When I talk to employers about 5500 filing requirements, more often than not they tell me their accountant files their 5500 filings and they are compliant. These employers are no doubt referring to the 5500 filing requirements applicable to their 401(k) or retirement plans. While I don’t practice in this area, it appears that the financial institutions which service 401(k)s and retirement plans are very familiar with this highly regulated area and have adapted by providing their clients with all the services they need to comply, including filing the 5500s filings associated with these plans.
The area of health and welfare plans is less easy to navigate. Employers often work with more than one insurance carrier or third party administrator to offer health insurance benefits to their employees.
While insurance carriers are required by law to provide the employer with the information needed to complete the 5500 form, they will not prepare the filing. While some third party administrators file the 5500 filing associated with the plan they administer, they will not file 5500 forms for all the plans offered by the employer.
Typically employers receive Schedule A and Schedule C information from several sources at this time each year. It is the employer’s obligation to determine whether filing is required for each plan they sponsor.
All welfare benefit plans covered by ERISA are required to file 5500 forms. Welfare plans with fewer than 100 participants at the beginning of the plan year and are unfunded, fully-insured, or a combination of insured and unfunded are not required to file. Beginning January 1, 2010, all 5500 filings must be submitted electronically using EFAST2.
Employers that do not file 5500 forms for their health and welfare plans are taking a chance they’ll be writing a blank check to the IRS. Penalties for not filing 5500 forms are calculated on a per day, per plan basis. For example, an employer that did not file 5500 forms for both a medical plan and dental plan will be assessed a daily fine for each plan. In some cases the fines can reach $30,000 per plan. Employers that proactively submit missing 5500 filings can save thousands of dollars. Fines that may have been $30,000 could be as low as $2,000 if the employer voluntarily corrects their error.
Employers that are unsure about their 5500 filing obligations should consult with their employee benefit advisor as soon as possible. Plan years that run on a calendar year basis are required to submit their 5500 filing no later than July 31, 2012 of this year.