Transcript Slide 1

This UBA Employer Webinar Series
is brought to you by United Benefit Advisors
in conjunction with Jackson Lewis
For a copy of this presentation, please go to www.UBAbenefits.com. Go to
the Wisdom tab and scroll down to HR Webinar Series and click. Under
Employer Series click the Registration and Presentation link. Click the red
Presentation button to see the slides.
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Represents management exclusively in every aspect of
employment, benefits, labor, and immigration law and related
litigation
Over 770 attorneys in 55 locations nationwide
Current caseload of over 5,000 litigations and approximately 300
class actions
Founding member of L&E Global
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This presentation provides general information regarding its subject and explicitly may not be construed as
providing any individualized advice concerning particular circumstances. Persons needing advice concerning
particular circumstances must consult counsel concerning those circumstances. Indeed, health care reform
law is highly complicated and it supplements and amends an existing expansive and interconnected body of
statutory and case law and regulations (e.g., ERISA, IRC, PHS, COBRA, HIPAA, etc.). The solutions to any
given business’s health care reform compliance and design issues depend on too many varied factors to list,
including but not limited to, the size of the employer (which depends on complex business ownership and
employee counting rules), whether the employer has a fully-insured or self-funded group health plan, whether
its employees work full time or part time, the importance of group health coverage to the employer’s
recruitment and retention goals, whether the employer has a collectively-bargained workforce, whether the
employer has leased employees, the cost of the current group health coverage and extent to which
employees must pay that cost, where the employer/employees are located, whether the employer is a
religious organization, what the current plan covers and whether that coverage meets minimum requirements,
and many other factors.
IRS Circular 230 disclosure: Any tax advice contained in this communication (including any attachments or
enclosures) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties
under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any
transaction or matter addressed in this communication. (The foregoing disclaimer has been affixed pursuant
to U.S. Treasury regulations governing tax practitioners.)
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Which plans must file Form 5500
Combining benefits for filing purposes
Filing due dates
Electronic filing
Basics for completing the Form 5500 and commonly used
schedules/frequent errors
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Correcting Form 5500 compliance failures/delinquent filer program
Areas of DOL and IRS emphasis in examining Form 5500
Areas of Form 5500 that increase audit exposure/strategies to
reduce risk
More emphasis on the welfare plan side
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Annual report to government by ERISA employee benefit plans
DOL enforcement and research tool
IRS and DOL use the Form 5500 as part of a process to determine
which plans to audit
Posted on DOL website
o Don’t use SSN or portion of SSN
ERISA reporting and disclosure requirement; not an Internal
Revenue Code filing requirement
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Employer maintained plan providing certain listed benefits to at least
one employee
Employee pension benefit plans
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Employee welfare benefit plans – common examples
o Health, dental, vision, prescription drug
• Include FSAs and HRAs
o Many wellness and employee assistance programs (EAPs)
o Life insurance, LTD, AD&D insurance
o Severance plans
Not required for the cafeteria plan itself, but required for underlying
plans
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Government and church employer plans
Most short-term disability plans
Sick pay
Voluntary employee pay all insurance
o Minimum employer involvement/sole function of employer is:
• Permit the insurer to publicize the program to employees,
• Collect premiums through payroll deductions, and
• Remit premiums to the insurer
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Most Health Savings Accounts (HSAs)
o Voluntary for employees and limited employer involvement
Vacation pay
Educational assistance plans
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Form 5500 filing required unless meet an exception
o Unfunded excess benefit plan
o Top-hat plan using alternative compliance method
o Small employer welfare plans
o Not subject to ERISA
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Less than 100 participants at beginning of plan year
o Participant equals covered employee or former employee (not
spouse or dependents)
o Individual must be covered, not merely eligible to elect coverage
AND
Not funded – paid from the general assets of employer or by
insurance company (insurance is not funded!)
