QUESTION: Our insurer has told us that we do not have to file Form 5500s for our insured ERISA welfare plans. Are all insured plans exempt from Form 5500 filing, or is there more information we should know?
ANSWER: There is no blanket Form 5500 annual report exemption for all insured plans. However, an insured welfare plan with fewer than 100 participants at the beginning of a plan year (a small plan) is exempt from filing a Form 5500 for that plan year so long as the following requirements are met:
Benefits Paid Through Insurance. Benefits must be paid exclusively through insurance policies issued by insurance companies or similar organizations, or through health maintenance organizations (HMOs).
Premium Payments and Participant Contributions. Premiums must be paid directly by the employer to the insurer (1) entirely from general assets; or (2) partly from general assets and partly from participant contributions, and any participant contributions must be forwarded to the insurer or HMO within three months after being withheld or contributed. The DOL has separately advised, however, that participant contributions become plan assets as soon as they can reasonably be segregated from the employer’s general assets (with 90 days being the outside maximum for welfare benefit plan contributions), so the safer approach is to forward the contributions as soon as possible. Using a TPA as a conduit to pay premiums would likely take the plan outside the exemption, as that would not constitute direct payment by the employer to the insurer.
Treatment of Insurance Refunds. Any insurance refunds to which contributing participants might be entitled must be refunded within three months. The plan’s provisions for allocating refunds must be disclosed to participants when they enter the plan.
Small welfare plans that are a combination of insured and unfunded may also be exempt from Form 5500 filing if applicable requirements are met. (For more about the filing exemption for small unfunded plans, see our Checkpoint Question of the Week). Note that there is no filing exemption for plans subject to the Form M-1 filing requirements (generally multiple employer welfare arrangements—MEWAs). Finally, keep in mind that an insured welfare plan must file Form 5500 for any plan year in which it covers 100 or more participants at the beginning of the year, unless another exemption applies (see our Checkpoint Question of the Week for information about other exemptions).
For more information, see EBIA’s ERISA Compliance manual at Section XXII.B (“Important Form 5500 Exemptions for Small Unfunded and/or Insured Plans). You may also be interested in our upcoming webinar “Form 5500 for Health and Welfare Plans: Preparation and Filing” (live on 05/08/2019).
Contributing Editors: EBIA Staff.