Schedule H Requirement for Wrap Plan

[401 Chaos]

Quick question for someone over their head on Form 5500 questions.

If you have a wrap plan that has several fully insured benefit programs (group health, dental, life, disability, etc.) as well as a self-insured health FSA / medical reimbursement arrangement, do you have to pull in and report data on the various insured programs on Schedule H or can Schedule H simply be limited to information related to the health FSA. (As I understand it, if it were not for the health FSA, the plan would not have to file a Schedule H at all.) Thanks.

[Guest Form5500]

For many years, a common technique for reducing the number of Forms 5500 an employer needed to file was for the employer to wrap its welfare plans (e.g., health, dental, medical reimbursement, etc.) into a single plan. However, the use of the wrap plan may work against the employer by transforming several small welfare plans exempt from filing a Form 5500 into a single large welfare plan that must file a Form 5500, or require to have a plan file an audit report with its filing.

For purposes of the Form 5500, an individual who is a participant in any of the welfare benefits is part of the participant count. If the wrap plan has 100 or more participants at the beginning of the plan year, the employer must file Form 5500 for the plan, even though each of the underlying welfare plans is unfunded or fully insured. Of course, an individual who participates in more than one welfare benefit is one participant.

All welfare plans funded through a trust must file a Form 5500 regardless of the number of participants. A welfare plan with less than 100 participants is required to complete a Schedule I. Welfare plans with more than 100 participants are required to to file a Schedule H and attach an audit report for the plan. The accountant issuing the audit report will most likely pull samples for their testing from both the fully insured and the self-insured arrangements. The reason being is that they are auditing the DOL plan (i.e., Plan 501, or whatever the Plan number) and issuing a report for that particular plan and not the arrangements underneath it. The audit report that they give you is done on an accrual basis and you should be taking that information and completing your Schedule H.