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Schedule F No Longer Required


Guest Joe Vasko

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Guest Joe Vasko

The IRS just released Notice 2002-24, which indefinitely suspended the requirement for taxpayers to file Schedule F for Fringe Benefit Plans. Is Form 5500 still required?

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Guest Jeffrey N

is it the whole 5500 form for cafeteria plans or just the "f" can't find anything. Can anyone give me a specific reference.

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I agree with MGB; you still have to file the 5500. Excerpt:

"This notice does not affect annual reporting requirements under Title I of ERISA, or relieve administrators of employee benefit plans from any obligation to file a Form 5500 and any required schedules (other than the Schedule F) under that title."

So, you print a 5500 page 1, page 2 (with 8c checked),and blank page 3. Sounds like a lot of time wasted to report nothing.

Maverick

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As I read the notice, you only have to file a Form 5500 to the extent that the Plan is subject to filing under Title I of ERISA. So, for example, if you've been filing a single Form 5500 for a fully insured health plan with a Section 125 premium-conversion feature, but covering fewer than 100 participants, you don't need to file a Form 5500. Similarly, if you had been filing a separate 5500 with a Schedule F solely to comply with the 6039D requirement, you will no longer have to file that 5500.

Another situation would be if you are a church plan or a governmental plan filing solely under 6039D.

One question: the notice seems to suggest that the 6039D filing is waived for any return which has not been filed yet (as opposed to returns which are not due yet). Does that mean that if you should have been filing for the past 10 years, but have failed to file, you are now off the hook for failing to file as required (formerly) by Section 6039D????

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Guest ubpMR

Anyone know where I can get a copy of the Notice? I can't seem to find a copy of it.

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jpod's post ("Similarly, if you had been filing a separate 5500 with a Schedule F solely to comply with the 6039D requirement, you will no longer have to file that 5500.") is interesting, and differs from all the analysis I've read so far. I hope he's right. Would any of you 5500 gurus out there care to offer an opinion? Thanks. Maverick

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Guest Melissa Winslow

The schedule F instructions indicate that "Schedule F must be attached to the Form 5500 filed for every fringe benefit plan required to file under Code section 6039D".

The "Purpose" section of Notice 2002-24 states

"This notice suspends the filing requirement imposed on specified fringe benefit plans by section 6039D..." I take that to be the Form 5500 AND the Schedule F.

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I recall seeing something under ERISA which stated that health benefits, including health FSA's, are considered Welfare Benefit Plans. However, if these "component" plans are offered under a Section 125 cafeteria plan, they were exempt from filing as a Welfare Benefit Plan under Title I of ERISA.

My question, though, is regarding an unfunded or fully insured plan with more than 100 participants. Are they required to file under ERISA even if they are considered part of a cafeteria plan?

Any feedback would be appreciated!

RAJ

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Guest Melissa Winslow

I just spoke with representatives from both the IRS and the DOL(EFAST) and unfortunately they do not seem to have any more information than we do. However, information from the Corbel website would indicate Corbel received some concrete information. Perhaps the Service will issue further clarification in the near future.

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Based on the Notice, the commentary on this Board, and the Corbel/Sunguard clarification, I drafted the following summary. I would appreciate all comments/corrections/questions:'

IRS Suspends Form 5500 Filing Requirements for Fringe Benefit Plans, With a Catch

The Internal Revenue Service (“IRS”) recently announced a suspension, effective immediately, of the annual reporting (Form 5500) requirements for cafeteria plans, educational assistance programs, and adoption assistance programs. However there is an exception to the suspension which is not immediately apparent in the announcement, set forth in IRS Notice 2002-24, and the IRS has had to make unofficial comments to clarify the Notice since its release.

First, a bit of background information is in order. The Employee Retirement Income Security Act of 1974, as amended (“ERISA”) requires pension and most welfare benefit to file a Form 5500 Return/Report for each plan year. However, “small” welfare benefit plans that cover fewer than 100 participants at the beginning of a plan year are exempt from the reporting requirement, provided that the plans are “unfunded,” i.e., plan benefits are either fully insured, or are paid exclusively from the employer’s general assets.

