ERISA Audit Requirements for Health & Welfare Plans

Health & Welfare (H&W) Plans are a critical component of many employers’ benefits offerings, covering medical, dental, vision, life insurance, disability, and other welfare benefits. While these plans are subject to ERISA reporting and disclosure requirements, not all H&W plans require an independent audit. Understanding when an audit is required – and when it is not – can help plan sponsors avoid compliance issues and unexpected filing delays as part of their fiduciary responsibilities.

What Triggers a Health & Welfare Plan Audit?

An audit of an H&W Plan is typically required for large ERISA welfare plans that are funded. Under ERISA, a plan is considered large if it has 100 or more participants on the first day of the plan year. Participant counts generally include employees who are eligible for the plan, not just those who elected coverage.

An audit is generally not required if the plan has fewer than 100 participants, or if the plan has 100 or more participants but is unfunded or fully insured.

Funded vs. Unfunded Health & Welfare Plans

An unfunded H&W Plan typically pays benefits directly from the employer’s general assets or through insurance contracts where premiums are paid directly to an insurance carrier. In these arrangements, plan assets are not held in trust. Even if an unfunded or fully insured plan has more than 100 participants, it is generally exempt from the audit requirement, although Form 5500 filing requirements may still apply.

A funded H&W Plan involves contributions being deposited into a separate trust or account. Once contributed, the funds become plan assets and may only be used for paying plan benefits or reasonable plan expenses. If a funded H&W plan has 100 or more participants, an independent audit is required.

Form 5500 Filing Requirements

H&W plans that are unfunded, fully insured, or a combination of unfunded and fully insured and have more than 100 participants are required to file a Form 5500. These plans are exempt from attaching audited financial statements and completing Schedule H, but typically include Schedule A forms related to insurance contracts.

H&W plans that are funded and have over 100 participants are required to file Form 5500, complete Schedule H, and attach audited financial statements prepared by an independent CPA firm.

Find the complete Form 5500 Filing Requirements here.

What Benefits Are Subject to Audit?

When an audit is required, all benefits that are part of the ERISA Health & Welfare plan are subject to audit. Many employers use a single ERISA wrap plan document that combines multiple welfare benefits into one plan. If the wrap plan is large and funded, the audit generally includes all welfare benefits under the plan, including both trust activity and activity administered directly by the plan sponsor.

Understanding Your H&W Plan

ERISA audit requirements for Health & Welfare Plans can be nuanced, especially for employers with self‑insured benefits or wrap plan structures. Taking the time to understand your plan’s funding, participant count, and reporting obligations can help avoid compliance risks and last‑minute surprises.

Please contact us if you have questions about the information outlined above; our seasoned and experienced employee benefit plan professionals are here to help.  You can also learn more on our Employee Benefit Plan services page.

About the Author

Related Services