Retiree Death Benefits

[Cassopy]

I have a few clients who provide an unfunded death benefit for their retired employees.  It is a relatively small amount ($2,000-3,000), but not small enough to qualify for the remembrance fund exception under ERISA.

I am curious how other handle the 5500 filings for these benefits.  These are larger employers, so there's a high participant count. Do you typically see these programs having their own filing, or wrapped with other welfare benefits?  Does the large participant count create issues? (Since it is difficult to track the number of retirees at any given time and enrollment is not required to be covered.)

[Flyboyjohn]

I'd argue it's a "payroll practice" that doesn't rise to the level of an ERISA covered employee benefit plan.

The more interesting question is how they treat the payment for tax purposes, W-2 or 1099 issued to deceased retired employee or check recipient?

 

[Juan Kelly]

For

[Juan Kelly]

payment of these benefits to be a "payroll practice, the retirees would have to be on the payroll. Are they? If so, are both an active and retiree death benefit paid?

[Peter Gulia]

Here’s the remembrance-fund exception Cassopy mentions:

Remembrance funds.  For purposes of title I of [ERISA] and this chapter [29 C.F.R. part 2500 to 2599], the terms “employee welfare benefit plan” and “welfare plan” shall not include a program under which contributions are made to provide remembrances such as flowers, an obituary notice in a newspaper[,] or a small gift on occasions such as the sickness, hospitalization, death[,] or termination of employment of employees, or members of an employee organization, or members of their families.

29 C.F.R. § 2510.3-1(g) https://www.ecfr.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-B/part-2510/section-2510.3-1#p-2510.3-1(g).

This subsection (g) is distinct from the rule’s subsection (b) for payroll practices.

Cassopy describes the benefit as unfunded. And Cassopy’s description suggests the employer might not be obligated to pay it. Might there be no plan?

[Luke Bailey]

Cassopy, my guess is folks wrap them into the overall welfare benefit for filing. If you're filing a single 5500 for medical, LTD, and life insurance, why wouldn't you throw in this welfare benefit.

I don't have any clients with such a plan so may be overlooking something obvious, but how do they avoid having to fund this?