Filing 5500 and Stop-Loss Plan Asset Consideration [EMPLOYERS]

Important information to consider

Are the stop loss premiums paid with participant contributions in this arrangement?

Assessing whether stop loss is a “plan” benefit

The DOL has addressed this issue specifically twice—the last being DOL Adv. Op. 2015-05A.  In that Adv. Op, the DOL basically indicated that a stop loss policy would not be part of the ERISA plan so long as no participant contributions were used to pay the premiums and the policy did not insure the plan.  

The employer in the Adv. Op. went to the trouble to pay stop loss premiums from an affiliate’s account so that it could clearly show that no participant contributions, which were held in the sponsoring employer’s account, were used to pay premiums.  

Likely Answer:

If the premiums are pulled from the same account that is funded by the employer to pay claims it would be hard to argue that they are not a plan asset.  Again, if the salary reductions are noted in the general operating account in such a way that you can show they don’t go to the separate account, then you can maybe argue that the stop loss is not paid with participant contributions.  But in the absence of this information, the stop loss is a plan asset subject to ERISA.

What does it mean if stop loss is a plan asset?

In the context of a Form 5500, it means that the Stop Loss and commissions are reported on a Schedule A that is attached to the Form 5500.  It means more than that though.

If some portion of the premiums are paid with participant contributions, then some portion of the stop loss reimbursement (the portion allocable to the participant contributions) is a plan asset and can only be used to benefit the plan participants (i.e. the employer cannot keep the entire reimbursement).  However, the general practice in the industry does not account for this and employers are generally reimbursed and retain the total amount.

IRS instructions for filing Form 5500 for any ERISA regulated plan

E-Filing your 5500 – Click to enter DOL site

Information Source: Health Rosetta

Josh Butler

Josh is the President of Butler Benefits & Consulting. Passionate about healthcare reform and helping employers save money while improving the quality of employee benefits.

See Full Bio