Participant count for 5500 form - welfare benefit plan

[Belgarath]

Haven't ever worked with welfare benefit plans. The language in the instructions for the 5500 form is based upon the 2510.3 regs. the question at hand (and I haven't seen the plan document yet) is specifically on the following which is the second of the three situations which make you a "participant" for 5500 count purposes.

"the date on which the individual becomes eligible under the

plan for a benefit subject only to occurrence of the contingency

for which the benefit is provided;"

The question was raised - if you are ELIGIBLE to sign up for health insurance, but you do not, are you a participant?

Although this situation seems analogous to a 401(k) situation where you are a participant as soon as you are eligible, whether you defer or not, the regulation has very different language (i.e. it specifically says that you are a participant in a 401(k) plan in such situation) whereas the welfare benefit section of the reg does not. I'd interpret this to mean that the "occurrence of the contingency" is not meant to mean "subject only to signing up" - I'd take it to mean, for example, that if the plan provides accidental dismemberment, you are a participant whether you have an accidental dismemberment or not.

So I think that the answer to the question posed is that no, such a person is not counted as a participant solely upon the basis of being eligible to sign up for the health (or whatever type) of insurance, for 5500 purposes. They would have to actually sign up. I'd love to hear what others think! Thanks.

Lines 5 and 6. All filers must complete both lines 5 and 6

unless the Form 5500 is filed for an IRA Plan described in

Limited Pension Plan Reporting or for a DFE.

The description of ‘‘participant’’ in the instructions below is

only for purposes of these lines.

An individual becomes a participant covered under an

employee welfare benefit plan on the earliest of:

 the date designated by the plan as the date on which the

individual begins participation in the plan;

 the date on which the individual becomes eligible under the

plan for a benefit subject only to occurrence of the contingency

for which the benefit is provided; or

 the date on which the individual makes a contribution to the

plan, whether voluntary or mandatory.

See 29 CFR 2510.3-3(d)(1). This includes former employees

who are receiving group health continuation coverage benefits

pursuant to Part 6 of ERISA and who are covered by the

employee welfare benefit plan. Covered dependents are not

counted as participants. A child who is an “alternate recipient”

entitled to health benefits under a qualified medical child

support order (QMCSO) should not be counted as a participant

for lines 5 and 6. An individual is not a participant covered

under an employee welfare plan on the earliest date on which

the individual (a) is ineligible to receive any benefit under the

plan even if the contingency for which such benefit is provided

should occur, and (b) is not designated by the plan as a

participant. See 29 CFR 2510.3-3(d)(2).

[jpod]

I agree.

[Bill Presson]

Agreed.

[Belgarath]

Just re-upping this. Another person had asked this question of the DOL (how the question was asked or phrased I do not know) and received a TELEPHONE response that you counted them as a participant, even if they had not signed up.

I think this is flatly wrong, (we all know how often the IRS/DOL provdes incorrect telephone responses) but I just thought I'd ask again. I don't know how you can read the 5500 instructions and 2510.3-3(d)(1)(i)(B) to arrive at this conclusion.

Thoughts?

[Bill Presson]

Just re-upping this. Another person had asked this question of the DOL (how the question was asked or phrased I do not know) and received a TELEPHONE response that you counted them as a participant, even if they had not signed up.

I think this is flatly wrong, (we all know how often the IRS/DOL provdes incorrect telephone responses) but I just thought I'd ask again. I don't know how you can read the 5500 instructions and 2510.3-3(d)(1)(i)(B) to arrive at this conclusion.

Thoughts?

Yes, the person giving the answer is wrong. But it wouldn't be the first time.

[Belgarath]

I have to give them credit - the DOL person who gave this answer called my co-worker back yesterday, and said that after thinking about it she had given an incorrect answer. So this DOL person does agree that you wouldn't count them in this situation.

[Bill Presson]

I have to give them credit - the DOL person who gave this answer called my co-worker back yesterday, and said that after thinking about it she had given an incorrect answer. So this DOL person does agree that you wouldn't count them in this situation.

Bravo!