’ Beneficiary Association”) or hold employee contributions in a separately maintained fund, makes them funded and subject to annual Form 5500 filings.

UnFunded Plans:
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.

Filing the 5500 for a Self-Funded Plan:
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. 

5500 Schedules:
Schedule A – Insurance Information (Required for a fully-insured welfare benefit plan or a self-funded plan that is under a Trust Arrangement.)

  • Schedule A must be completed if any benefits under an employee benefit plan are provided by an insurance company, insurance servicer, or other similar organization. This includes investment contracts with insurance companies.
  • Insurance premiums, broker commissions and year-end enrollment information are reported on Schedule A.
  • Self-insured plans are required to attach Schedule A for stop-loss coverage ONLY IF the plan itself is the named policyholder of the stop-loss policy. Typically, a plan is the policyholder of a stop-loss policy only when it is funded through a trust.

Schedule C – Service Provider Information (Required only for a FUNDED welfare benefit plan i.e., has a trust that pays service providers)

  • Schedule C must be completed if a service provider was paid $5,000 or more in compensation, directly or indirectly from the plan, or an accountant or enrolled actuary was terminated during the reporting year.
  • Schedule C is NOT required for payments made by the EMPLOYER for plan-related expenses. Schedule C is required only when payments are made from the PLAN. Because the employer makes all payments to service providers for an unfunded plan, a Schedule C is typically required only for funded plans. If the provider allocated services to the Plan Sponsor who in turn funded via general assets and a trust IS NOT in place, then the Schedule C is not applicable to be reported in the Form 5500 report.

What if you filed a Schedule you didn’t need to file?
There is no penalty for oversharing information with the IRS regarding your plan. The bigger question is why you would if you don’t have to?

Wrap Up:

  • 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.

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 and worth noting. 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.

Funded Plan All funded plans (funds set aside in a trust or custodial account for the exclusive benefit of the plan’s participants) must file Form 5500 regardless of size.
Unfunded Plan Insured plans or self-funded plans that are unfunded (benefits paid as needed directly from the general assets of the employer or employee organization that sponsors the plan).

Unfunded plans that have 100 or more participants at the beginning of the plan year must file Form 5500.  Unfunded plans with less than 100 participants at the beginning of the plan year are not required to file.

Schedule A Schedule C
For Fully-Insured (premium-based) insurance policies.

Schedule A for stop-loss policy is to be included if the plan is funded via a trust ERISA Plan.

Only to report fees of $5,000 or more paid out of trust fund assets to entities for services provided to the Plan.
Includes the total premiums within policy period plus participants (covered persons). Includes the fees paid out of the trust’s plan assets to service providers for legal, marketing, etc.
Commissions, bonus or other sources of revenue from the Carrier to Broker are to be noted. Broker’s commissions are not reportable on a Schedule C. However if the broker’s fees were paid out of trust fund assets, then those would be reported on the Schedule C.