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There’s a magic number when it comes to your welfare benefit plans. That number is 100. While there are a few exceptions, most businesses that reach 100 employees covered by their plans must file a form with the government to show that the plans meet all regulations and remain in compliance with government requirements. If they fail to file that form, known as a Form 5500, businesses can face some significant penalties.

Gilmore Jasion Mahler’s Molly Wolf specializes in employee benefit plan administration, advising many healthcare practices and other businesses, and acting as a third-party administrator (TPA) for their plans.

“As employees come and go, it’s not uncommon for a business to go over those 100 individuals covered by their welfare benefit plans and not even know it,” she says. “Some insurance providers will watch that closely for a business, but others may not, and that can be a costly mistake.”

Do you know the exact number of employees you have? Is it possible you’ve gone over that 100 mark in terms of members of your business benefit plans? Could you owe a penalty and not know it? Wolf says there’s one thing you can do right now to get a good idea of where you sit: Look at how many are on your company’s long-term disability (LTD) plan. It’s a good place to start, she says, because for most plans that provide LTD coverage, it automatically applies to all employees. It’s also important to know when checking how many plan participants you have that those covered may include not only active employees receiving benefits, but terminated employees, retired employees, deceased employees, and even eligible employees who are not yet enrolled in the plan. 

Wolf says most businesses that need to file a Form 5500 have likely received their 5500 Schedule A or will soon receive it. That’s because the 5500 is due the last day of the 7^th month after their plan year ends. If you have a calendar-year plan, as may businesses do, your Form 5500 will be due on July 31, 2022. You’ll need the months ahead to gather your information and file before the deadline.

The 5500

The Form 5500 is filed by private and public businesses every year with, not only the IRS, but also the U.S. Department of Labor (DOL). The purpose of the form is to demonstrate that your plan is operating as it should be and meets all government requirements as outlined by the Employment Retirement Income Security Act (ERISA). It’s also important to note that the Form 5500 covers not only retirement and savings plans like 401(k)s, pension plans and profit-sharing plans, but it is also required for health and welfare benefit plans with over 100 employees, including medical, vision, dental and more.

Here is a listing of the most common ERISA welfare benefit plans that must file a Form 5500:

• Accidental Death & Dismemberment (AD&D)
• Business Travel Accident
• Cancer Insurance (if voluntary)
• Death benefits (other than life insurance)
• Dental Benefits
• Disability benefits
• Employee Assistance Programs (EAPs)
• Group Term Life insurance
• Health insurance
• Health Reimbursement Accounts or Arrangements (HRAs)
• Health Flexible Spending Accounts (FSAs)
• Legal (prepaid) Assistance Plans
• Long Term Care Plans
• Medical Savings Accounts (MSAs)
• Prescription Drugs
• Severance Benefits
• Vision

5500 Penalties and Pitfalls

If you miss the deadline to file your Form 5500, you’re looking at the potential of two penalties: one from the IRS and one from the DOL. The IRS penalty is $250 a day up to a maximum of $150,000. DOL penalties went up for 2022 due to inflation and can be as much as $2,400 a day with no maximum.

If you know you’ve missed the deadline to file, Molly Wolf says your best option is something called the Delinquent Filer Voluntary Compliance Program (DFVCP). She says it is an inexpensive option, generally the best way to resolve late filing, and could significantly reduce what you owe in late fees & penalties per plan.

All Form 5500s must be filed electronically through the EFAST2 program. Be sure all the information you provide is accurate. You could also face a fine or penalty for mistakes on the form. Some common errors include incorrect information on the number of benefit plan participants, failing to include terminated plans as part of the submission, mistakes with employee identification numbers (EINs) or plan numbers, just to name a few.

Another potentially costly pitfall: confusion over whether your welfare benefits are offered through separate plans or collectively offered through a “wrap” document. If your plans are all separate, that means you need to file a 5500 for each individual plan as opposed to a single 5500 for a “wrap” document. Wolf says she has seen it happen where a business doesn’t know they need to file a Form 5500 for each individual plan. She says she’s seen it go the other way as well, where a business is filing multiple 5500s and it turns out they had a “wrap” document all along, and only needed to file one form.  

