Since the inception of the Employee Retirement Income Security Act of 1974 (ERISA), plan sponsors have long been audited, investigated and fined by the U.S. Department of Labor (DOL) for failing to comply with various aspects of this law. And over the years, the DOL has dedicated and invested more resources and time into ensuring ERISA is being followed to the fullest. Much of the DOL’s focus has been on retirement plans, but that’s changing, and there is a renewed focus shifting to health and welfare plans. That being said, it’s more important than ever for businesses offering health and welfare plans to be aware and on the lookout for any items that impact their compliance with this law.
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All Businesses Must File Form 5500
The latest proposed change is set to hit in 2018, but companies need to start preparing now. Under the proposed regulations, any business that offers a health and welfare plan – regardless of the number of participants – would be required to file a Form 5500. Currently, the general rule is if a plan has 100 or more participants, this form is required to be filed. But by 2018, it’ll be mandatory that all welfare plans file.
What This Means For Your Company
If you’re not already submitting a Form 5500, now would be a good time to start preparing! Even if you’re not required to now, getting into the habit of requesting data and reviewing plan items now may prevent grief down the road for your company. How?
Businesses that are required but do not file a Form 5500 will be subject to a penalty of $2,063 per day (up from the current penalty of $1,100 per day). That’s $2,063 per day until you submit the correct information. And that could add up to a lot of dough you’d be shelling out to the government, just for not being in compliance. So don’t wait until it’s too late.
Be Prepared
While there’s no guarantee that your business will be audited or fined, the likelihood is increasing as the DOL is spending more time policing ERISA. In the recent past, the DOL has mined data in its e-file system, identifying sponsors who file as a large plan on the retirement side (401(k)) of the house, and running searches on that employer’s ID number to see whether the plan sponsor is complying with ERISA requirements by filing any necessary Form 5500 on the welfare plan side. If found noncompliant, the company would be dinged with fines.
And this is just one example of what is to come. The DOL is also ramping up efforts in other areas where they have suspicions that welfare plans are noncompliance.
Our team of benefit plan experts can work with your company to evaluate your health and welfare plan and help you determine if there are any gaps in compliance. From there we can provide tools and recommendations for areas that you need to strengthen to ensure that you don’t get penalized.
Don’t get caught out of compliance. Email Rea & Associates to learn more about what you can do now to prepare for this upcoming compliance change.
By Darlene Finzer, CPA, QKA, CSA (New Philadelphia office)