July 12, 2019


Employee health and welfare benefit plans are established to provide medical, sickness, accident, disability, and many other benefits to employees or former employees and their dependents and beneficiaries. Plans with more than 100 participants on the first day of the plan year must file Form 5500 each year whether funded or unfunded.

A funded plan receives contributions from active or former employees and/or uses a trust to hold plan assets or act as a conduit for the transfer of plan assets. Conversely, an unfunded plan has its benefits paid as needed directly from the general assets of the employer rather than a separate trust account.

It’s important to know these differences when it comes to understanding when a Form 5500 needs to be filed. In fact, most insurance companies will provide a Form 5500, Schedule A, but fall short of preparing the full Form 5500. Failure to do so can result in penalties of $1,100 per day from the date the filing was due until it is paid. 

Considering the penalties could add up, we wanted to walk you through a complete understanding to make sure your company had the facts.

First, who is considered a participant when understanding if a Form 5500 is required?

The Department of Labor considers the following groups to be counted as participants when contributing to whether or not your company needs to file:

  • Active participants (employees)
  • Participants retired or separated from service receiving benefits 
  • Other participants retired or separated from service and entitled to future benefits 
  • Deceased participants whose beneficiaries are receiving or entitled to receive benefits

Second, which plans are considered exempt from any filing requirements?

Typically, forms need to be filed, except for the following:

  1. A welfare benefit plan that covered fewer than 100 participants as of the beginning of the plan year and is unfunded, fully insured, or a combination of insured and unfunded.
    1. A fully insured plan has its benefits provided exclusively through insurance contracts or policies, the premiums of which must be paid directly to the insurance carrier by the employer from its general assets or partly from the company’s general assets and partly from contributions by its employees.
    2. An example of a combination plan would be one that provides medical benefits as an unfunded plan and life insurance benefits from a fully insured plan.
  2. A welfare plan maintained outside of the United States primarily for participants who are nonresident aliens.
  3. A governmental welfare plan
  4. An unfunded or insuranced or insured welfare plan maintained for a select group of management or highly compensated employees.
  5. An employee benefit plan maintained only to comply with workers’ compensation, unemployment compensation or disability insurance laws.
  6. A welfare benefit plan that participates in a group insurance arrangement that files a Form 5500 on behalf of the welfare benefit plan
  7. An apprenticeship or training plan
  8. An unfunded dues financed welfare benefit plan
  9. A church plan
  10. A welfare benefit plan maintained solely for (1) an individual or an individual and his or her spouse who wholly own a trade or business or (2) partners or the partners and their spouses in a partnership.

As shown, it can be a bit confusing trying to decide if your health and welfare plan needs to file a Form 5500.  We can help! Let us cut through the tax laws and provide you with a clear answer. And if you do need to file, we can prepare the filing for you.

Whether you need to file a Form 5500 for your health and welfare plan or if you need to file a Form 5500 for your retirement plan, we can provide timely service and the answers you need while being cost effective. And, if you are looking to consult on what type of retirement plan is best for you, we would be glad to discuss your needs and what type of plan and plan provisions would best serve your needs. For more information, contact us at info@hobe.com.

Hobe & Lucas Certified Public Accountants, Inc. is a full-service accounting and business consulting firm dedicated to providing clients with exceptional value.

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Investment advisory services are offered through Avantax Planning PartnersSM. Commission-based brokerage services are offered through Avantax Investment ServicesSM, Member FINRA, SIPC. Insurance services offered through licensed agents of Avantax Planning Partners. 3200 Olympus Blvd., Suite 100, Dallas, TX 75019. The Avantax entities are independent of and unrelated to Hobe & Lucas Certified Public Accountants, Inc.

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