Compliance Expertise

The Issue

Upon the completion of a compliance review for a newly acquired client who grew from approximately 75 employees to just over 150 employees in the past 3 years, we discovered that the required 5500 forms had not been completed for two of those past three years. According to federal law under ERISA, health and welfare plan sponsors with 100 or more participants at the beginning of a plan year are generally required to file an annual report with the Department of Labor/IRS. This "Form 5500" contains information about the plan and includes disclosure of all commissions and fees received by those who provide services to insured plans. Failure to file these forms by the required deadlines could result in an IRS penalty of $25 per day, up to a maximum of $15,000. The DOL penalty for late filing can run up to $1100 per day with no maximum.

Our Solution

Since their growth in the initial year began with less than 100 employees they were exempt from filing for that year. However, we advised the client that they were, in fact, delinquent for the second two years and were facing the potential of substantial penalties. After collecting the necessary plan data from each year, we assisted the client in completing and filing an electronic 5500 form for both years and then prepared a special filing under the "Delinquent Filer Voluntary Correction Program" (DFVCP) offered by the IRS and Department of Labor. Under the DFVCP program, the client’s liability for financial penalties dropped from hundreds of thousands of dollars to the limit of $2000 for each annual report, not to exceed $4000 per plan. If the Department of Labor were to have conducted an audit before the DFVCP was filed and discovered the delinquency, the plan sponsor would have been prohibited from using the DFVCP and would have been responsible for the significantly higher penalties.

The Result

Plan compliance today is complex and spans a multitude of areas and required processes, from 5500 filings to "Pay or Play" to COBRA and FMLA, just to name a few. Requirements vary by number of employees, and process deadlines are scattered throughout the year. With our guidance and suggested compliance audits we can help clients resolve potential problems before they become expensive mistakes.

We schedule compliance reviews on a regular basis for all of our larger customers to assure that they are aware of the latest developments in the ever-changing world of health care reform. Additionally, we provide you with a continual stream of bulletins and videos that provide information on the latest benefit developments and legislative updates.