5500 filing for POPS and HEALTH FSA

[Guest mpark]

I am a TPA who handles retirement plans. One of my other responsibilities is the annual tax filing for about 8 cafeteria plans, all of which have less than 50 participants.

I understand that POP only plans do not have to file.

What about a plan with a POP and Health FSA or DCAP?

The more I read, the more confused I become.

Please help.:confused:

[papogi]

Check out these links. You have nothing to file under the IRS. You may need to file under ERISA for the HCFSA (and the underlying health plan in the POP), depending on the number of participants and whether or not the plan is considered "funded."

http://www.benefitslink.com/articles/sched...edF020412.shtml

Especially this:

http://www.ebia.com/weekly/questions/2002/.../Caf020411.html

HCFSA specific:

http://www.ebia.com/weekly/questions/2002/.../Caf020613.html

[Guest mpark]

Thank you for your quick response:)

[Ron Snyder]

We have been discussing this on the thread entitled Premium Only Plans. I suggest that you be very careful, perhaps to the point of asking your legal counsel for an opinion on this issue. I cannot find anything on which I can rely that obviates the need for sponsors of 125 plans to file form 5500. None of the references cited above changes that. If you prefer to be safe than sorry, all 125 plans must file form 5500, but no longer need to attach Schedule F.

[Guest mpark]

I did find this short article this morning on the IRS website.

Seems legitimate, but again, not quite an amendment to 2002-24.

http://www.irs.gov/pub/irs-utl/sprsum02.pdf Page 10

[Ron Snyder]

From the above-listed site:

"Good News For Some Fringe Benefit Plan Sponsors

On April 4, 2002, the Service issued Notice 2002-24, 2002-16 I.R.B. 785, announcing the indefinite suspension of the requirement for taxpayers to file Schedule F (Form 5500) Fringe Benefit Plan Annual Information Return. Specifically, Notice 2002-24 suspended the filing requirement imposed by Code section 6039D on certain fringe benefit plans, such as cafeteria plans, educational assistance programs, and adoption assistance programs. Since the release of this notice, questions have arisen over how this suspension affects the completion of the 2001 Form 5500. Some filers are confused as to whether they need to file a Form 5500 at all or, if they do, how to complete lines 8c and 10c of the form. Here is the key point:

Employers who in the past had filed the Form 5500 (and attached the Schedule F) solely to meet the reporting requirements of section 6039D, need no longer file either the Form 5500 or Schedule F.

The Service has not suspended (in fact, it does not have the jurisdiction to suspend) the Form 5500 reporting requirements for welfare benefit plans. Therefore, an employer who maintains a welfare benefit plan (not otherwise exempt from the Form 5500 filing requirements), together with a cafeteria plan, educational assistance or adoption assistance program, must continue to file the Form 5500. In these cases, however, the employer no longer needs to attach a Schedule F. Also, in these situations, boxes 8c and 10c on the Form 5500 are to be left blank."

My concern is alluded to by the IRS in the foregoing announcement: The IRS doesn't have the right to suspend the filing requirement for a form that is filed with the DOL.

[Guest mpark]

What is "funded" for purposes of the exemption to file 5500 for a small welfare benefit plan?

[E as in ERISA]

A standalone POP is only a 125 arrangement; it is not a "welfare plan" under ERISA. (The arrangement only converts the employee premium dollars to pre-tax; the arrangement itself does not provide any health benefits). IRC 6039D is the only section that requires a 5500/Sch F filing requirement for these arrangements. There are no DOL filing requirements for these arrangements. The IRS can suspend the filing, because the DOL would have only acted as an agent for the IRS in receipt of the filings.

A plan with a POP and a health FSA is both a 125 arrangement and a "welfare plan" under ERISA. (In this case the plan provides health benefits when claims are paid). Both IRC 6039D and ERISA require a 5500 filing for the plan. The IRS cannot suspend the DOL filing requirements.

A DCAP is a benefit that seems similar to an FSA. However, it is not a "welfare benefit" under ERISA Sec. 3(1). So the filing requirements are governed solely by the IRS.

[papogi]

Vebaguru, the IRS does not have the authority to eliminate the need to file forms under ERISA to the DOL. Welfare plans (including HCFSA's) may, indeed, need to file a 5500 to satisfy ERISA. However, this confirms that the IRS does not require the 5500 form for informational purposes. If your welfare plan gets by the 5500 requirement for ERISA under one of its few exceptions, then there is no 5500 requirement at all.

Generally, a plan is unfunded if monies are paid directly from company general assets (check is written from account set up in sponsoring employer's name), and not paid from a separate account. Keep in mind that HCFSA pre-tax payroll deductions for FSA's are protected from "funded" status with ERISA Tech Rel 92-01.

[Guest mpark]

So, if a plan that has an fsa has less than 100 participants, there would be no filing requirement for the fsa under ERISA?

sorry for so many questions, but I'm from 401(k) land.

[papogi]

Correct. If the FSA has fewer than 100 participants and is "unfunded," you have no 5500 filing responsibilities (to the IRS for the Cafeteria Plan, or to ERISA for the FSA).