Employee Welfare Benefit Plans Making Your Head Spin?

Darlene Finzer | December 28th, 2012

Every year, we receive questions regarding whether a filing requirement exists for a client’s welfare benefit plan. Clients want to ensure that their plans remain ERISA compliant without taking on the burden of any unnecessary paperwork.  Here are answers to some of the most frequently asked questions about employee welfare benefit plans.

What is a welfare benefit plan?

A welfare benefit plan is any plan, fund or program that is established or maintained by an employer for the purpose of providing benefits for participants. Common employee benefits provided under plans include medical, disability, unemployment, life, vision, dental and accidental death & dismemberment coverage.

Does your plan need to file?

There are two main factors to consider in deciding if your plan is required to file: its size and its funding type.  This chart will give you a rough idea of if your plan needs to file Form 5500.

Fewer than 100 participants 100+ participants
Funded by employees Yes Yes
Funded by employer No Yes

Regardless of funding type, any employee welfare benefit plan that covers 100 or more participants at the beginning of the plan year must file a Form 5500.  If your plan has fewer than 100 participants at the beginning of the plan year, it is required to file if it is considered a “funded” plan.

A welfare benefit plan is “funded” if, at any time during the plan year, it:

  • Received contributions from active or former employees.
  • Used a trust or a separately maintained fund to hold assets or act as a conduit for the transfer of plan assets during the year.

An unfunded plan is one where plan benefits are paid exclusively from the general assets of the employer.

A welfare benefit plan with fewer than 100 participants at the beginning of the plan year that is unfunded and/or fully insured is not required to file a Form 5500.

A fully insured plan is one in which plan benefits are provided exclusively through insurance contracts or policies. The insurance premiums for the plan must be paid fully by the employer or partly by the employer and partly by its employees. (Note: plans in which employers reimburse of employee paid insurance premiums are not considered fully insured plans.)

What about premium only plans?

Premium only plans (POP plans) are cafeteria plans that are funded solely by insurance where employees enter into a salary reduction agreement for an amount equal to their portion of the premium cost. Based on the design, POP plans would normally be considered funded plans because of the employee contributions; however, they are an exception to the rule. No Form 5500 is required to be filed for a POP plan regardless of the number of participants.

Compliance with ERISA law considered alone is complex enough.  Add to that recent changes in healthcare regulation and staying compliant with the myriad of regulations impacting employee welfare plans can seem almost impossible.  But, there are solutions, such as ERISAEdge,that make your job as a fiduciary easier.  ERISAEdge, offered by Total Administrative Services Corporation, that allow the benefits offered to be consolidated under a “megawrap” document for which a third parties takes on compliance, administration, and regulatory responsibilities.

Ohio Employee Benefit Plan Help

We realize that the rules relating to welfare benefit plans can be confusing. If you are unsure of the filing requirements for the benefits that you offer to your employees or would like to ease your welfare plan compliance burden by contracting with a third party, please contact Rea & Associates.  Our employee benefits team can work with you to ensure plan compliance in the most painless way possible.  As a fiduciary, you’re responsible for keeping your plan compliant – but you don’t have to do it alone!

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