Welfare Plans 5500

[Guest bernverd]

An employer has life, disability, health and dental plans each with over 100 participants. Their ERISA attorney says they can use the policy as their plan document. Since each of these types of insurance is on a separate policy do they need to file a separate 5500 for each?

[Guest ERISA Pros]

An employer has life, disability, health and dental plans each with over 100 participants. Their ERISA attorney says they can use the policy as their plan document. Since each of these types of insurance is on a separate policy do they need to file a separate 5500 for each?

First, this employer must file separate Form 5500s for each "Plan." This is one of the main disadvantages to the employer of not adopting a "Wrap Plan Document." A Wrap Plan would consolidate the life, disability, health, and dental into one Plan for reporting (Form 5500) and disclosure (SPDs) purposes--saving the employer time and expense.

Second, using insurance policy as the plan document is fraught with risks. Many insurance companies provide a complimentary ERISA "wrapper" template for employers to fill in and attach to their certificates of insurance. A few carriers even include the required ERISA disclosure language in the content of their certificates to transform them into Summary Plan Descriptions, or SPDs. And several popular ERISA document vendors produce SPDs without preparing a Plan Document for the employer. However, having an SPD alone, or one that takes on the dual role of Plan Document and SPD, or even an incomplete or inconsistent Plan Document, may leave the employer/Plan Administrator exposed.

ERISA requires employers/Plan Administrators to adopt a written Plan Document, which is the source of authority and documentation of administrative practices. It controls many important legal matters such as amendment procedures and should contain a grant of discretionary authority to fiduciaries to make benefit determinations. The Plan Administrator is also required to deliver a plain language summary of the plan, called a Summary Plan Description or "SPD," to its Participants.

When a Plan Participant sues a plan fiduciary over a benefit claim decision, the standard of review used by the court can make or break the case for the Administrator/fiduciary/employer. The standard of review determines the scrutiny that the court will apply when reviewing the fiduciary's decisions. The highest degree of scrutiny - de novo review - enables the court to review even the smallest errors. Under the standard of review more favorable to the fiduciary - the "abuse of discretion" or "arbitrary and capricious" standard - a court may review only the largest and egregious errors.

In recent cases, the SPD granted the Plan Administrator the discretion to interpret the plan and determine eligibility for benefits - language that did not appear in the plan itself. Upon appeal, the court held that the Plan Administrator was not entitled to the more favorable "abuse of discretion" standard of review for ERISA Plans. The appeals court reversed the decision of the district court and sent the case back to a lower court to review the Plan Administrator's decision to deny a claim for long-term disability benefits under the "de novo" standard, which is more favorable to the employee/plaintiff.

These cases underscore the need for carefully prepared documents. Plan fiduciaries should review the language in their Plan Document and compare it with the SPD on this issue and other important issues, such as subrogation and reimbursement rights.

[Ron Snyder]

This has been much discussed in the past. Check prior threads.

[Guest VEBAPLAN]

Very good Ron

[Guest tpranger]

It really does depend on what the situation really is. And most of the time the policy that is playing a role in the situation is something to pay attention to as well. in most of the case, it is essential for you to file a 5500. But there are some exceptional ones that I have met. And there is no need for a move like that. I would advise you to read through all the details that you have and make sure you got all the terms cleared. ovulation