Form 5500 Filing Exemption for Small Health Plan

Question: Our company acquired another business at the end of last year, which significantly increased our employee count. We haven’t filed a Form 5500 for our insured health plan before because we’ve qualified for the filing exemption for small plans. Due to the acquisition, we now have more employees and dependents covered under our health plan. We know the Form 5500 filing deadline is approaching. How do we determine if we still qualify for the exemption?

Answer: Employers that are subject to ERISA must file an annual report (Form 5500) with the Department of Labor (DOL) for their employee benefit plans. The Form 5500 must be filed by the last day of the seventh month following the end of the plan year. Employee benefit plans that operate on a calendar year basis must file their Forms 5500 for 2022 by July 31, 2023. An employer may extend this deadline by two and one-half months by filing IRS Form 5558. This extended deadline is typically Oct. 15 for calendar year plans, but for 2022 filings the extended deadline is Oct. 16, 2023.

There is an exemption from the Form 5500 filing requirement for certain small welfare benefit plans. Welfare benefit plans are exempt from the Form 5500 filing requirement if they:

• Have fewer than 100 covered participants at the beginning of the plan year; and

• Are unfunded or fully insured (or have a combination of unfunded and fully insured benefits).

A fully insured health plan qualifies for the filing exemption for the 2022 plan year if it covered fewer than 100 participants at the beginning of that plan year (that is, Jan. 1, 2022, for a calendar year plan). “Participant” includes only employees and former employees (for example, COBRA beneficiaries) who are participating in the plan. Covered dependents (for example, spouses, domestic partners and children) are NOT counted as participants when determining whether a plan qualifies for the small plan exemption.

A small welfare benefit plan that has fewer than 100 participants at the beginning of the plan year will qualify for the filing exemption even if the number of participants increased during the plan year to 100 or more. However, the plan will be subject to the Form 5500 requirement for the 2023 plan year if it continues to have 100 or more participants at the beginning of that plan year (that is, Jan. 1, 2023, for a calendar year plan).

Also, when counting the number of participants, it is important to first determine whether any other welfare benefit plans should be combined with the insured health plan for reporting purposes. A common practice for employers is to combine more than one type of ERISA welfare benefit (for example, group medical insurance, life insurance, dental and vision insurance and a health FSA) into a single plan, often using a wrap plan document to achieve this. If multiple benefits have been combined under a single plan, all employees participating in the plan’s benefits must be counted to determine if the filing exemption applies. According to the DOL’s Instructions to the Form 5500, an employer must “review the governing documents and actual operations to determine whether welfare benefits are being provided under a single plan or separate plans.”

Content from Zywave 6-23