Typically, an operations manager or human resources leader would be responsible for filing a Form 5500 for a business, though many businesses rely on an outside provider known as a third-party administrator (TPA). In those cases, that third-party will prepare the filing based on the data provided or collected from the client and the plan’s providers.

If you’re concerned about being able to accurately file your Form 5500 and want to consult with an expert who specializes in employee benefit plans, Gilmore Jasion Mahler’s Molly Wolf is a good place to start. To begin the conversation, email info@gjmltd.com with “Employee Benefit Plan Services Inquiry” as the subject line of your email.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business & transaction advisory, healthcare management & advisory, outsourced accounting, and risk advisory. The firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution, nonprofit, private equity and utilities.  

Did you wait until the last minute to get to work on your 2021 tax return? Well, you’re in good company. Statistics show many Americans put off completing their return until just days before the deadline. If you’re among the procrastinators and will be tackling your 2021 return this week, we have some last-minute advice to share. We also have information on some of the most common mistakes the IRS is seeing as people file this year.

Deadline date

As you surely know by now, the tax filing deadline was pushed back a little bit again this year because of the Emancipation Day holiday in the District of Columbia. This year’s tax deadline is Monday, April 18, 2022. That goes for your state tax return as well, and your local tax return.  

Unemployment Compensation 

The IRS says there’s some confusion this year on whether unemployment benefits should be included on 2021 tax returns as income. GJM tax experts say any unemployment compensation you received in 2021 is considered income and should be included on your 2021 tax return. The reason for the confusion is that there was a special law that you didn’t have to include unemployment payments on your 2020 tax return. That special law was just for one year and only applied to 2020 tax returns. It isn’t the case anymore, so be sure to include any unemployment benefits as income on your 2021 tax return.

COVID-Related Tax Breaks 

Make sure you include any COVID-related tax breaks you got in 2021: Advance Child Tax Credit payments and that third Economic Impact Payment. The IRS says it is seeing some taxpayers claim the wrong amounts on their 2021 tax returns. Make sure you reference the IRS letters you received regarding these payments: IRS Letter 6419 for the Advance Child Tax Credit payments and IRS Letter 6475 for your third Economic Impact Payment. That way you will be sure to get the correct amounts on your return.

Charitable Donations 

You can claim a deduction up to $300 for cash contributions to qualifying charitable organizations, even if you claim the standard deduction on your 2021 tax return. Married couples filing joint tax returns can claim up to $600.

Virtual Currency

Be sure to check either yes or no in the box on your 1040 Form that asks about virtual currency. The IRS says some people are forgetting to do so.

Set Up a Payment Plan

Failing to file your tax return because you know you owe and don’t have the money to pay is a big no no. It could cost you a great deal in penalties. If you owe money you need to pay by the April 18 deadline or set up a payment plan.

File Electronically

The IRS says a good way to cut down on mistakes is to file your tax return electronically and do direct deposit to your bank account. Electronic platforms require you to fill out all the necessary fields and that could help you avoid making a simple mistake, like forgetting your SSN.

Avoid Common Mistakes

Often people’s tax returns get held up, red flagged or delayed because of simple errors, according to the IRS. Be sure to review all your information for accuracy and doublecheck your final steps before hitting “submit” or mailing your tax return.

Here are some other important steps to avoid simple mistakes:

• Make sure you use correct filing status
• Report all your taxable income
• Doublecheck your name, birth date and Social Security Number
• Doublecheck your routing and bank account numbers
• Sign and date your tax return
• Keep a copy of your tax return
• If mailing a paper tax return, make sure you mail it to the right address and have the correct postage on it
• Take a deep breath and don’t rush. As a last-minute filer, if you hurry through filling out your return, you’re increasing your chances of making a simple mistake

Can’t get your return done in time? File for an extension. That gives you six more months to file, with the extended deadline for individuals on October 17, 2022. If you need some help, you’ll find all kinds of helpful tools from the IRS, including how to track your refund once you’ve filed.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business & transaction advisory, healthcare management advisory, outsourced accounting, and risk advisory. The firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution, nonprofit, private equity and utilities.  

