<100 participant H&W filing requirements

[PAL]

When is a H&W plan with less then 100 participants required to file a Form 5500? I understand that if the less than 100 participant plan is fully insured or pays benefits out of the assets of the employer (or a combination of both), then a 5500 would not be required. However, I'm a little confused as to when a plan is considered unfunded.

The instructions say an unfunded welfare benefit plan has its benefits paid as needed directly from the general assets of the employer or employee organization that sponsors the plan. But then go on to say that plans that are NOT unfunded include those plans that received employee contributions during the plan year and/or used a trust or separately maintained fund to hold plan assets or act as a conduit for the transfer of plan assets during the year. There does appear to be an exception where a welfare plan with employee contributions that is associated with a cafeteria plan may be treated as unfunded if it meets certain requirements. However, what if the plan does not have a 129 plan? Also what about HSA's? Would either of these two things change the plan to being "funded" and therefore require a Form 5500?

PAL

[Lori Friedman]

In general, a welfare benefit plan doesn't file Form 5500 if it (1) had fewer than 100 participants at the beginning of the plan year and (2) is "fully insured" and/or "unfunded".

"Fully insured" means that plan benefits are provided exclusively through insurance contracts or policies. "Unfunded" means that the plan didn't:

(1) Receive any participant contributions during the plan year. Contributions made through an I.R.C. Sec. 125/cafeteria plan aren't treated as participant contributions and, thus, don't make the plan "funded"

(2) Use a trust or other separately-maintained fund, including an I.R.C. Sec. 501©(9) VEBA.

The same plan generally files a Form 5500 when it has 100 or more participants at the beginning of the plan year, but with limited reporting requirements.

If you find these rules confusing, you have plenty of good company. It can be a real challenge to determine whether a welfare benefit plan exists (as compared to a fringe benefit plan or some other general employee benfit), whether it's fully insured and/or unfunded, and whether there's a Form 5500 filing requirement. You can find some helpful information at the 2007 Form 5500 instructions, p. 3 and Dept. of Labor Reg. 2520.104-20(b).