Compliance Essentials: Plan Documents and Summary Plan Descriptions, Nondiscrimination Testing, and Form 5500 Requirements Explained

7/7/25

For employers offering health and welfare benefits, compliance isn’t optional — it’s essential. From required documentation to annual testing and reporting, there are a number of federal regulations designed to ensure employee benefit plans are fair, transparent, and properly administered. While these requirements can be complex, understanding the basics can go a long way toward reducing risk and avoiding costly penalties.

This guide offers a practical overview of three key components of benefits compliance: Plan Document and Summary Plan Descriptions (SPDs), nondiscrimination testing, and Form 5500s. Whether you’re an employer managing a plan or a broker supporting your clients, knowing what’s required — and where to turn for help — makes all the difference.

1. Plan Documents and Summary Plan Descriptions (SPDs)

Under the Employee Retirement Income Security Act (ERISA), most employer-sponsored health and welfare plans must have a written plan document (PD) and a Summary Plan Description (SPD). In addition to ERISA, the IRS requires that certain employer sponsored benefits be in writing. These documents generally describe the plan’s benefits, rules, eligibility, and participant rights in clear language.

The ERISA PD/SPD requirement applies to:

  • Health Flexible Spending Accounts (FSAs)
  • Health Reimbursement Arrangements (HRAs)
  • Wrap Plans (which consolidates multiple ERISA plans into one ERISA plan)

The IRS written requirement applies to:

  • Dependent Care FSAs
  • Health FSAs
  • Pre-tax only (also known as premium only) plans

Maintaining current, compliant documents ensures plan transparency and protects against legal risk.

2. Nondiscrimination Testing

To maintain tax-advantaged status, certain benefit plans must pass annual nondiscrimination testing under the Internal Revenue Code. These tests ensure that plans do not disproportionately favor highly compensated employees or key decision-makers.

Plans Subject to Testing:

  • Pre-tax only plans
  • Health FSAs
  • Dependents Care FSAs
  • HRAs
  • Self-funded plans

Failing non-discrimination testing may result in tax consequences for key employees and potential plan disqualification, making timely, accurate testing a must.

3. Form 5500s

Unless an exemption applies, employer-sponsored welfare benefit plans, including Health FSAs, are required to file an annual Form 5500 with the Department of Labor. Lifetime Benefit Solutions, Inc. can assist with preparation of Form 5500s on an annual basis as well as the preparation of any Form 5500s for filing under the Delinquent Filer Voluntary Compliance Program.

Navigating Compliance Doesn’t Have to Be Complicated

While compliance requirements are numerous and nuanced, you don’t have to manage them alone.

Lifetime Benefit Solutions offers a full suite of compliance services to help employers and brokers stay ahead of regulatory obligations. We take the guesswork out of documentation, testing, and reporting — so you can stay focused on your people and your business.

Our services include:

  • Creation and maintenance of plan documents and SPDs, summary of material modifications and plan amendments
  • Self-service online nondiscrimination testing with downloadable reports
  • Form 5500 preparation
  • Ongoing support

Let’s make compliance simple. Contact us today to learn more or to request a quote.

Note: LBS is not a law firm. This material is for informational purposes only and does not constitute legal or tax advice. Please consult with your own legal counsel or tax advisor for the legal and/or tax requirements that may apply to you or your employees.