ALERT! Mandatory Form 5500 filing for sponsors of group benefit plans
Posted September 24, 2010
Sponsors of group health, disability or life insurance plans must file Form 5500 or pay stiff penalties.
Organizations with more than 100 employees that sponsor certain group benefit plans must file an annual Form 5500 with the Department of Labor (DOL). Failure to file Form 5500 in a timely manner may result in a penalty of $25 per day up to a maximum of $15,000.
The penalty applies to each Welfare Benefit Plan your organization sponsors per year. For example; your organization may have 200 employees covered by group health, vision, long-term disability, short-term disability and life insurance benefits that are provided through various insurance contracts. In the absence of a “wrap” agreement that bundles all of these benefits together, your organization would be deemed to sponsor five separate Welfare Benefit Plans. Therefore, if a Form 5500 was not filed in a timely manner for any of these plans, the organization could be assessed $75,000 (maximum of $15,000 per plan) in penalties per year.
There are many instances of organizations that were not aware of the filing requirements for their Welfare Benefit Plans, so they have not filed returns for ten or more years. These organizations may face penalties in excess of $750,000.
Delinquent Filers Voluntary Compliance Program
There is a glimmer of good news for delinquent filers and non-filers. If you discover that your organization has not filed Form 5500 for the Welfare Benefit Plans it sponsors, the Delinquent Filers Voluntary Compliance Program (DFVCP) can be used to significantly reduce the penalty amount. To qualify, the organization must file the delinquent Form 5500s before the IRS or DOL issues a notice for the late returns or selects the plan for audit.
Get help!
Please contact our Employee Benefit Services Group or call 800-572-3504 if you have any questions regarding Welfare Benefit Plan filing requirements, or would like assistance in meeting your compliance requirements.
