COVID-19 certainly has made an impact on the health and welfare industry and raised questions on whether there is an impact on the Form 5500. One question, in particular, has come up frequently:
- Are those who were on furlough during 2020 to be counted in the 5500?
We have the answer below.
In addition, the 2021 DOL Civil Penalty Fees, released on January 15th, are found at the end of the blog.
Health and Welfare Form 5500
Question:
- Are those who were on furlough during 2020 to be counted in the 5500 as active participants of the Plan?
Before we get into some of the nuts and bolts of the answer, we do want to remind you that the counts of the Form 5500 are to be snapshots on the first day of the ERISA Plan year and the last day of the ERISA Plan year. If a participant during the Plan year was on furlough but was back to active status and a participant of the Plan at the end of the ERISA Plan year, then they would be counted.
If the former employee was on furlough at the end of the Plan year, be sure to read the remaining portion of the blog.
Unfortunately, there is not a one-size-fits-all answer. Policies on furlough language have been discretionary, and each employer seems to design their approach a bit differently.
Some employers keep the employees on the Plan without offering COBRA, in which case we surmise that they are not separated, just on a type of leave (sort of like USERRA or FMLA leave with benefit protections). If they are under the Plan, they would be counted as an active employee on the 5500.
If you are unsure and Plan Documents are not available, the sources to review are the insurance issuer/stop-loss/TPA documents to confirm they will expand coverage during a furlough.
In contrast, other employers do offer COBRA to furloughed employees due to becoming ineligible because of reduced hours. They would therefore be under the Form 5500 Count line 6b for those enrolled in COBRA.
One area in grey is the following: when a former employee is in the COBRA Election Notice period.
29 CFR 2510.3-3(d)(2) states that an individual is not a participant covered under an employee welfare plan on the earliest date on which the individual (a) is ineligible to receive any benefit under the plan even if the contingency for which such benefit is provided should occur, and (b) is not designated by the plan as a participant.
Wrangle’s interpretation is that the receipt of the completed COBRA Election Form by the employer is the contingency, so employees in their COBRA Election notice period are not participants and would not be counted. We advise the Plan Sponsor to seek advice from an ERISA attorney for final confirmation.
For further questions, feel free to reach out to Ann McAdam at amcadam@wrangle5500.com.
DOL Civil Penalties for 2021
| Civil Penalty/Monetary Penalty Description | Maximum Penalty Effective 1/15/21 |
| Failure or refusal to file Form 5500 | $2,259 per day |
| Failure to furnish employee benefit plan documents to the DOL (including plan and trust documents, SPD, SMM, collective bargaining agreement) | $161 per day
(but no greater than $1,613 per request) |
| Failure by employer to inform employees of Medicaid/CHIP coverage opportunities (notice is included on our SPD) | $120 per day per failure |
| Failure of MEWA to file required report (M-1) | $1,644 per day |
Annual Adjustments to Penalties: The DOL will adjust these penalty amounts annually for inflation.