Facts: Five months ago, you accepted employment as the new HR\Benefits Manager for a 300 employee manufacturing company. Now that you are comfortable in your new role, you decide to review the manila file folders that your predecessor left behind in a pile on a shelf. As you review the file folders, you notice that one is labeled, "Form 5500 Annual Report – 2010." You review the file folder and determine that the 2010 Form 5500 annual report for the medical plan was never filed with the U.S. Department of Labor ("DOL"). You research and learn that the 2010 through 2017 Form 5500 annual reports were not filed with the DOL.
Issue: As a seasoned HR\Benefits manager, you know that the DOL can assess civil penalties against plan administrators who fail to file a timely Form 5500 annual report for each plan year. If a Form 5500 annual report filing is late, the DOL may assess a $50 per day penalty with no limit for the period of the failure. If the Form 5500 annual report is not filed, the DOL may assess a penalty of $300 per day, up to $30,000 per year, until a complete annual report is filed.
Solution: The DOL established the Delinquent Filer Voluntary Compliance Program ("DFVCP") to encourage retirement and welfare plan sponsors to file late Form 5500 annual reports and pay a reduced civil penalty. To correct, plan sponsors must first electronically file a complete Form 5500 annual report with all schedules and attachments for each plan year that the plan sponsor is seeking relief. Second, plan sponsors utilize the DOL's online penalty calculator to compute the correct penalty amount and make the proper payment electronically using the online instructions.
For small plans (fewer than 100 participants at the beginning on the plan year), the penalty amount is $10 per day for each day a single Form 5500 annual report is filed after its due date, not to exceed $750. In the case of more than one delinquent Form 5500 annual report for the same plan, the maximum penalty amount is $750 for each annual report, not to exceed $1500 per plan.
For large plan (100 or more participants at the beginning of the plan year), the penalty amount is $10 per day for each day a single Form 5500 annual report is filed after its due date, not to exceed $2,000. In the case of more than one delinquent Form 5500 annual report for the same plan, the maximum penalty amount is $2,000 for each annual report, not to exceed $4,000 per plan.
As the company's HR\Benefits manager, you ensure that the plan information is gathered in order to prepare the Form 5500 annual reports for all past due plan years (2010-2016), and you coordinate the payment of the maximum penalty amount ($4,000) for large plans in order to re-establish plan compliance. The good news is that the DOL established this correction program in order to encourage plan sponsors to correct for late filings, and plan sponsors should have no fear entering this correction program. Should you have any questions about late Form 5500 annual reports, please call your relationship attorney.