Group Term Life Plan - is a 5500 required?

[Effen]

I have a new client with 500 people in a Group Term Life Plan that has never filed a Form 5500. The plan has been around since '95. At first I thought they had a problem, but it seems to me that Notice 90-24 provides an exemption.

Does anyone think they should be filing? If so, why?

Does anyone think they are exempt?

[Guest F1fan]

As I recall, without benefit of having a copy readily available, IRS Notice 90-24 provided a rather limited exemption from filing a Form 5500 for arrangements considered fringe benefit plans under IRC section 6039D, such as a group-term life insurance plan described in IRC section 79. However, a group-term life insurance plan is most likely a welfare benefit plan under ERISA, and thus would generally be required to file a Form 5500, absent some other exception. Assuming that your client pays for at least a portion of the coverage, and that a Form 5500 has not been otherwise filed because this is offered as part of a group insurance arrangement, then it seems likely that a 5500 is required, based on the information provided.

[Effen]

Are you saying that 90-24 provided an exemption for only for GTL plans that weren't welfare plans? Is it possible that it isn't a welfare plan?

The plan solely provides group term life benefits and the employer pays the entire premium.

Also, lets assume that 90-24 provides an IRS exemption from filing. Do I still have to satisfy the DOL filing requirements? I assume I still have DOL requirements since the 5500 amnesty program is only a DOL program.

[Guest F1fan]

My prior post should have made it clearer that a group term life insurance plan (100% employer-paid for purposes of my comments) would likely be both a fringe benefit plan under 6039D of the IRC, as well as a welfare benefit plan under ERISA. As with many benefit plans, the IRS and DOL share joint jurisdiction. Notice 90-24 merely provides an IRS exemption from filing a Form 5500 as a fringe benefit plan. If such an arrangement covered less than 100 participants, then it would not need to file a Form 5500 as a welfare benefit plan, per the exception detailed in the 5500 instructions (and I believe DOL reg. 2520.104-20). However, if the arrangement covered 100 or more participants, it would need to file Form 5500 as a welfare benefit plan. Based on the information you have provided, I do not know of any exception that applies. As you noted, the DOL does offer an amnesty program for late filings, and the client may wish to pursue that.

As an aside, based on my experiences when I was a consultant, I would be concerned that the client had other unidentified welfare benefit plans that required 5500s as well (i.e., STD, LTD, AD&D, EAP). To echo a comment often used on these message boards, your client may wish to obtain experienced counsel.

[Effen]

I'm with you 100% and counsel is involved.

When I asked the client why they never filed in the past, they produced a letter from 1993 that referenced the Notice. After I read the letter and the Notice, I started to wonder myself. The plan has well over 100 participants.

It sounds like you agree that they still need to file and the amnesty program would probably be a good option.

[Guest F1fan]

Agree on both points.