Administrators have long struggled with the question, “How many Form 5500s do we need to file?” Some practitioners believe that you need a separate Form 5500 for each different benefit offered, i.e. one for the life insurance, one for the health insurance, one for the dental insurance, etc. While that is definitely compliant, using that approach often results in increased costs for the client, as the client is billed for 3 or more Form 5500s per plan year instead of just one.
A wrap document combines all of your ERISA plans into a single plan with one plan number. That way, you have an Employee Benefit Welfare Plan with several parts: life, health, dental, disability, etc. rather than a life plan, a health plan, a dental plan, a disability plan.
The biggest benefit of the Wrap Document is if your 5500’s are delinquent. Because the penalties you will have to pay are determined by the number of plans that you have, the Wrap Document provides the documentation that you need to prove that you have one plan and not five. The penalty under the Delinquent Filer Voluntary Compliance Program is $2000 per plan per plan year up to a maximum of $4000 per plan. If someone has 1 plan, their penalty would be $4000. If they have 5 plans, their penalty would be $20,000.