Mergers and acquisitions remain the leading source of technical questions related to Form 5500 compliance. To assist in navigating these complexities, we’ve created a checklist designed to guide constructive conversations with your clients. Each question is paired with the rationale behind it, helping you better understand what may be required on the Form 5500 front.
Important Note: We strongly recommend involving an ERISA attorney for review and guidance. This is especially important when there is no common control, meaning benefits may be shared, but one company does not own the others at 80% or more. In such cases, the group may fall under a Multiple Employer Welfare Arrangement (MEWA).
| Question to Ask | Why is this Important? |
| First Level: Look at Past History | |
| What is the EIN of the group being acquired? | You will want to review if there have been any past health and welfare 5500 filings on the DOL’s EFAST website to have a historical perspective. This will provide the opportunity to see if there are any gaps in coverage, late or missed filings, and 5500s filed with errors. The group that will or has acquired may have compliance matters to address.
Wrangle reviews the prior year Form 5500 report as part of our due diligence for new groups added to the Dashboard. |
| How many participants are enrolled in their benefit plan as of the first day of the Plan year before the acquisition? | This will help determine if the group has met the reporting threshold and needs to file. |
| Does the group have any unions? | If any of the contributions or benefits within the plan are subject to the collective bargaining process, the box on page one for collective bargaining would be narked (which is often missed.) It may also hint of a multi-employer group if more than one employer shares the union employees. |
| Is there a Wrap Plan Document? | The most critical pieces of information to know are the ERISA Plan benefit structure and ERISA Plan year. It will dictate many of the aspects needed to accurately prepare the Form 5500s. |
| If there is no Wrap Plan Document, what are the carrier contracts and their renewal dates? | Without a Wrap Plan Document, each carrier contract is its own ERISA Plan and may need its own Form 5500. If a Wrap Plan Document was not in place but the benefits were all bundled in one Plan with one Form 5500, there is a compliance issue to address. |
| Were any benefits under a trust? | Trusts require careful attention because they have additional compliance obligations. If a trust terminates, extra measures must be taken to ensure proper handling and reporting. Regardless of the participant count, a Form 5500 must be filed for any trust. For large plans, an independent audit must be completed and an IQPA report must be included with the Form 5500. Failure to file the Form 5500 or include the required audit report can result in significant penalties: $410 per day late, capped at $133,000. |
| Were any benefits under a PEO? | Professional Employer Organizations (PEOs) present unique compliance challenges that require thorough review. Key questions to consider include: — Filing responsibility: Did the PEO file required reports on behalf of the participating employers? — SAR distribution: Were Summary Annual Reports (SARs) properly distributed to participants? — Benefits outside the PEO: Were any benefits offered outside of the PEO arrangement reported? If not, there may be missed filings. |
| Did the group get 100% acquired or is there an indication of less than 80% owned? | Acquisitions may not mean that there is common control. This needs to be carefully monitored to make sure that a MEWA did not form. We highly encourage for an ERISA Attorney to review if the group acquired is not wholly-owned. |
| Second Level: Look at How the Acquired Company is to be Assimilated | |
| Has the company that was acquired, enrolled in benefits of the Acquiring company? If yes, what was the date? | You need to be mindful of the participant count changes, including for COBRA. The Wrap Plan Document may need to be amended if the new participants and acquired company are to be listed as an affiliated employer. (Plan Participants will need the Summary Material Modification (SMM) for their SPD.) |
| Were any benefits termed of the acquired company, are they to be carried forward to be under the company that acquired them or are they to be kept but as standalone benefits? | This can also affect if the group had a Plan previously and needs a final Form 5500 filed. Additionally, if there are to be changes for the company that was acquired, their Wrap Plan Document and Form 5500 may need to include other benefits.
When a merger occurs mid-year, short plan year filings may be required. If so, filing deadlines will change, which can lead to potential late filings. It is critical to determine these requirements as early as possible to avoid penalties, especially if there is no Wrap Plan Document in place and policies terminate before the renewal date. New Plan Documents may be needed if there are to be standalone benefits. Don’t forget that the participants are to have the SPDs of the Wrap Plan Documents. |
| Are any benefits termed self-insured and if so, are there any run out claims? | Self insured benefits can create a sticky issue with wrapping up. Final reports cannot be filed if there are run out claims. This often creates short plan year filings and new deadlines to factor. |
| Third level: Any Changes When Moving Forward | |
| Is there to be a new company name going forward and/or an EIN? | This can be an easier issue to handle than perceived. Page two of the Form 5500 can list the old EIN and Plan Sponsor name and page 1 lists the new data. This allows the existing Plan to continue without the need to establish a new ERISA Plan. The Wrap Plan Document is to be updated as well.
If a new ERISA plan is created, a Wrap Plan Document should be put into place and the SPD should be distributed within 120 days after the Plan is established to participants. |
If you have any questions, feel free to contact Ann McAdam at amcadam@wrangle5500.com.