Businesses with Benefit Plans: Is this on your Radar? It Should Be.

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 7th 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 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.  

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