Independent audit required for self-funded welfare plan in which TPA s

[Guest jfgc]

We have a self-funded welfare plan. The TPA sends a check register for claims processed and we in turn cut a check for the claims from general assets. A reserve is set up but actual reserve monies are not deposited. Is an audit required by a CPA firm to be attached to the 5500 or can we prepare the 5500 ourselves without an audit.

[KIP KRAUS]

I have run plans of this nature for years and never have attached an auditors report. It's not required. However, if assets were being set aside in a trust to pay benefits it's my understanding that an auditor's report would be required.

The only financial data we file on our self-insured medical plan is a Schedule A for the stop loss premiums paid.

Paying benefits from general assets, even if there are employee contributions, does not, in my opinion require a trust, especially when claims typically will exceed total employee contributions on a weekly basis.

[Guest]

I suggest you see if a trust is required for the plan. I believe it is the position of the DOL that if the plan is funded by cafeteria plan contributions, then a trust is required.

If a trust and over 100 participants, generally an audit is required.

[SLuskin]

There has been a moratorium on the trust requirement for cafeteria plans for a number of years now. This holds true as long as the funds are paid from general assets and not an account called "Cafeteria Plan Account" or something of that nature. Also, the account should not be interest bearing. I have been doing 5500s for cafeteria plans for 11 years and have never had one require an audit.

[Linda]

Another point...I do not think you want to attach a Schedule A for the stop-loss policy unless (and this is not the usual situation) the stop-loss policy is owned by the plan or a plan trustee.

[pjkoehler]

Your question does not describe your company's plan as a contributory welfare benefit plan, so the discussion regarding "cafeteria plans" (which really aren't ERISA plans at all), which more properly relates to the underlying component welfare benefit plans (particularly Health-FSAs), and the DOL policy of nonenforcement regarding the ERISA Sec. 403 trust requirement described in DOL Tech. Rel. 92-1, are not on point.

The simple answer to your question can be found in DOL Reg. Sec. 2520.104-44, which generally exempts any ERISA welfare benefit plan that pays benefits solely from the general assets of the employer maintaining the plan from: (1) the audit requirement (requirement that the plan engage a qualified public accountant) and (2) the auditor's report requirement (requirement that the plan attach an auditor's report to the Form 5500).

[This message has been edited by PJK (edited 06-08-2000).]

[Guest mbaker]

Does anybody know if the DOL Proposed Regulation (Federal Register 12-1-99- 29 CFR Part 2520) providing a waiver of the annual report of an independent qualified public accountant for employee benefit plans with fewer than 100 participants at begin of plan year--has been issued in final form.

Proposed Regs: http://www.benefitslink.com/erisaregs/2520...-proposed.shtml

[Guest mbaker]

I found it - Final Regs - effective 5-19-00

http://www.dol.gov/dol/pwba/public/regs/fe.../2000009611.htm

[Guest Mfcavo]

I thought the audit requirement exemption doesn't apply because the plan is not fully unfunded due to employee contributions. Some say that Tech Release 92-12? extends the exemption to contributory self-funded plans but I am not sure I read it this way. Any thoughts out there?

[Moe Howard]

The question of 5/25/2000 appears to say that this is a self insured plan and that no employee contributions are used to pay benefits.

If the plan was fully insured then no audit would be required.

However, the plan is not fully insured .... but since no employee contributions are used then the plan is not funded nor is a trust required to be used. Since no employee contributions are used, then an audit is not required.