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Welfare vs fringe benefit plans


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My employer has a group health, dental and vision plan which the premium is paid in full by the employer for each employee. If the employee elects dependent coverage the employee must pay the full dependent premium but it is paid on a pre-tax basis. We also have a section 125 plan with flexible spending accounts. Our AFLAC policies are paid by the employee but on a pre-tax basis also. We have group LTD and STD paid in full by the employer. My questions is, when completing the form 5500 do we have a welfare and fringe benefit plan or do we just have a fringe benefit plan?

This is our first year and I need some help desperately! Thanks so very much in advance for any assistance you can give me.

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I am curious as to what AFLAC has told you and what they are providing. I often hear that they claim to give free F5500 preparation if you allow them to sell their products to the employees, but it seems to be a different story when filing time comes around.

What happened in your case? What was AFLAC supposed to provide?

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

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psb: Your employer sponsors multiple ERISA employee welfare benefit plans and a fringe benefit plan described in Code Section 125(d) or cafeteria plan. The cafeteria plan is not an ERISA plan. Technically, the Health-FSA, the dependent care assistance-FSA and group insurance contracts are separate ERISA welfare benefit plans that should be analyzed separately to determined their individual Form 5500 filing requirements, if any. You can avoid this potential multiplicity of filings by adopting a wraparound welfare benefit plan that establishes the benefit structures associated with the FSAs and the insurance contracts as components of a single welfare benefit plan. This would reduce the potential annual filing requirement to a single Form 5500. However, if in the aggregate the total number of participants in any single plan is less than 100, your employer qualifies for the small welfare benefit plan exception and is not required to file a Form 5500 for such plan year.

Phil Koehler

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Thanks so very much for responding with such a wealth of knowledge. Our firm has only 44 employees, we do not have more than 38 employees in any one plan. So based upon your response if I am understanding correctly, we will not be required to file a 5500 for our welfare or fringe benefit plans. Is this correct?

With regard to AFLAC... they have been NO help at all!

Thanks again for your timely reponse!

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psb: You're conclusion is right. Here's why:

The small welfare benefit plan exception is described in DOL Reg. Sec. 2520.104-20. The FSAs would probably qualify for the unfunded plan exception (i.e. benefits are paid from the general assets of the employer) and the insured benefit would probably qualify for the fully-insured plan exception. As long as the participant headcount remains less than 100, your employer will qualify for this exception to the ERISA Title I reporting requirements.

A separate IRS fringe benefit reporting regime theoretically exists under Code Sec. 6039D with respect to the cafeteria plan. As a matter of historical interest, had it not been for IRS Notice 2002-24 (April 5, 2002), your employer would have an IRS reporting obligation to file a 5500 and Schedule F. Please Note: this is not an ERISA reporting obligation. But, you've lucked out for the time being. The Notice eliminates all past nonfiler obligations and all future reporting under sec. 6039D until future guidance is published.

Phil Koehler

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