Case Studies

Compliance Expertise

The Issue

Our new client, who had a plan with 180 participants for several years, had been advised by their former benefits broker that no 5500 filings had ever been required. 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. While there are no fees or taxes due the IRS with the 5500 filing, the penalties for failure to file can range as high as $1,100/day.

The Solution

We conduct a thorough “compliance review” to make sure that clients are following all the rules of the road with regard to their plans. When the conversation turned toward annual “Form 5500” filings, the client explained that none had ever been done because none had ever been required. Upon further review, Summit determined that this plan sponsor was required to file 5500’s currently, and should have filed for the previous seven years as well. We advised the CFO that they were, in fact, delinquent and were facing the potential of substantial penalties. We then worked with the client to collect all of the necessary data from various plans, plan documents and insurance companies going back seven years. We completed seven years of 5500’s and prepared a special filing under the “Delinquent Filer Voluntary Compliance” (DFVC) program offered by the IRS and Department of Labor. Under the DFVC program, the client’s liability for financial penalties dropped from hundreds of thousands of dollars to a limit of $4,000. From the moment the DFVC filing was done the client could breathe a sigh of relief, because if the Department of Labor had conducted an audit before this the DFVC filing and had found the delinquency, the plan sponsor would have been prohibited from using the DFVC approach and would have faced the aforementioned penalties.

The Summary

Plan compliance involves a myriad of issues and steps on an ongoing basis, from 5500’s for those required to file, to Medicare “Part D” notices, “Women’s Health and Cancer Rights Act” notices, plan documents and a host of other issues. By taking the initiative to conduct compliance audits before the government steps in we can resolve potential problems before they become expensive mistakes.

The preceding are hypothetical case studies and are for illustrative purposes only. Actual performance and results will vary. These studies do not represent actual clients but a hypothetical composite of various client experiences and issues. Any resemblance to actual people or situations is purely coincidental.