Delinquent Filer Voluntary Compliance Program

Posted by Christopher J. Ciminera

The extended filing deadline (October 15th) for the Form 5500 for calendar year plans is two months behind us now. I can’t believe how fast the filing season has come and gone.

Wait…what…you haven’t filed your 5500? You extended your vacation? You were too busy thinking about the holidays? Now what? You’re probably asking if your 5500 can be filed late and whether you can avoid being assessed a large penalty?

In some cases, the answer is yes.  Under the Delinquent Filer Voluntary Compliance Program (DFVCP), plan administrators may voluntarily file a delinquent 5500 to comply with the filing requirements of the Employee Retirement Income Security Act (ERISA) while paying reduced penalties, so long as the plan sponsor has not received a “Failure to File Notice” from the Department of Labor (DOL) Employee Benefit Security Administration (EBSA). However, this is not true for everyone. Filings that are not subject to Title 1 of ERISA, such as Form 5500-EZ filings, are not eligible to participate in the DFVCP.

To comply with the requirements of the DFVC Program, a plan administrator needs to do the following:

  • File the delinquent 5500 with all applicable schedules and attachments. This will be the same filing that would have been filed on a timely basis, except that Part I, Section D of the 5500 has a box that must be checked to show that it is being submitted under the DFVC program.
  • A statement labeled “DFVC Program” must be attached to the 5500.
  • A copy of the first two pages of the signed and dated 5500 without the schedules or attachments must be filed with EBSA
  • The reduced penalty payment must be sent with the step above. Payments can be made electronically or with a check made payable to the “Department of Labor.” The system’s acceptance of the online payment does not constitute acceptance to the DFVCP.
  • The original filings must still be sent to EFAST
  • When completed, mail the copy of the first two pages of the 5500 signed and dated, including the check for the penalty amount to the new lock box address effective March 29, 2011:  DFVCP/DOL, P.O. Box 71361, Philadelphia, PA 19176-1361

Note that the EBSA has an online calculator to help determine and pay the penalty. There are detailed examples and instructions to help guide you through the use of the calculator.

The applicable penalty depends on many things:

  • Is the plan a small plan
      • If you file the 5500 as a small plan and you file a Schedule I, then the penalty is $10 per day that the 5500 is filed after the unextended due date (July 31st for calendar year plans). The penalty is capped at $750 for a single late filing or $1,500 for multiple late filings.
  • Is the plan a large plan
      • If you file the 5500 as a large plan and you file a Schedule H, the penalty is $10 per day that the 5500 is filed after the unextended due date. The penalty is capped at $2,000 for a single late filing or $4,000 for multiple late filings.
  • Is the plan sponsor is a nonprofit
      • In the case of a 501(c)(3) organization filing as a small plan, the penalty is $10 per day that the annual report is filed after the unextended due date, but is capped at $750 for a single or multiple filings.
      • If the 501(c)(3) organization is filing as a large plan, then the penalty maximum is the same as the penalty for other plan sponsors. Small plan filings that are eligible for the special per-plan penalty cap must make a notation in the upper-right corner of the first page of the Form 5500 indicating that the plan is sponsored by a 501(c)(3) organization.

No matter what, penalties cannot be paid from plan assets. Also, the IRS and PBGC have agreed to provide penalty relief for those plans where DFVCP conditions have been satisfied. In fact, most of the time, the IRS will send a “Failure to File Notice” to the plan administrator first, such that there is still an opportunity for the plan administrator to file under the DFVCP, since the IRS, not EBSA, has sent a notice.

In conclusion, there is a way through the DFVCP program, but cutting short that summer vacation might have been a better idea!

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