Certain fringe benefit plans that would not otherwise be subject to the Form 5500 reporting requirements under ERISA have until recently been required to report certain information on Schedule F to Form 5500, pursuant to a special rule under Code Section 6039D. The fringe benefit plans subject to this special reporting requirement are cafeteria plans, educational assistance programs, and adoption assistance programs. Typically, if an employer sponsored a welfare benefit plan that was subject to filing requirements (such as a group health plan covering 100 or more participants) together with a cafeteria plan or other fringe benefit plan mentioned above, the employer would file Form 5500 for the health plan, and attach Schedule F with information about the fringe benefit plan.

By contrast, if an employer’s welfare plan was exempt from Form 5500 reporting requirements because it was unfunded and covered fewer than 100 participants, but the employer also sponsored a fringe benefit plan such as a cafeteria plan, the employer would file Form 5500 solely for the purpose of attaching Schedule F with information about the cafeteria plan.

The IRS has now suspended the reporting requirements for the three types of fringe benefit plans mentioned above: cafeteria plans, educational assistance plans, and adoption assistance plans. Because of the way that the IRS worded the Notice, however, confusion arose as to whether the Notice suspended filing requirements only for Schedule F, or also for Form 5500 when it is required in conjunction with Schedule F. The IRS has since clarified that the Notice operates to suspend both filing requirements, when related to one of the three types of fringe benefit plans (cafeteria, education assistance, and adoption assistance). That means that employers whose group health plans are exempt from reporting requirements (e.g., fewer than 100 participants, or a government or church plan) but who have been filing Form 5500 & Schedule F solely for their cafeteria plans, need no longer file either Schedule F or Form 5500 for the welfare plan arrangement.

Note, however, that the IRS Notice did not suspend the Form 5500 reporting requirement for welfare benefit plans that, standing alone, are required to file Form 5500 (i.e., must file independent of the fact that the employer maintains a fringe benefit plan subject to reporting under Code Section 6039D). What that means is that an employer who maintains a group health plan with 100 or more participants, together with a cafeteria plan or other fringe benefit plan mentioned above, must continue to file Form 5500 for the health plan only. The employer may stop filing Schedule F to the Form 5500, however, for the fringe benefit

plan(s).

The IRS Notice also provides relief from failure to file return/reports for fringe benefit plans in prior years. Therefore, employers who owed “delinquent” submissions from prior plan years need no longer prepare and submit the overdue Form 5500 & Schedule F returns for their fringe benefit plans. Again, the exemption does not apply in instances where Form 5500 was required independent of the existence of a fringe benefit plan. For example, if the employer owed a Form 5500 in a prior year because it maintained a group health plan with 100 or more participants, the employer would be required to file the delinquent Form 5500. If the employer maintained a cafeteria plan in the same prior plan year, however, the employer would no longer need to file the delinquent Schedule F.

Christine P. Roberts © 2002

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Christine:

The only thing I would add to your very complete response is to use the word "suspend" instead of "repeal" since the notices say this is effective while the IRS reviews the procedure and does address how reporting would be handled upon future rulings on the subject. (applicable to plan years after the release of future guidance).

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Guest Carolynn

I'm finally getting a handle on these changes, I think, but what about a cafeteria plan with over 100 participants, but with no group health plan - do we still need to file a Form 5500?

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Guest Carolynn

In this instance the Cafeteria Plan benefits include the Health FSA (also the DCAP and the Premiums for Health Insurance). Thanks for everyone's help on this, it really helps to be able to "discuss" this new change.

Carolyn

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Carolynn,

If your FSA has over 100 participants you still need a "Title I" 5500 for that plan as well as any insured medical plan offered that has over 100 participants. There are ways to "wrap" various benefits into one plan. However, if you have a health fsa and are allowing partiipants to pay insurance premiums through the cafeteria plan it appears that you have at least one and probably two "Title I" plans. Your filing obligations wil proablby then turn on the number of participants in those plans.

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Guest LynneP

I've talked to IRS & no Form 5500 or Schedule F required for caf plans, including premium conversion (pre-tax plans.) But DOL still requires filing for welfare & pension plans. Welfare (e.g. med, dental, life, disability) filing ususally only required for 100+ participants.

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Guest LynneP

Oops. Just realized I missed page 2 replies. I don't think Health Care FSA with 100+ still needs to file (because of underlying welfare benefits) No one has ever filed an FSA as a welfare plan before. IRS says they don't want it, does DOL really want it?

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Guest LynneP

But what exactly are you filing? Just the Form 5500, check as a welfare plan, medical plan code with benefits paid out of general assets? We've never filed Health Care FSA as a welfare plan before -- has anyone else?

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