Demystifying Red Flags Found with Wrap Plan Documents, Form 5500s and NDT
Our webinar was packed with information on the Plan Documents and the H&W Form 5500. We are pleased to provide to you the questions collected during the presentation and the corresponding answers. If you need further clarification feel free to contact Ann McAdam at amcadam@wrangle5500.com . For inquiries on our services, please contact Elaine Harvey, our Sales Director at: eharvey@wrangle5500.com.
Q&A Session ā Questions Focused on the Plan Documents
| Question | Answer | |
| 1 | If a group offers certain benefits like telehealth and EAP to Volunteers, not employees, how are these handled? | When those, other than employees, COBRA subscribers and retirees, are offered benefits, best practice is to seek the advice of an ERISA attorney to review. This may just require a change in the definitions and eligibility rules. The reason is that those who are not an employee may be deemed as a self-employed. If they share the benefit(s) this could lead to a multiple employer plan, a MEWA. |
| 2 | Wouldnāt the clientās payroll vendor issue the Section 125 Premium-Only-Plan (POP)? Can the POP be back-dated? | They sometimes will issue a POP, but not always. We typically recommend that backdating only occur to the first day of the current plan year. |
| 3 | Does the Wrap Plan Document need to be updated annually when there are no changes to plan year, carrier, contribution amount, etc.? | If there are no changes to the Plan, including no ERISA-mandate level changes, the Wrap Plan Document would likely not need to be updated, so long as it is still within its five-year shelf life. If there has been absolutely no changes, the Wrap Plan Document can go up to 10 years before it needs to be restated. |
| 4 | If there are two EAPs, one from the medical plan and one from the LTD plan, do we include both separately in the Wrap Plan Document? | Yes, this is recommended as they have different carriers. |
| 5 | Should Advocacy benefits be included? | The decision would likely depend on whether the benefits included any kind of āhealthā component. It is always good to check with an ERISA Attorney to determine if a benefit is subject to ERISA. |
| 6 | What if the Telehealth is part of the medical plan; would it be included in the Wrap Plan Document? | This can be listed within the Wrap Plan Document and SPD as a component to the medical plan. |
| 7 | I wasnāt aware of the 5-year shelf life. After 5 years, is the Wrap Plan Document to be updated? | Yes, after the five years, the Wrap would need to be fully restated to incorporate all changes that have been made, including all updated language, and restart the five-year shelf life. |
| 8 | Could you please elaborate on when a Plan number needs to be changed? | One example would be if the Plan Sponsor had multiple Plans with no Wrap Plan Document, and then they put a Wrap Plan Document in place. They may choose to assign a brand new Plan Number for the Wrapped Plan. Another example: When there is a major shift in the Plan, perhaps moving from a MEWA to a single employer plan; at this point the MEWA Plan would be termed thus the Plan number would need to be retired and a new Plan number would be assigned for the single employer type plan. |
| 9 | Who has the responsibility to insure that the SPDās are current and not older than 5 years? | Technically, the responsibility rests on the Plan Sponsor to ensure that their Wrap Document and SPD are current and up to date. However, some PEOs/MEWAs do not provide the participating Employers the SPDs. For these we encourage for an ERISA attorney to review and advise. They may have the group provide the SPD with additional language added about the PEO, funding, etc. |
| 10 | When an amendment is submitted, is the 5 year timeline restarted as of the amended date? | No, an Amendment/SMM typically does not count as a full restatement of the plan documents. The timeline to use is based on the creation date of the Wrap Plan Document / SPD. |
| 11 | Is the HSA a benefit to be listed in the Wrap Plan Document? | No, HSA benefits are typically not subject to ERISA. You could list it in a special Non-ERISA section of the SPD for participantsā information. |
