Welfare benefit plan - Stop-loss coverage

[Lori Friedman]

When a welfare benefit plan purchases stop-loss coverage (the plan itself, and not the plan sponsor, pays the premiums):

1. The policy constitutes a plan asset

2. Schedule A is required

3. The premiums are reported on Schedule H, Part I, Line 2e(2) ("...To insurance carriers for provision of benefits")

But, how have you been completing Form 5500, Lines 9a and 9b? Do you check "Insurance" for plan funding arrangement, for plan benefit arrangement, or for both?

[JanetM]

Well, IMHO, I would mark 9a as being insurance, since you have to file an A for stop loss in funded welfare plan.

9b - I checked the preparers manual - which says: Stop-loss coverage is not a benefit but a reimbursement to the plan or plan sponsor. Do not consider stop-loss coverage when answering line 9b

My interpretation of marking insurance - you only do it when the insurance company pays the benefits to third party or plan participant/beneficiary directly.

[IRA]

What if the sponsor purchases the insurance? Do you check 9a(1)? Does it matter whether the insured is the sponsor and not the plan?

[Guest Dell]

I mark 9a and 9b as including insurance when there is stop loss coverage. I realize the Preparers Manual says to ignore stop loss for 9b, but it seems to me the manual is inconsistent. Stop-loss premiums are to be reported on Sch H as "payments to insurance carriers for provision of benefits." Seems to me to it is better to include stop loss in 9b since you are supposed to report the premiums on Sch H on the benefits paid lines. The manual even says there is an EFAST edit check to make sure 9b includes insurance if Sch H shows insurance premiums for benefits (which is how Stop Loss premiums should be treated).

I am talking about situations where the stop loss policy pays the plan, not the employer.