CPA & Business Advisory Blog

Department of Labor Amnesty Updates for Deliquent Filers

Recognizing that many employers were unaware of their responsibility to file an annual return for various types of retirement and welfare employee benefit programs, the Department of Labor (DOL) created the Delinquent Filer Voluntary Compliance Program (DFVCP) in 1995.  DFVCP allows an employer who has not filed required Form 5500s to file all required Form 5500s for a particular program at one time, and pay a reduced one-time penalty.  The penalty amount will vary depending on the number of program participants, the number of delinquent returns for that program and how late the returns are—but the maximum penalty is $4,000 per-program.  This penalty amount is significantly less than potential penalties that could be assessed if the employer does not file and this failure to file is discovered as a result of a DOL or Internal Revenue Service (IRS) audit. 

Restatement of the DFVCP

On January 29, 2013, the DOL, through its Employee Benefits Security Administration (ESBA) division, issued a restatement of the DFVCP.  This restatement is a comprehensive update of changes that have occurred in the DFVCP since March 28, 2002.  Among the items that are covered in the restatement are:

  • All DFVCP filings must be done electronically, using the ERISA Filing Acceptance System (EFAST2) that is currently used for filing all IRS Form 5500s
  • All returns filed under the DFVCP must use the IRS Form 5500 for the year in which the DFVCP filing is made as opposed to the form for the plan year at issue
  • Payments may be made electronically; hard copy checks remain acceptable, but those checks must be accompanied by a hard copy of the return
  • Future updates to the DFVCP will be posted on the ESBA’s website, rather than through the Federal Register.  The website is www.dol.gov/esba.

The entire restatement can be found here.

When must an employer file a Form 5500?

In general, all tax-qualified retirement programs designed to qualify under Internal Revenue Code (IRC) Section 401(a) must file Form 5500.  There are significant exceptions to this rule, including, but not limited, to one participant plans with less than $250,000 of assets at the end of the year, certain simplified employee pension plans (under IRC Section 408(k)) and SIMPLE IRAs. 

For a welfare benefit plan under ERISA, which covers many programs (including but not limited to health benefits, dental benefits, vision benefits, short term disability, long term disability, life insurance, and prepaid legal services), the employer must have 100 or more employees eligible to participate in the program at the beginning of the plan year.  The method by which the program is funded (through insurance contracts or solely by employer payments from its general assets, for example) does not impact the filing requirement.

What should an employer do?

An employer should analyze the programs that it offers to its employees and the levels of eligibility to determine if filing is required.  The design of welfare benefit programs should be examined to determine if programs can be combined for Form 5500 purposes.  Then, the returns should be prepared and the DFVCP filing made, including penalty payment.

We would be pleased to assist you in reviewing this issue and preparing the DFVCP filing package if needed.  For more information on this topic, post a comment below or contact our Compensation & Benefits Advisory Services Group at 440-449-6800.

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