| 12 | What is an embedded EAP? | An EAP benefit that is included/integrated or as a rider with another benefit like LTD. |
| 13 | Are participants defined only as employees or does this number include dependents as well? | For the Wrap Plan Document: Plan participants include the employee and their dependents covered by the plan. Please see the section on 5500 for its definition which is different. |
| 14 | Do Wrap Plan Documents and the SPDs require each carrierās address and group number? | Yes, the Wrap would need to include the carrier name, policy number, benefit type, and claims contact information. |
| 15 | Instead of a Summary Materials Modification (SMM) document attached to the SPD, can the group amend & restate plan each year there are changes? | They could choose to do this. However, this arrangement would be more expensive and create more of an administrative burden than just an Amendment/SMM. |
| 16 | Does changing the medical plan from HMO to PPO require an amendment? | The answer would depend on what was listed in the original document, but most likely, yes. |
| 17 | If Wrangle prepares the Wrap Plan Document for the group, do you work with the group with the deadlines and submissions of all the moving parts from this presentation? | Yes, we provide a tracking system to make sure the Plan Sponsor is aware of when the Wrap Plan Document is approaching the five year shelf life as well as inform of ERISA Level changes requiring an amendment and SMM. |
| 18 | The concept of āendorsedā is confusing. Can you please review that topic again, briefly? | To determine what is an endorsed benefits without the courts or assistance from an ERISA attorney is tricky and reaching safe harbor as what would be in place to not be endorsed and a 100% voluntary plan please see page Intro tab.
Per the DOL: āAn endorsement within the meaning of section 2510.3-1(j)(3) occurs if the employee organization urges or encourages member participation in the program or engages in activities that would lead a member reasonably to conclude that the program is part of a benefit arrangement established or maintained by the employee organization.ā To see if the benefit is considered not endorsed and as a result falls under safe harbor, here is a five-point test outlined from the key court hearing of Booth v. Life Ins. Co. of N. Am., 2006 WL 3306846 (W.D. Ky. 2006): (1) Has the employer played an active role in either determining which employees will be eligible for coverage or in negotiating the terms of the policy or the benefits thereunder? (2) Is the employer named as the plan administrator? (3) Has the employer provided a plan description that specifically refers to ERISA or that the plan is governed by ERISA? (4) Has the employer provided any materials to employees suggesting that it has endorsed the plan? (5) Does the employer participate in processing claims? Also if the employer/Plan Sponsor allowed the Section 125 Plan ā pre-tax dollars to pay for the benefit, then the benefit would be deemed endorsed |
| 19 | Does Wrangle have a fillable form to send to the employers that asks all the questions needed to complete the WRAP from in the Platform? | Yes. When you insert the data in the Platform, you can then generate a PDF of the intake form. This will show the field name and the answer listed. However if the answer is left blank, the options of the drop down menu are not provided on the PDF of the intake and may result in data not being saved. |
| Q&A Session ā Questions Focused on 5500s | ||
| Question | Answer | |
| 1 | Does the Summary Annual Report (SAR) need to be distributed to employees annually? | The SAR needs to be distributed for every Form 5500 that is filed, except for plans that are 100% self-insured. The SAR will reflect the benefits reported and total premiums paid in the Form 5500. Those under a trust will have additional details listed. |
| 2 | Does EAP need to be listed in the Form 5500? What if it is embedded in the LTD | Yes, if the EAP is included in the Wrap Plan Document, it would be a benefit to be reported on the 5500 filing. The benefit code used is 4Q- Miscellaneous. On the Schedule Aās page 4 we would specify: Employee Assistance Program.
