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For Purposes of the Form 5500 Small Plan Filing Exemption, How Do We Show That Our Welfare Benefit Plan Is Going Above or Dropping Below the 100-Participant Threshold?

EBIA  

EBIA  

QUESTION: Our welfare benefit plan had over 100 participants at the beginning of the 2017 plan year. However, it had fewer than 100 participants at the beginning of the 2018 plan year, so it is now a small welfare benefit plan exempt from filing Form 5500. Do we need to file something to show that the plan now has under 100 participants?

ANSWER: The plan’s Form 5500 for the 2017 plan year should reflect that no Form 5500 will be filed for the 2018 plan year due to the decrease in participants. As your question indicates, small unfunded, insured, and combination unfunded/insured welfare plans are exempt from filing Form 5500. A small plan for this purpose is one that covers fewer than 100 participants at the beginning of the plan year, even if the number of participants reaches or exceeds 100 during the year. A plan that has been filing Form 5500s may stop doing so for any year in which it has fewer than 100 participants at the start of the plan year. Because the filing deadline for a plan year (seven months after the end of the plan year, with extensions possible) occurs after the next plan year begins, the plan administrator knows when filing Form 5500 for the year just ended whether a filing will be required for the next year. So, when you file Form 5500 for the 2017 plan year, you already know that no filing will be required for the 2018 plan year. To alert the DOL not to expect a 2018 Form 5500, enter Code “4R” on line 8b (along with other applicable codes for the plan), indicating that the plan will qualify for the filing exemption for 2018. Failing to include this code on the 2017 filing may generate an inquiry from the DOL when it doesn’t receive a 2018 Form 5500 for the plan.

If, in the future, the plan again covers 100 or more participants as of the beginning of a plan year, you will need to resume filing Form 5500. In that case, enter Code “4S” on line 8b of the first Form 5500 filed after the hiatus, indicating that the exemption applied (and forms were not filed) for the intervening year(s). For example, if your plan covers more than 100 participants at the beginning of the 2019 plan year, enter Code 4S on line 8b of the 2019 Form 5500.

Plans going under and over the threshold like this should not, in Part I of the main body of the Form, check the “final return/report” or “first return/report” boxes on line B. And do not confuse this exemption with the so-called “80-120” rule, which permits a plan that is not exempt from filing Form 5500 to continue filing the same financial Schedule (Schedule H for large plans or Schedule I for small plans) so long as it has at least 80 covered participants but not more than 120.

For more information, see EBIA’s ERISA Compliance manual at Section XXII.B (“Important Form 5500 Exemptions for Small Unfunded and/or Insured Plans”). See also EBIA’s Self-Insured Health Plans manual at Section XXIX.B (“Annual Form 5500 Reporting”). You may also be interested in our recorded webinar, “Form 5500 for Group Health Plans: Preparation and Filing” (recorded on 5/3/18).

Contributing Editors: EBIA Staff.

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