The AICPA's guide on audits of employee benefit plans clearly says that an audit of a funded health and welfare plan is an audit of the PLAN and not the TRUST. A plan may establish a trust to hold assets to pay all or PART of the covered benefits. We have been auditing and reporting on plans for years where we show stop loss premiums paid and stop loss refunds received by the Plans. For Form 5500 purposes, the stop loss premiums do not have to be reported if they are in the name of the Plan Sponsor, which is usually the case. Because of this, we are including them on the face of the financials, excluding them on the Form 5500, and preparing a reconciling footnote in the notes to the financial statements. Is this the proper treatment? Shoud we be showing them in the financials at all?

Plan assets must be used exclusively for the benefit of participants and beneficiaries. Many times the stop loss policies benefit the employer. If that is the case, then they should not be paid by the PLAN or you have a fiduciary violation. So they should be paid by the EMPLOYER out of its assets. BOTH the audit and the 5500 are reporting on the PLAN. If the stop loss benefits the employer and has been paid by the employer, neither the audit or 5500 should include the stop loss premiums or proceeds.

What do you think about administrative PPO fees? These are also paid out of the general assets of the sponsor. The sponsor does not run all items through the trust. They sometimes just run through the maximum allowed deduction, and the rest goes through the general assets of sponsor. We have shown the PPO fees as administrative expenses of the Plan with an offsetting amount (gross up) to employer contributions. These are clearly to benefit the Plan.