As the summer sun begins to shine, it signals more than just vacations and barbecues, it also marks the arrival of Form 5500 season. If you are responsible for employee benefit plans, you know this is the time when attention shifts toward ensuring compliance with the Employee Retirement Income Security Act (ERISA). Among the most common areas of confusion during this process are Schedules A and C. Understanding the distinction between these two schedules is crucial to accurately completing your Form 5500 filing and maintaining regulatory compliance.
Let’s break it down.
Schedule A: The Insurance Disclosure
Think of Schedule A as your plan’s insurance report card. It is required if the benefit plan includes insurance contracts, such as group life, health, dental, vision, or other insured benefits. Schedule A discloses information regarding insurance carriers, commissions, fees, and premiums paid. It helps ensure transparency regarding the costs associated with providing insured benefits.
Key Takeaways:
- Required when insurance contracts are part of the plan
- Details premiums, commissions, and fees
- Information is typically provided by the insurance carrier
Schedule C: The Service Provider Breakdown
Schedule C, on the other hand, is all about service providers. It is required if service providers to the plan receive $5,000 or more in direct or indirect compensation, and these compensation payments to the providers are made from a “Funded” plan, for example, a plan that keeps the plan's assets segregated as in a Trust. This schedule details payments made to accountants, third-party administrators, consultants, and other vendors who provide services to the plan. The goal is to shed light on the plan’s administrative expenses and ensure there are no conflicts of interest. However, if the plan is unfunded and uses the general assets of the sponsor for these provider payments, a Schedule C is generally not required to be filed.
Key Takeaways:
- Required when service providers receive $5,000 or more from a “Funded” plan
- Reports both direct and indirect compensation
- Focuses on administrative expenses and potential conflicts
Why It Matters
Misunderstanding or overlooking Schedules A and C can lead to errors in Form 5500 filings, which may trigger audits, penalties, and unnecessary stress. Given the complexity of benefits administration, maintaining accuracy and transparency is key to avoiding these pitfalls.
Stay Ahead This Season
As the Form 5500 season approaches, now is the time to ensure you understand each schedule and gather the necessary information. Whether working with your internal team or relying on external partners, clear communication and thorough documentation will set you up for success.
