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How Much Can You Fix With A Wrap-Document?


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We have several HIPAA and non-HIPAA welfare benefit policies and want to wrap them into one ERISA compliant plan document to satisfy the law and avoid multiple 5500 filings. Do you think that HIPAA is enough reason to maintain two wrap docuents going forward?

Also, of course some 5500s "cant be located" (weren't filed) for several of the past years. Assuming that the policies going back several years don't satisfy ERISA, is there any beneift to creating a wrap document now that has a retroactive effective date? Does anyone think that this would give us sufficient basis for filing a single 5500 under DFVC for several of the past years?

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One of the nice things about freeerisa.com is that it is a way to see if 5500 forms have or have not been filed without requiring the client to come up with copies.

Two responses to your question:

(1) You seem to be asking whether it is possible to repent retroactively and by so doing make a sin not a sin. I think not. That said,

(2) If you are within the remedial amendment period (which can extend until the EARLIER of the due date or the actual filing date of the applicable return, such an amendment would be possible.

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Um, by saying they "cant be located," I mean that we know they were not filed, but freeerisa and planeterisa were good ideas.

Without the 5500 issue, I would think that they need ERISA compliant documents and that retro documents are probably better than no documents at all for the past period.

Now, using the retro documents to get out of extra DFVC filings and pentalites offends us on some level too, so I wanted to see if there was some sense of outrage at the idea on this board, but I am not sensing it. If we are aware of the risks, it does get them back into the system and compliant going forward, so it sounds like an alternative at least.

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  • 3 weeks later...

I have been dealing with some similar issues for a client. We are going to go ahead and prepare a wrap for the unfiled plans effective this year, but we are going to do DFVC for all the plans as if they are one, all the way to the beginning (1990s). The cover letter will state that we are filing the plans under one plan number because we want to treat them as one plan and they are (as of 1/1/05) part of one plan document. My rationalle is that it would not make sense to separately do DFVC for each plan individually because we would have to assign different plan numbers and then we would have to change the plan numbers to go forward with the furture filing for the wrap plan. I figure with this come clean approach we are not hiding anything and the worst that could happen is the DOL will want more $. Then we'll have to decide whether to argue whether they were one plan back to the beginning. I think you need to have some kind of documentation tying them together somehow to make this argument.

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Kirk: That's encouraging. How about this one: Client is up to date on its self insured health plan filing (plan has major medical and discount benefits--client is a hospital)--however, it has not ever filed for its separate EAP which provides counseling services and has been around for 10 years or so. I want to wrap it into the existing health plan this year but what to do about past filings? Under the rationale you and I have used, it seems reasonable to "not look back" (ie due to present intent and plan number problems) ... any thoughts? THANKS

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Ashley L:

Fortunately, in the situation that I described previously, there hadn't been any filings for any of the plans covered by the wrap document. Because of that, I didn't have to face the issue confronting you.

But I think that you have to do a filing with respect to the EAP. The reason for that is because if you don't, yet you treat both plans as having been covered by the Form 5500 for the medical plan for those prior years, then those Form 5500s could be rejected by the DOL because they contained nothing about the EAP. Thus, treating the wrap as being retroactive in these circumstances doesn't solve the problem.

Kirk Maldonado

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Thanks. That's kind of what I was thinking too, but I'm still struggling with the logistics-- For example, what plan number do I assign for the DFVCP if I want to wrap it into the health plan (#502) going forward? Do I just use 502 and attach a cover letter explaining? Do I have to refile the whole health plan for all of the years the client failed to file the EAP or can I just do the EAP component (and explain that the remaining components of the plan have already been filed under 502 and that going forward they will all be part of one filing)? Any thoughts, disagreement or confirmation of my approach appreciated. THANKS

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  • 1 year later...

Just wanted to bump this thread up to check in regarding everyone's most recent experience with the use of retroactive wrap plan documents to fix prior filing problems.

Like Kirk and AshleyL, I have in the past had a couple of occassions to retroactlively adopt wrap plans in order to limit the DFVC filings required for plan sponsors who have never filed Form 5500s. I too have never had any objections from the DOL. In fact, one time I called the DFVC hotline and asked them directly if they had any problem with the use of a retroactive wrap plan in such situations and the person on the other end said no without any hesitation. (While I suspect the person answering the phone is admittedly not a DOL policy maker, it seems other DOL representatives have informally indicated that retroactive wrap plans can be used.) Although the use of retroactive wrap plans has always struck me as a bit suspect and not above challenge, it clearly appears that many plan sponsors have done this without issue.

I now have a client who is in a different situation. Basically they have filed a single Form 5500 for all their welfare plans for the last 10+ years or so as if they had a wrap plan in place. (I think they thought their cafeteria plan was a wrap plan which it is not.) Everyone is in agreement that the filings are not technically correct and that a wrap plan is needed going forward. However, when I suggested that they retroactively adopt a Wrap Plan to try and address the prior filings, their benefits broker (an experienced broker with a large national group) said they did not think you could retroactively adopt a wrap plan and did not think that would legally help the situation.

