An employer sponsoring life, medical, dental, and disability insurance plan that files its Form 5500s just 30 days late could be fined $132,000. If that employer earns 8% net after tax, it would have to generate $1,650,000 in sales revenue to pay for the government’s fine.
Atlanta, GA (Vocus) December 22, 2009
According to a recent study by ERISA Pros, LLC, the majority of U.S. employers with 100 or more employees do not comply with the ERISA requirement to file an annual Form 5500 for their Health & Welfare Benefit Plans. U.S. Census Bureau reports show that there are about 110,000 employers that employ 100 or more people. However, according to public records, some 60,000 of these employers have not filed a Form 5500 for a Welfare Benefit Plan -- a 55% rate of noncompliance.*
ERISA is a federal law that regulates employer-sponsored benefit plans, such as 401(k), group life, medical, dental, and disability insurance plans. It imposes strict requirements on employers sponsoring these plans to report certain financial information to the Department of Labor annually on Form 5500, and to disclose benefit-related information to their Plan participants in a Summary Plan Description (SPD).
ERISA is enforced by the U.S. Department of Labor (DOL), which can penalize an employer up to $1,100 per day that its Form 5500 is filed late. This penalty is cumulative, applies separately to each benefit Plan, is not subject to a statute of limitations, and is not tax deductible to the employer. According to ERISA Pros’ founder, Bernard Kearse, “An employer sponsoring life, medical, dental, and disability insurance plan that files its Form 5500s just 30 days late could be fined $132,000. If that employer earns 8% net after tax, it would have to generate $1,650,000 in sales revenue to pay for the government’s fine.”
Beginning in 2010, employers must file all Plan Year 2009 and later Form 5500s electronically. ERISA Pros will begin offering Form 5500 preparation & electronic online filing services for Health & Welfare Benefit Plans using the Department of Labor's (DOL) EFAST2 system. Electronic filing may make it easier and faster for some employers to file, but for others, it will create confusion and complication. It will also make it easier for the DOL to monitor compliance and enforce penalties. Rather than relying on random audits or participant complaints to initiate an investigation of an employer's compliance with ERISA, the DOL will be instantly alerted if numbers on a Form 5500 are inconsistent or if the form is incomplete or not prepared and filed at all. The DOL will also be able to perform additional checks on the Form 5500, such as the reasonableness and accuracy of information provided.
Many ERISA specialists believe that in the Welfare Benefit Plan arena, the rate of employer compliance with the requirement for proper preparation and delivery of Summary Plan Descriptions (SPDs) may be even lower than that of filing Form 5500s. In fact, Kearse continues, “None of ERISA Pros’ customers were in full compliance before becoming our client. Fortunately, the DOL does have a Late Filer Voluntary Compliance Program that offers a reduced penalty, but this program cannot be used once the DOL finds the employer's error through an audit or investigation. The DOL is slated to hire 1,000 new employees, of which about 670 will be investigators. Employers should take steps now to get in compliance before the DOL knocks on their door.”
About ERISA Pros:
ERISA Pros provides ERISA compliance solutions for Health & Welfare Benefit Plans, including Plan Documents, Summary Plan Descriptions (wrap SPDs), and Form 5500 preparation and electronic filing services . Atlanta attorney, Bernard Kearse, JD, LLM, founded ERISA Pros to fill the need for high quality, yet affordable documents and services. For a complimentary ERISA compliance evaluation or for additional information on ERISA Pros, its “Wrap-Tight” sm wrap SPD, or Form 5500 preparation and electronic filing, contact Bernard Kearse.
Bernard V. Kearse, III, JD, LLM
ERISA Pros, LLC
Suite 800; 990 Hammond Dr. NE
Atlanta, Ga. 30328
*It is assumed that employers with 100 or more employees offer at least one Welfare Benefit Plan and are subject to ERISA Reporting and Disclosure requirements.