IRS/DOL Scrutiny of 5500s and Transit Plans on the Rise

IRS Scruitiny of 5500 and Transit Plans

With ACA reporting looming on the horizon, many employers are focused on what’s new, but BPC wants to take a moment to review some older regulations that may be thrown into new light in 2016.

If you aren’t already utilizing BPC’s 5500 service, now’s the time to let us help ease the burden by filing your 5500 for you.  

 

5500s for Health & Welfare Plans:

Background: Under ERISA and DOL regulations, many health & welfare plans are required to file a Form 5500 on an annual basis.  Small plans, defined as those with fewer than 100 participants on the first day of the plan year, are generally exempt.  Large plans providing benefits such as healthcare, dental, vision, life or disability benefits will generally be required to file a 5500 each year.  Some small plans may also be subject to the filing if operating with a trust. 

Many large employers stopped filing health and welfare 5500s in 2002 (for 2001 plans) when the IRS indefinitely suspended 5500 filing requirements for cafeteria plans.  That change, however, did not apply to health and welfare plans in general, even if the benefits are funded through a cafeteria plan. 

Penalties for failure to file can be staggering.  The DOL states that they may assess penalties of up to “$300 per day, up to $30,000 per year, until a complete annual report is filed (See Q/A 8 here).  On top of these penalties, the IRS may add its own penalties into the mix. 

Luckily, the DOL offers a Delinquent Filer Voluntary Compliance Program (DFVCP), under which employers may file even severely past due plans with penalties of just $4,000.  Likewise, the IRS will waive all penalties for employers using this program.  However, once an employer receives a DOL Notice of Intent to Assess a Penalty, they will be disqualified from the DFVCP. 

What’s changing? While it is difficult to speculate on audit intentions of the IRS and DOL, BPC does consider it to be worth noting that Affordable Care Act requirements are creating very clear reporting of health coverage to the IRS. The IRS recently pushed the filing timeline back for several form which you can learn more about by clicking here.  Whether you’re reporting PCORI Fees on IRS Form 720, or meeting your Code § 6056 reporting obligation with IRS Forms 1094-C and 1095-C, we have reached a point where groups will clearly be self-reporting the presence and scope of their healthcare offerings directly to the IRS.  Since Form 5500s are also filed to the IRS, it will be very simple for the IRS to cross-check these forms and determine a Form 5500 is absent. Whether you’re reporting PCORI Fees on IRS Form 720, or meeting your Code § 6056 reporting obligation with IRS Forms 1094-C and 1095-C, we have reached a point where groups will clearly be self-reporting the presence and scope of their healthcare offerings directly to the IRS.  Since Form 5500s are also filed to the IRS, it will be very simple for the IRS to cross-check these forms and determine a Form 5500 is absent. 

How BPC can help:  BPC can assist employers wishing to cleanup past 5500 non-compliance by preparing forms and providing penalty calculation and payment guidance on the DOL’s DFVCP.  BPC can provide these filing services for multi-year and/or multi-plan catchups with discounts of up to 20% over usual filing costs. 

For more information, email us or request specific pricing here.

Transit:

Background: Since 1985, Code § 132(f) has authorized employers to provide qualified transportation and parking fringe benefits to employees on a pre-tax basis.  Generally, such plans are offered as salary-reduction benefits, with employees deferring a portion of their salary on a pre-tax basis for use on these benefits.  Similar in this regard to Flexible Spending Accounts, such plans allow both the employer and employee to save significant tax dollars. 

What’s Changing? In IRS Revenue Ruling 2014-32, the agency indicated that beginning in 2016, cash reimbursement of transportation expenses will no longer be permitted in areas where fare media, including terminal-restricted debit cards, are readily available.  The test for determining whether transit fare is “readily available” depends on a variety of facts and circumstances, but employers in most major metro areas will find that offering cash reimbursement for transportation expenses is no longer a viable option in the eyes of the IRS. 

We are also pleased to point to some good news coming out of Congress.  Late in 2014 they passed legislations that brought the monthly maximum available for this benefit up to align with the parking maximum, which for 2016 is set at $255 per month. 

How BPC can help: BPC can provide transportation plans driven through terminal-restricted debit card starting in 2016.  Using the same debit card they may already use for Health FSA, HRA, or HSA benefits, your employees can purchase transit passes directly from any terminals that sell only transit fare.  Under this setup, there is no requirement for employees to substantiate expenses since the cards will only work for actual transit fare. 

Parking benefits may still be administered using cash reimbursement.  BPC can provide administration of both the mass transit (through terminal-restricted debit cards) and parking (through cash reimbursement) portions of your Transportation Plan. 

To find out whether BPC offers terminal-restricted debit cards for mass transit in your area (we bet we do!) request a proposal or email us.

Posted on January 7, 2016 .