Question: Our company offers two medical plans, each with a different carrier. One of our medical plans had 45 employees enrolled as of January 1 (our plan year start date) and the other plan had 60 employees enrolled. There are 115 employees enrolled in the dental plan. If we don’t have 100 or more employees enrolled in either medical plan, do we have to include medical on our Form 5500? If the medical plan must also be included, can we combine both medical and dental on the same 5500?
Answer: Title 1 of ERISA requires certain employee health and welfare benefit plan sponsors to file a Form 5500 and any applicable schedules. The obligation applies to large plans, which are those plans with 100 or more covered participants as of the beginning of the plan year and certain small plans (those with fewer than 100 participants), including:
- Small funded plans. “Funded” plans should not be confused with “self-funded plans.” Funded plans typically have a trust or separately maintained fund to hold plan assets. Many plans are unfunded, meaning they pay benefits from the general assets of the employer, or have been deemed unfunded under IRS Technical Release 92-01.
- Small plans required to file a Form M-1. The Form M-1 is required for certain multiple employer welfare arrangements (MEWAs) and entities claiming exception (ECEs).
In this context, “participants” means employees or former employees, such as former employees who elected COBRA benefits, but does not include spouses or dependents. There are other exceptions to the Form 5500 requirement for certain large and small plans, including but not limited to, governmental plans, certain plans for select management or highly compensated employees, certain plans participating in group insurance arrangements, and apprenticeship and training plans meeting certain requirements.
The general rule is one Form 5500 for each insurance contract; however, there are exceptions to this rule. One exception can apply when two contracts are for the same type of benefit being offered. In this case, you have two insurance contracts with two different carriers, but both are for a medical benefit. Here, the Department of Labor (DOL) would likely determine that you should combine the participants in both plans to determine whether it is a large plan. Since you had more than 100 participants enrolled in your medical benefit (combined total for both plans) as of the beginning of the plan year, then you would likely need to file a Form 5500 for your medical benefits.
Another exception to the “one Form 5500 for each insurance contract” general rule is when an employer decides to combine all ERISA benefits into a single welfare benefit plan through a wrap document. A wrap document serves as the plan’s written plan document required under ERISA. Like other plan documents, the wrap document can specify terms of the plan not otherwise expressed in the insurance contracts, including eligibility requirements for the different benefits offered, and assists an employer with meeting its ERISA obligations.
If an employer offers different types of benefits, such as medical and dental, and wants to bundle them into one plan, then the employer is required to have a wrap document. In this case, if you want to file a single 5500 for both your medical and dental plan, then you would need to ensure you have a wrap document in place.
Question: We are negotiating to provide supplies to a federal contractor. Under the terms of their contract with the government, our inspection personnel are required to get annual eye exams. Do we need to abide by these terms?
Answer: Federal contractors are required to abide by the terms of their contract with the government. If your company provides a federal contractor with supplies that are regulated by the terms of the governmental contract, then you will need to abide by the terms of the agreement. Otherwise, the federal contractor will be functioning outside the parameters of the contract and potentially lose, or be found in violation of, the contract. However, it is reasonable to ask for proof of this requirement, any necessary medical protocol, and add these additional costs to the price of the services your company is providing.
To be collaborative, you may ask whether the federal contractor recommends an eye exam provider or you may be free to select your own provider. Keep in mind, as the employer, you would be responsible for paying for any eye exam required of your employees. However, as previously mentioned, you could include the cost of this additional service in your total bill to the federal contractor.