For the Schedule A on the LTD, the box for Other would be checked and āEmployee Assistance Programā would be listed. |
| 3 | How do you handle a group that has historically been over 100 belly buttons and filed a 5500; then in the new plan year they were now under 100. | In this situation, the 5500 filing that started with over 100 enrolled but next year had less than 100 enrolled would include a special benefit code 4R to indicate that the plan fell below the reporting threshold and would not need to be filed again until they go back over the reporting threshold. |
| 4 | What do you do if an EAP carrier will not provide a Schedule A? | If they will not even provide the per EE amount for the EAP a placeholder Schedule A would be inserted. This recognizes that the benefit is part of the Plan but very little information would be provided. On page four of the Schedule A we would report that the carrier failed to provide the data necessary. The DOL is very familiar with this arrangement. |
| 5 | If a Wrap Plan Document contains multiple plans (i.e. medical, dental, etc.), do all lines need to be filed in the 5500 even if some of them had less than 100 participants as of the start of the plan year? | Yes, when there is a Wrap Plan Document in place, all benefits that are included in the Plan need to be reported in the 5500 filing if even one benefit under the Plan has over 100 enrolled. |
| 6 | Are participants defined only as Employees? Or does this number include dependents as well? If we count only 50 enrolled Eis; however there are 100 if we include the dependentā¦. Do we file the 5500? |
For the Form 5500: Plan participants are the Active employees, COBRA subscribers and Retiree subscribers. Dependents are not included.
The reporting threshold for the Form 5500 filing requirement is 100 or more enrolled active employees plus ex-employees/COBRA as well as retiree subscribers enrolled as of the first day of the ERISA Plan Year. Dependents are not counted in the reporting threshold. Dependents are only counted in the individual Schedule Aās and are known as covered persons. |
| 7 | If I didnāt include EAP in my initial filling and need to include it, what is the best practice: include it going forward or amend? Does amending send a red flag and cause potential fees? | Best practice is to amend the Form 5500 filing to include the EAP benefit and Schedule A for it. So long as the original 5500 filing was filed on time, amending generally doesnāt cause red flags or require any fees from the DOL. If Wrangle prepared the original 5500 filing we would not charge any additional fees to prepare the Amendment to add the EAP. |
| 8 | Should an employer file for an extension just to ensure they have essential time to file and meet the filing deadline? | If the Form 5500 deadline is within a week, we recommended to file the Form 5558, the IRS form for the extension of an additional 2 1/2 months, to give the plan sponsor more time to efile the Form 5500 filing. |
| 9 | Can you clarify filing voluntary benefits (Ex. Accident, CI, Hosp) if they are through payroll deduction, we should add them to the filing, Correct?? | The answer is maybe. If the voluntary benefit is 100% paid by the employee after tax (not using the Section 125 plan of pre-tax dollars) and the Plan Sponsor has not endorsed the benefit, such as including the benefits in its Wrap Plan Document and the benefit has reached safe harbor (see Intro Tab), there is the likely chance the voluntary would not be included. The key to check is on endorsing. Courts are called into play to help decide at times. Here are a series of questions to ask. Wrangle encourages for an ERISA attorney to review and advise.
To see if the benefit is considered not endorsed and as a result falls under safe harbor, here is a five-point test outlined from the key court hearing of Booth v. Life Ins. Co. of N. Am., 2006 WL 3306846 (W.D. Ky. 2006): (1) Has the employer played an active role in either determining which employees will be eligible for coverage or in negotiating the terms of the policy or the benefits thereunder? (2) Is the employer named as the plan administrator? (3) Has the employer provided a plan description that specifically refers to ERISA or that the plan is governed by ERISA? (4) Has the employer provided any materials to employees suggesting that it has endorsed the plan? (5) Does the employer participate in processing claims? |
| 10 | How is the Schedule A covered person count different than the participant count on the Form 5500 page two? |
A Schedule A on a Form 5500 typically includes a ācovered personsā count, which encompasses not only employees but also their dependents and spouses, making it more inclusive than the āparticipantā count on the main Form 5500 which only includes participating employees and former employees; therefore, a Schedule A reports a broader count than just employee count alone. Key points about Schedule A and participant count: ā¢ Covered persons: Schedule A primarily reports the number of ācovered personsā which includes spouses and dependents covered under the benefit plan. ā¢ Participant count: The main Form 5500 reports the āparticipantā count which only includes eligible employees and former employees participating in the plan. ā¢ Importance of distinction: This distinction is crucial because it can result in a higher number on Schedule A compared to the participant count on the Form 5500, particularly for health benefits where dependents are often included |