Compliance Quiz1 Does the Employer sponsor an Employee Retirement Income Security Act (ERISA) Employee Benefit Plan?
These plans may include the following:
- Health Insurance
- Dental Insurance
- Vision Insurance
- Health Flexible Accounts (FSAs)
- Health Reimbursement Arrangements (HRAs)
- Accidental Death & Dismemberment Insurance
- Group Term Life Insurance
- Short and Long - Term Disability
- Severance Insurance
- Wellness and Employee Assistance Programs
- Voluntary Benefits offered as pre-tax benefits under any Section
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Is there currently an ERISA Summary Plan Description (SPD) WRAP in place?
The Employer needs an ERISA SPD WRAP.
Have there been any changes to the plan or the component benefits since the ERISA SPD WRAP was last updated?
The Employer needs to update the ERISA SPD WRAP.
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2 Does the Employer offer any benefits on a pre-tax basis?
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The Employer is required to perform annual nondiscrimination testing at the end of each plan year. It is highly recommended that Employers also perform Predictive and Mid-Year testing to reduce the risk of a testing failure.
Do you have a Section 125 plan document in place?
The Employer needs a Section 125 plan document/POP.
Has anything changed since the document was last updated?
The Employer needs to update the Section 125 plan document.
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3 Does the Employer have at least 100 employees in the plan on the 1st day of the plan year?
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The Employer needs a Form 5500.
The e-file is due 7 months following the end of the plan year.
4 Did the Employer average more than 50 Full Time Equivalent employees in the prior calendar year?
The Employer is an Applicable Large Employer (ALE) and needs to complete the 1094/1095-C Forms.
Did the non-ALE offer self-funded medical coverage to employees?
The Employer needs to complete the 1094/1095-B Forms.
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5 Does the Employer have variable hour employees?
Monthly tracking is OPTIONAL.
Monthly tracking is REQUIRED.
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Please read these Notes carefully based on your answers.
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ADDITIONAL NOTES:
Must distribute to:
- Covered employees
- Terminated COBRA participants
- Parents or guardians of children covered under a qualified medical support order
- Dependents of a deceased retiree under a retiree medical plan
When to Distribute?
- With enrollment materials
- Within 90 days of coverage for new hires
- Within 120 days after a new plan is adopted
- An updated SPD must be furnished to all covered participants every 5 years, and every 10 years even if the SPD has not changed
POTENTIAL PENALTY:
There is a potential compliance risk with a wrap document due to the fact that you are required to provide wrap documents to participants within 90 days of participation to comply with ERISA: otherwise, you could have a penalty liability. Failure to furnish plan documents to the DOL upon request can cause a penalty of $159/day (but no greater than $1,594 per request).
POTENTIAL PENALTY:
The potential penalties can include salary reductions or other benefits of the plan provided to highly compensated employees or key employees to be taxable.
ADDITIONAL NOTES:
A Premium Only Plan (POP) is the simplest form of a Section 125 cafeteria plan. A POP does not include language specific to Group Term Life, HSA or Self-Funded plans. If needed, please go with the Section 125 plan document instead of the POP.
POTENTIAL PENALTY:
The potential penalties can include salary reductions or other benefits of the plan provided to highly compensated employees or key employees to be taxable.
The e-file is due 7 months following the end of the plan year.
ADDITIONAL NOTES:
A separate annual report (i.e. Form 5500) is required for each plan. However, a plan sponsor could combine all of its employee benefit arrangements into one plan utilizing a wrap plan and it would then report all of those arrangements under one Form 5500.
Plan Types that are required to file a Form 5500:
- Welfare-Pension-Multiple Employer Welfare-Arrangements (MEWAS)
- Common/Collective Trust (CCT)
- Group Insurance Arrangement (GIA)
- Pooled Separate Account (PSA)
- Master trust investment account (MTIA)
- 103-12 IE (Investment Entities)
POTENTIAL PENALTY:
The IRS penalty for late filing of a 5500 series return is $50 per day. The DOL penalty for non-filers (those who have never filed) is between $300 per day and can run up to $2,233 as of January 2020. These penalties can be reduced significantly to as little as $2,000 for one plan for one year or $4,000 cap per plan for one year if the Employer files late under the delinquent filer voluntary compliance program (DFVCP).
ADDITIONAL NOTES:
When determining ALE status, consider the entire controlled group of employers. For example, Employers A, B, and C are part of a controlled group because they have a common ownership. Employer A has 15 Full-Time equivalent employees, B has 30, and C has 20. Individually, these are small employers, however, collectively, they are an ALE, and all three employers must file 1094/1095-C forms.
POTENTIAL PENALTY:
There are multiple penalties regarding Affordable Care Act (ACA) reporting:- Failure to file - $260 per form, $3,218,500 annual cap (on this penalty)
- Failure to distribute to covered employees - $260 per form, $3,218,500 annual cap (on this penalty)
- Correcting failure within 30 days of due date - $50 per form, $532,000 cap
- Correcting after 30 days but on or before August 1 - $100 per form, $1,596,500 cap
- Employers who intentionally disregard to comply with their reporting obligation risk increased penalties (twice the penalty [$520 per form] and no cap).