Less than 2% of welfare plans file a Form 5500
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One Form 5500 is required for each “plan”
Plan documentation is important to determine what is a plan for
welfare plans
o Plan documentation should match Form 5500
o 3 digit plan number
o SPDs
Default rules when documentation is not clear
o One plan per benefit
o One plan per insurance contract
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7 months after end of plan year
2 1/2 month automatic extension with IRS Form 5558
o File extension by normal due date
Plan termination – 7 months after liquidation of plan assets
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Electronic filing required by all filers under ERISA Electronic Filing
Acceptance System (EFAST2)
o Beginning in 2009 forward (2010 transition is paper)
o The failure to file electronically is treated as a non-filing
Choice between: (i) DOL’s free system iFile, or (ii) EFAST2
approved third party software
Over 80% of filers use EFAST2 approved third party software
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Plan Administrator; not the Plan Sponsor
o No sharing of signing credentials e.g., do not give signing
credentials to third party preparer
Preparer may sign on behalf of Plan Administrator if:
o Preparer uses preparer’s signing credentials
o Preparer receives written authorization from the Plan
Administrator to submit the filing
o Manually sign a paper return
o PDF first two pages of manually signed form with electronic filing
o Note – manually signed will be part of publicly disclosed 5500
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Review and validate content before submission
o Step in EFAST2 system
Submit Form 5500 by midnight per Plan Administrator time zone
Check status of filing
o “Filing received” (not approval)
o “Filing unprocessable” or “processing stopped”
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Part I – Annual Report Identification Information
o Plan year (designated by Plan Sponsor and in SPD)
o Type of plan
o First/final return
• Zero out final return
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Part II – Basic Plan Information
o Plan name – be consistent/abbreviations ok
o Plan number – Plan Sponsor designation
o Note – change of name and/or EIN of Plan Sponsor
o Match number of plan participants at beginning plan year with
prior year 5500
o Line 8b – identify all benefits provided by the plan
o 9a and 9b – don’t mark trust unless you are 100% sure of the
trust
• “Unfunded” means “general assets of the Plan Sponsor”
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Form M-1 Filing Attachment
o New for 2013
o M-1 is for MEWAs and ECEs
o Must indicate whether plan is required to file Form M-1
o Failure to include may result in rejection of 5500
o Trap for unwary – no prompt on Form 5500 or EFAST2
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Schedule A – Insurance Information
o Most common for welfare plans
o Required if benefits paid by insurance company
o Not required for stop loss insurance purchased by employer
o Insurance company legally required to provide the information
o Separate Schedule A for each policy
o If insurer is late providing the information, timely file and deal
with implications
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Schedule C – Service Provider Information
o Most welfare plans do not file
o Not required if no formal trust required, i.e.,
(a) Employer contributions only, or
(b) Cafeteria plan, or
(c) Insured
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Schedules H and I – Financial Information
o Schedule H – large, funded plans
o Schedule I – small, funded plans
o Very rare with welfare plans
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Plan Sponsor and Plan Administrator are ultimately responsible
For Welfare/Fringe Benefit Plans, only DOL will assess penalties
DOL Enforcement Programs (Office of the Chief Accountant):
o Directed at service providers and quality of audits being
performed
o Late, non-filers, and deficient information
o MEWAs have their own enforcement program
o Delinquent Filer Voluntary Compliance Program
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Penalties imposed on Plan Administrator, may not be covered by
E&O
Why Penalties are Imposed:
o Form 5500 has not been filed or filed late
o The filing does not include all of the required forms and
schedules
• Incorrect or incomplete forms/schedules
If timely filed but incomplete/inaccurate, can re-file complete and
accurate form within 45 days without penalties
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Administrative Penalties:
o Statutory penalties up to $1,100 each day (cumulative back to
1988)
o Late filers - $50 per day
o Non-filers - $300 per day with $30,000 per year max
• Penalties imposed on Plan Administrator, not Plan Sponsor
– Personal liability which may not be covered by E & O
coverage
o Reduction of penalties possible under enforcement programs
Criminal Penalties – very rare if ever
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What is the DFVCP?
o Meant to encourage Plan Administrators to file any unfiled Form
5500s
o Reduced civil penalties in exchange for voluntary compliance
Who can participate?
o Must be an ERISA plan (Title I)
o May participate as long as have not received notice in writing
from DOL that there has been a failure to timely file the Form
5500
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What are the requirements?
o Electronically file complete Form 5500s – check box labeled
“DFVC Program”
o Calculate penalty using online calculator and submit payment
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Version of the Form 5500 to be filed:
o Generally, you file the annual report from the year missed
o There are exceptions - can use DOL’s online tool to determine
which to file
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Reduction of penalties available:
o Reduced civil penalty under ERISA § 502(c)(2)
• Large Plans - $10/day up to $2,000 per filing or $4,000 per
plan
• Small Plans - $10/day up to $750 per filing or $1,500 per plan
• Small 501(c)(3) Plans - $10/day up to $750 per filing or $750
per plan
o IRS will not impose penalties if the filer satisfies DFVCP
requirements
Always better to volunteer mistakes than to be caught in one
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Compile information about employee benefit plans
o Identify benefit, tax, and economic trends in the private sector
Identify potential investigative targets
o Targeting is the process the DOL and IRS use to identify plans
and service providers with the highest potential for abuse
o Targeting can be based upon specific enforcement strategies
and priorities of the National and Regional Offices
o Targets may share service providers, be of a specific size or
type of plan, or other criteria
Accuracy will be verified during the course of an investigation
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Missing attachments
Accountant’s Report (IQPA) – read and critique it!
Schedule H, Part IV - “Compliance Questions”
o Line 4a – the failure to transmit participant contributions
o Line 4d – nonexempt transactions with a party-in-interest
o Line 4f – a loss due to fraud or dishonesty
o Line 4l – the failure to provide benefits when due
Schedule A, Part III – Welfare Benefit Contract Information
Service Provider information, especially the IQPA
MEWAs!!
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Accountant’s/auditor’s report
o Only required for retirement plans and funded welfare plans
o DOL began a program in November 2013 to review the
Accountant’s Report that accompany 5500s
o DOL is asking and requiring more than the tasks many auditors
perform, e.g., audit work papers, discrimination testing, audit
tests unique to employee benefit plans
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in the UBA Employer Webinar Series
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if you have a follow-up question, you can email the presenters today or
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