Are you doing enough to protect your manufacturing business from a cyber-attack? As more and more manufacturers deal with cyber incidents, including ransomware, it’s clear the cyber threat is now a top concern for the industry. In this article you’ll hear from some cyber experts brought together for a recent GJM Manufacturing Financial Executive Roundtable event. GJM manufacturing team lead Wes Beham hosted the gathering, while GJM’s Reid Mankowski moderated the panel discussion: “The Cyber Threat: Protecting Your Business.”  Read on to learn what our expert panelists say you should be doing to protect your business, as well as some areas of risk you may not have considered.

Threats

Dr. Loren Wagner is Director of Risk & Technical Services at CentraComm, a company that helps businesses determine their risk of a cyber-attack. Wagner says the cyber threats out there remain ominous. He cites the SolarWinds hack in early 2020 as an example of the damage a “supply chain”-related hack can do. SolarWinds is a software company that provides IT management and monitoring services. The hackers in the SolarWinds incident added harmful code to the SolarWinds software system. When SolarWinds then sent out software updates to its customers, that hacked code was included, giving the cyber criminals access to IT infrastructure at those companies. The hacks went undetected for months. Some top US officials believe the hackers were Russian.

But Wagner says threats don’t always come from afar. They can originate much closer to home and he says you can’t rule out an internal hack, perhaps from a disgruntled employee. Nation-state hackers and organized crime can be responsible as well. He says they’re very good at what they do, and these types of threats are increasingly common.

A Changing Landscape

Wagner was joined on the GJM roundtable panel by Alex Clark, VP and Cyber Risk Leader for Hylant. Clark says it’s incredible when you consider how the cyber landscape has changed. He says ransomware now accounts for about half of the cyber insurance claims they’re seeing.

“Cyber bad actors are getting more creative."

Clark says these "bad actors" are attacking operational functions once they access a company’s infrastructure. “Businesses need to start asking more questions to make sure they’re protected.” Clark says he’s seeing an increase in ransomware attacks in which the hackers not only lock down the business for ransom, but also steal company data.

What can you do right now to protect your business, and what questions should you be asking? Here’s what our panelists say you need to consider:

• Do you have your IT/security team at the executive table for the conversation about cybersecurity? They need to be there
• Try to think down the road to stay ahead of these criminals
• Look at your peers. Are you where you should be with policies/protections?
• How proactive are you being with your security measures?
• Do you have an incident response plan? Have you tested that response plan?
• What does your backup system look like? Where is that backup system?

Corey Kaemming says The Andersons has done some tests in which they hired people to try to break into their system and see if they could get in. Kaemming, also a panel member, is Senior Manager of Information Security at The Andersons. Another test, he says, involved letting an individual gain access to their system and seeing how far they could get and what information they could access.

The panelists all agreed that preparation helps a company understand its limitations. Kaemming says The Andersons has documented its response plan and will practice it on a regular basis. Clark also urged attendees to take advantage of resources their insurance carriers offer to help mitigate their risk.

Here are some other key items panelists say all executives should keep in mind:

• Multifactor authentication for emails
• Ensure you have system backups in place and that you test them regularly
• Software “patching” in place where it needs to be. For example: you patch Microsoft, but Adobe may not get patched
• Employee awareness and training is critical. They need a clear understanding. Do a periodic vulnerability assessment
• Don’t forget to secure “end of life” software: old, abandoned versions of software still out there
• Do scans at least two times a year, more if you have a lot of change going on
• Cyber insurance: No longer a blanket approach. Find the right fit for you. Several carriers cater to middle market businesses
• Cell phones: another risk. Are personal devices included in your cyber policy?
• Revisit policies around your cyber policy. For example, your acceptable use policy
• Once you’ve had a claim there will be heightened scrutiny from insurance underwriters
• Just because you’ve had a claim that doesn’t make you uninsurable

Cathy Witte from CIFT/Ohio Manufacturing Extension Partnership (MEP) also spoke to attendees, offering details on a funding opportunity for cyber projects available through the MEP. Manufacturers looking to learn more are encouraged to call 419-535-6000, ext. 142, or go to ciftinnovation.org.

The cyber threats that exist today are ever-present and everchanging. Be sure your business is ready.

GJM’s Risk Advisory offerings include a team of specialists who work with many different types of businesses to determine and manage cyber risk. Learn more about our Risk Advisory Services.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business & transaction advisory, healthcare management advisory, outsourced accounting, and risk advisory. The firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution, nonprofit, private equity and utilities.