When Form 5500s ramp up in the second quarter, our ERISA Desk Team receives a wave of urgent requests for the Wrap Plan Document to be prepared. Often with these inquiries, the Plan Sponsor specifies that the Wrap Plan Document needs to be backdated beyond the current ERISA plan year. Unfortunately, this cannot be done – Wrap Plan Documents can only be created within the current plan year. Why? What are the consequences? What are the next steps to consider? The answers to these questions and more details can be found below.
The Wrap Plan Document
The Wrap Plan Document is the go-to source for the benefit plan structure. It also permits bundling multiple benefits under one Plan. If a Plan Sponsor did not have a Wrap, then each benefit and/or carrier contract is considered standalone needing to be its own Plan with a separate Plan Document.
With standalone plans, you cannot then bundle all benefits together to be under one Form 5500. If the DOL were to audit and see all benefits under one 5500, without a Wrap Plan Document in place, they may issue late filing penalties for the number of 5500 reports that should have been filed. As a result, people ask for a Wrap Plan Document and then try to backdate it to fit what was needed to have just the one Form 5500 report.
The DOL is savvy and has informed Wrangle that they can tell when a Wrap Plan Document is created with an imposed backdate. For instance, they will check if there has been a corresponding distribution of an SPD to the participants in the previous year(s). They may require the Plan Sponsor to file the delinquent filings but not allow them to use the DFVC’s reduced penalty fees.
Furthermore, per EBIA, a reference guide prepared by ERISA attorneys, backdating could be deemed by the DOL as a criminal offense under Code §7206 (see below). Granted this appears a bit of an extreme to impose, nevertheless, this is in the DOL’s realm to apply.
A resolution or other corporate action (e.g., an officer’s signature on a document) taken to adopt a plan should never be backdated, even if the plan has an earlier original effective date. Backdating could be a criminal offense.
In connection with any compromise under section 7122, or offer of such compromise, or in connection with any closing agreement under section 7121, or offer to enter into any such agreement, willfully—
(A)Â Â Concealment of property. Conceals from any officer or employee of the United States any property belonging to the estate of a taxpayer or other person liable in respect of the tax, or
(B)Â Â Withholding, falsifying, and destroying records. Receives, withholds, destroys, mutilates, or falsifies any book, document, or record, or makes any false statement, relating to the estate or financial condition of the taxpayer or other person liable in respect of the tax;
shall be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 3 years, or both, together with the costs of prosecution.
What to Do:
You must file Form 5500 for each benefit plan or carrier contract that meets the reporting threshold. Specifically, any plan with 100 or more enrolled participants on the first day of the plan year, as well as any Multiple Employer Welfare Arrangement (MEWA) that filed a Form M-1, or any trust, must file regardless of participant count. Additionally, file a final report for all but one plan, ensuring that the remaining active plan aligns with the Wrap Plan Document. Although this process is detailed and time-consuming, it ensures compliance and minimizes the risk of penalties. [Wrangle’s DFVC go-to expert also advises this same set of instructions for delinquent reports that have not been filed and do not have a Wrap Plan Document as a guide].
Example of What This Looks Like:
ABC Company has not had a Wrap Plan Document and started offering benefits on 1/1/23. They have Aetna for medical, MetLife for dental, VSP for vision UNUM for life, AD&D, LTD, and STD.
Each benefit and/or carrier contract has over 100 enrolled on the first day of the Plan year.
2023 Form Year: 1/1-12/31
Plan 501: Medical under Aetna
- 5500: first filing
Plan 502: Dental under MetLife
- 5500: first and final report
Plan 503: Vision under VSP
- 5500: first and final report
Plan 504: Life, AD&D, LTD and STD under Unum
- 5500: first and final report
2024 1/1-12/31/24 with a Wrap Plan Document. All benefits are bundled.
Plan 501: all benefits
Overall Wrangle encourages to have the Wrap Plan Document in place as soon as possible to show a good faith effort towards compliance. As for past filings without a Wrap Plan Document, we believe the approach to take is what is outlined in this blog. However, if there is hesitancy, we encourage you to have the client speak with an ERISA attorney on what would be the best answer on past filings without a Wrap Plan Document.
If you have any questions on this matter, feel free to contact Ann McAdam at amcadam@wrangle5500.com.