Monday, December 8, 2008


Posted by Mark Taylor

I have a situation where the 5500 annual report is checked both under 9a and 9b (insurance and general assets of the sponsor). Would this be considered an insured plan subject to state law defenses or an self-funded plan not subject to state law defenses?

-Louisiana Attorney

If both “Insurance” and “General Assets” are checked on the Form 5500, then it means that some of the plan’s benefits are self-funded and some are insured. This is very common. “Welfare Benefit” plans also include coverage for dental, life, disability, etc., so one aspect of the plan may be insured while another is self-funded.

What you have to do is look at the “Schedule A” that is attached to the Form 5500. There should be one Schedule A for every insurance policy that the plan carries, so there may be more than one attached. Thumb through all of them and look at line 7 to see what type of insurance was purchased. If 7a is checked, then it’s a health insurance policy. Then look at line 8, where the plan should (but they don’t always) declare exactly how much was paid in premiums for the policy and how much was paid out in benefits. This is great ammo to have if the plan claims to be self-funded.

However, if none of the Schedule A documents have line 7a checked for health insurance, then the insurance likely covers other aspects of the plan while the health benefits remain self-funded and exempt from state law.