QUESTION: We understand that certain welfare plans are exempt from filing Form 5500s. We have a small self-insured welfare plan—how do we determine whether we must file Form 5500 for this plan?
ANSWER: Whether your plan is required to file Form 5500 depends on the plan’s size and whether it is funded, unfunded, or insured. It sounds like you have already determined that your plan is small for purposes of the DOL’s Form 5500 filing exemptions for certain small plans. (For information about determining whether a plan is a small plan, and an overview of other welfare plan filing exemptions, see our Checkpoint Question of the Week.) Small funded plans must file Form 5500. Small plans that are unfunded, insured, or a combination of unfunded and insured are exempt from filing. (For a discussion of the filing exemption for small insured plans, see our Checkpoint Question of the Week.) For your small self-insured plan, you must determine whether the plan is funded or unfunded to determine whether Form 5500 filing is required.
Funded Plan. A funded plan is one that pays benefits from plan assets. In general, a plan has plan assets, and thus is funded, if it receives participant contributions (e.g., after-tax payroll withholding or pre-tax salary reductions) or uses a trust or separately maintained fund for paying benefits. (An account in the employer’s name is normally not considered a separate fund if it is available for general purposes other than paying benefits.) However, as discussed below, some plans that would otherwise be considered funded are treated as unfunded if the requirements of Technical Release 92-01 are met.
Technical Release 92-01. For plans meeting the conditions of Technical Release 92-01, the DOL will not enforce the requirement to hold plan assets in trust; these plans are also considered unfunded for purposes of the Form 5500 filing rules. For a self-insured plan, the exemption is available only if the sole reason that a plan would be considered funded is the presence of participant contributions made through a cafeteria plan. In addition, amounts contributed through the cafeteria plan must not be segregated from employer assets. (The nonenforcement policy is also available to certain insured plans, subject to different conditions.)
Unfunded Plan. An unfunded plan is one that pays benefits solely from the general assets of the employer maintaining the plan. (A plan that pays benefits through insurance is not unfunded, but, as noted above, small insured or combination insured/unfunded plans are also exempt from filing.) As discussed above, plans that meet the conditions of Technical Release 92-01 are considered unfunded for this purpose.
Thus, whether your plan can rely on the small unfunded plan Form 5500 filing exemption will depend on the particular facts and circumstances—such as whether the conditions of Technical Release 92-01 are met if the plan has participant contributions.
For more information, see EBIA’s ERISA Compliance manual at Sections XIV.B (“Funded Versus Unfunded: The Difference Is ‘Plan Assets’”), XVI.B (“ERISA’s Trust Requirement”), and 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 upcoming webinar “Form 5500 for Health and Welfare Plans: Preparation and Filing” (live on 5/08/2019).
Contributing Editors: EBIA Staff.