As a small business, when was the last time you reviewed your health plan to ensure it was in compliance with IRS reporting requirements? Health and other welfare benefit plans must file a Form 5500 annually unless they are specifically exempt by the IRS.
The following summary of basic reporting requirements may be the tool you need to give your health and welfare benefit plan(s) an annual “check up”:
1. ______ Did your welfare benefit plan have fewer than 100 participants as of the beginning of the plan year? (DO NOT COUNT covered dependents, but DO COUNT former employees who are still covered by the plan.)
If you answered ‘YES’ to (1), see (2) below.
If you answered ‘NO’ to (1), your plan must file a Form 5500.
2. ______Is your plan any of the following: unfunded, fully insured, or a combination of both?
Unfunded – The employer pays all of the benefits of the plan; there are no employee contributions and/or the employer does not use a trust to hold assets of the plan.
Fully Insured – Benefits of the plan are paid entirely from insurance contracts/policies. Premiums are paid directly to the insurance company by the employer using employer’s assets, employee contributions, or a combination of both.
Unfunded and Fully Insured, a combination – An IRS example of combination funding would be a single plan that provides both unfunded medical benefits and fully-insured life insurance.
If you answered ‘YES’ to (2), your welfare benefit plan does NOT need to file a Form 5500.
If you answered ‘NO’ to (2), you must file a Form 5500 for your welfare benefit plan(s).
Welfare benefit plans that use a voluntary employees’ beneficiary association (VEBA), must file a Form 5500.
The Form 5500 is due 7 months after a plan’s year end (e.g., a 12/31 year end would need to file by 7/31). The Form 5500 is an information return, so there is generally no tax due. However, the IRS does assess penalties for failure to file or for late filings.
Your CPA is an excellent resource if you need to file a Form 5500 for your plan or if you have questions about the filing requirements.
Most importantly, remember to give your health plan a “check up” annually.
Daria A. Cruzen, CPA