If anything, it seems to me the use of a retoactive wrap plan is is less offensive in this type setting than the use of retroactive wrap plans in a DFVC context since at least the plan sponsor filed a return and disclosed the information. The national consulting group did not reference any recent changes or developments on the retroactive Wrap Plan front--they just did not think anything could be done retroactively outside of the remedial amendment period. Again, I don't view retroactive plans as ideal either but they do seem to be accepted by the DOL in my experience.

My questions are as follows:

1. Has anyone encountered any problems or resistance from the DOL with use of retroactive wrap plans or seen or heard of any change in the DOL's position on use of retroactive wrap plans since the original post?

2. Anyone see any problems with the use of a retroactive wrap plan to conform to prior 5500 filings without a plan in place as compared to the use of retroactive wrap plans as part of a DFVC filing?

3. If a retroactive wrap plan may work--and, again, I agree it is not perfect but seems like a solution that is worth trying giving the alternatives--does it not make sense to go ahead and put a retroactive wrap plan in place now rather than waiting to see if there is ever a need to produce the plan document and then attempting to put one in place in the midst of a DOL audit, etc.? (Seems to me even though it is late, the "less late" it is adopted, the better.)

4. Finally, if you are going to do a retroactive wrap plan in this type of setting, is it legally necessary to take it all the way back to the beginning of the plan or could you argue that only the 2003, 2004, and 2005 years are techncially open and need to be corrected since a 5500 filing has been made (or is about to be made) for each of those years. While it is tempting to take the wrap back all the way to inception, the benefits provided under the plan and the insurers involved, etc. have changed considerably over the past 12+ years and it would be much easier to only try to get an accurate wrap document in place for the "open" years assuming earlier years have closed.

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  • 1 year later...

Just wanted to bump this up again as have seen no real discussion on this issue recently. I have run into a similar situation previously described and another broker / insurer saying the DOL is very clear that you cannot retroactively adopt a wrap plan. I have yet to have them produce the applicable guidance and have not seen any myself but I was wondering if I had missed it. (I wouldn't disagree with that position but it does seem to fly in the face of what others have done and obviously makes an enormous difference to employer in terms of total DFVC fees.) Thanks.

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  • 4 weeks later...

Desperate enough to try bumping this up one more time.

Interested in knowing if anybody has any new or different thoughts on adopting a retroactive wrap plan in order to make one DFVC filing for employer that failed to file any 5500s for several welfare benefit plans for several prior years. Because DFVC has no "per plan sponsor" cap, filing DFVC for each individual Plan would require filing 5500s for at least 4 different plans, all capped at per plan cap amount of $4,000. So, without retraocive wrap they owe at least $16,000 under DFVC (4 plans X $4,000 per plan amount) versus just $4,000 for maximum wrap plan filing penalty.

We have seen arguments that such retroactive wrap plans may be used for such purposes but have run into a couple of brokers that suggest the DOL is clear this doesn't work. They do not offer up any written guidance to support their claims, just their understanding (maybe based on recollection of informal comments??) that DOL does not allow. Just wondering if I have missed some clear DOL prohibition on use of retroactive wrap plans.

Many thanks.

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Guest Stuartt

Discussions that I have had with the DOL indicate that they do not approve of retroactive wrap plans.

The DOL did state that if the various benefits are presented to the employees as an entire benefit program, they will accept a single filing under something like a "health and welfare benefit plan" even without a wrap document.

I have done many DFVC filings using this method. The DOL's main concern is to get the sponsor to file the 5500s.

As an additional question - Why doesn't the DOL give you some kind of letter or acknowledgement of the DFVC filing? It would be nice to have it in the file rather than rely on return receipts and FedEx tracking. (small rant off)

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Stuartt,

Thanks for the response. Just to be sure I understand, are you saying you think it may be ok for a company to file a retroactive wrap plan where there was some history or prior thought that the company had one single plan in the past but simply had not filed (e.g., where the company thought that their Section 125 / Cafteria Plan document was a single plan covering all the individual welfare programs) but not okay where the company never filed and also never really presented all of the various welfare progams as a single plan in the past? If they never filed as separate plans, could you take the position the company always viewed the programs being offered under a single plan but just didn't file? Thanks.

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Guest Stuartt

The DOL national office people I have spoken with do not believe that a retroactive wrap plan can be adopted. To the extent that the health and welfare benefits are presented to the employees as the health and welfare program, the DOL will allow you to file a single 5500 covering this "health and welfare program" even if your wrap document does not go retroactive. The DOL does not ask for any kind of verification of this in a DFVC filing.

One can have an ERISA plan even without a wrap document. The wrap plan just documents what you are doing.

"If they never filed as separate plans, could you take the position the company always viewed the programs being offered under a single plan but just didn't file?"

Yes

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  • 1 month later...

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