In less than eight weeks, the floodgates will open and Schedules from the carriers will take over emails for those calendar year ERISA Plans. Most of these will be the Schedule As. However, brokers will see Schedule Cs appear as well, leaving them feel uncertain and very much puzzled. Are Schedule Cs to be included in a Form 5500? Unless there is a large group trust, the answer is no. We will explain.
A Carrier or TPA generates a Schedule C if the benefit is self-insured* (or if the benefit is level-funded**) and service provider fees were paid by the Plan Sponsor. The carrier or TPA will issue out the Schedule C regardless if the ERISA Plan is under a trust or not to cover all scenarios.
Schedule Cs for the Form 5500 are used if the fees to a provider were at $5,000 or more and if the service provider fees were covered by a large funded Plan (Plan under a Trust). If the provider allocated services to the Plan Sponsor who in turn funded via general assets and a trust is not in place, then the Schedule C is not applicable to be reported in the Form 5500 report.
This is noted in the Form 5500 instructions on page 27
“Health and welfare plans that meet the conditions of the limited exemption at 29 CFR 2520.104-44 or Technical Release 92-01 are not required to complete and file a Schedule C.”
[29 CFR 2520.104-44 includes: Plans that pay from general assets (self-insured) and pay insurance contracts (fully-insured)]
Source: https://www.dol.gov/sites/dolgov/files/ebsa/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500/2023-instructions.pdf
Examples:
Scenario 1:
ABC Co. has a self-insured medical policy. It pays administrative fees to Aetna to manage the network and day to day activities. The admin fees are $150,000 and the commissions to the broker are over $5,000. Aetna sends a Schedule C. Is this reported in the Form 5500?
Answer: No, neither the Aetna administrative fees nor commissions to brokers are reported since the ERISA Plan is not under a large trust. If the policy was fully-insured and premium was reported, then the premium and commissions would be listed within a Schedule A. See Table 1.1 for clarification.
Scenario 2:
Smith Co has a self-insured medical policy under its ERISA Plan. The ERISA Plan, Smith Co Employee Health and Welfare Plan is under a large trust with over 100 enrolled participants. UHC is the TPA and sent a Schedule C to the Trust. The Trust paid UHC $5,000+ in service fees to administer the medical benefit. Is the Schedule C to be reported?
Answer: Yes, the Trust paid UHC and as a result, the Schedule C is to be included.
* Self-insured (also known as Self-funded) is a funding vehicle for benefits. The Plan Sponsor covers the claims and pays Administrative Only fees (ASO) to a TPA (often a carrier) to handle the administration of the benefit. Premiums are not issued from the Plan Sponsor to the Carrier.
**Level funding is a hybrid of fully and self-insured. However its roots are more closely tied/identified by self-insured side. For 5500s we do treat as self-insured [in contrast, minimum premium-type funding, also a hybrid has more of the fully-insured aspects and often does the Schedule A].
Table 1.1: Schedule A vs Schedule C
| Schedule A | Schedule C |
| For Fully-Insured (premium-based) insurance policies. | Only to report fees of $5,000 or more paid out of trust fund assets to entities for services provided to the Plan. |
| Includes the total premiums within policy period plus participants (covered persons). | Includes the fees paid out of the trust’s plan assets to service providers for legal, marketing, etc. |
| Commissions, bonus or other sources of revenue from the Carrier to Broker are to be noted. | Broker’s commissions are not reportable on a Schedule C. However if the broker’s fees were paid out of trust fund assets, then those would be reported on the Schedule C. |
| Schedule A for stop loss policy is to be included for a trust ERISA Plan. | N/A |
| DOL requires the name & address of Broker(s) – if applicable. | DOL requires Service Provider(s) and their EIN number. |
If you would like this blog post in a PDF-format, feel free to contact Ann McAdam at amcadam@wrangle5500.com.