ERISA Compliance Review
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ERISA Annual Reports
Most employers have heard of The Employee Retirement Income Security Act (ERISA) and
consider it a rather lengthy and complex set of rules governing employee benefits plans. It is really nothing more than a very large requirement to disclose the details of your benefit plans to participants and the Government. It puts the responsibility squarely in the hands of you, the Plan Sponsor. ERISA is very specific about the information you are required to provide employees and the vehicle used to disclose that information.
ERISA Welfare Plans
Although ERISA contains a more comprehensive list of potential plans (and exemptions),
the most prevalent employer-sponsored welfare plans include: medical, dental, vision,
cafeteria plan healthcare reimbursement, (insured) short-term disability, long-term
disability, employee basic and voluntary life insurance, accidental death and
dismemberment insurance, employee assistance programs which provide medical services,
and prepaid legal services.
TIP: Welfare plans with fewer than 100 enrolled employees (“small plan”) are generally
exempt from annual filing and disclosure if benefits are paid from general assets or
benefits are partially or fully insured.
Form 5500s and Summary Annual Reports
Your Annual 5500 Filing is the vehicle used to report your benefit plan detail to the
Department of Labor (DOL). It contains information on the characteristics and financial
operations of the plan. The information included in these filings is used to update the
DOL database for enforcement, compliance, and research.
TIP: The Form 5500 is generally due by the last day of the seventh month after the end
of the plan year. The due date for a calendar year plan is July 31st.
A Summary Annual Report (SAR) is the ERISA disclosure of your benefit plan detail to
plan participants. It outlines in narrative form the financial information in the
plan’s Annual Report. For each 5500 filing, a corresponding SAR should be distributed
to plan participants within 2 months of the filing deadline. The DOL provides a (free)
model format which is used to comply with this requirement.
TIP: An SAR model template is available on
the DOL website.
Form 5500 Basics and Attached Schedules
The Form 5500 Annual Report consists of the main Form 5500, which includes basic
identifying information, and, depending upon the type of plan, one or more of 13
Schedules that focus on a particular subject matter or filing requirement. For example,
insured welfare plans require the Schedule A attachment. Financial Schedules H or I are
required for self insured plans.
TIP: Most insurers automatically produce the Schedule A once an employer reaches 100
enrolled employees. However, if your welfare plan combines multiple types of benefits
(i.e. medical, dental, life, disability) into one plan, a Schedule A should be attached
for each insurance contract regardless of the number of plan participants.
Common Filing Errors
The Form 5500 and schedules are subjected to computerized edit tests. Watch out for the
most common mistakes:
» Omission of necessary information;
» Failure to completely answer multiple part questions;
» Attaching supplemental information to the forms instead of completing the necessary
line items;
» Attaching information that is not properly completed and labeled; and
» Failure to use acceptable forms and to enter information on the forms correctly.
Penalty/Sanctions
The Department of Labor has authority to assess penalties from $50 per day, up to $1,100
per day per annual report.
TIP: The DOL, at its discretion, may waive all or part of a penalty if an administrator
files a timely statement showing reasonable cause for failure to file a complete report
when due. The statement should specifically request the penalty be waived and must
contain a declaration by the administrator that the statement is made under penalty of
perjury.
Voluntary Compliance
The DOL reviews your Form 5500 submission and if there is a problem, sends
correspondence requesting that the correct information be provided. This correspondence
is designed to achieve voluntary compliance with the reporting requirements.
If you discover errors or omissions in a previously filed annual return/report, file an
amended return/report to correct the errors and/or omissions. The amended return is
also designed to achieve voluntary compliance.
Generally, the DOL does not have the manpower to identify and track down employers that
have not filed 5500s. The Delinquent Filer Voluntary Compliance Program (DFVC) was
established to encourage employers to voluntarily file overdue annual reports.
Penalties are reduced to $10 per day, not to exceed $2,000 per plan.
TIP: You must request participation in the DFVC Program by checking the appropriate box
on the 5500 Form. The DFVC Program is typically not an option once you have been
notified of a pending audit.
Additional Information
Many employers do not understand the filing requirements. In an effort to simplify and
expedite the data collection, the DOL created the EFAST system, with a dedicated website
(www.efast.dol.gov) and customer service unit (866.463.3278).
HR Business Solutions guides clients through the vast array of HR and benefit compliance
regulations.
This publication is intended to assist employers in complying with the annual reporting
requirements. It provides only general guidance. Not all rules or requirements are
reflected. See the instructions to the Form 5500 and applicable regulations for detailed
information. The contents of this document are not a legal interpretation of ERISA.
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