The U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) has recently announced various changes to its Delinquent Filer Voluntary Compliance Program (DFVCP). The DFVCP, which was established in 1995 and last comprehensively updated in 2002, provides benefit plan sponsors the opportunity to file overdue, incomplete or incorrect Form 5500 annual reports and pay reduced civil penalties for prior noncompliance with the annual reporting requirements of Title I of ERISA. As used herein, “Form 5500” refers to both Form 5500 and Form 5500-SF (the “short form,” which can generally be filed by retirement plans with under 100 participants at the beginning of the plan year).
Form 5500-EZ can be filed with the Internal Revenue Service (IRS) for one-participant plans that are not subject to Title I of ERISA. The DFVCP cannot be used by Form 5500-EZ filers.
In general, a plan sponsor may utilize the DFVCP as to a Form 5500 only if it has not received written notification from EBSA of a failure to timely file such form. The basic penalty under the program is $10 per day for delinquent filings. The DFVCP also caps the maximum penalty for a single late annual report at $750 for small plans and $2,000 for large plans. For plans with multiple delinquent filings, the per-plan penalties are limited to $1,500 for small plans and $4,000 for large plans.
Small plans are generally those with fewer than 100 participants at the beginning of the plan year and large plans are those with 100 or more participants at the beginning of the plan year. However, certain plans with between 80 and 120 participants may take advantage of rules that allow them to classify themselves as small plans, even if they would otherwise be considered a large plan.
The revamped DFVCP, which is now in effect, updates the prior version of the program in various ways indicated below.
The new DFVCP is fully integrated into the EFAST2 electronic filing system for filing Form 5500s, meaning that all forms must be submitted electronically. In general, delinquent filers must use the most current year forms and schedules available for filing in EFAST2. However, the new DFVCP provides specific rules concerning the attachment of schedules relating to the Form 5500. In certain circumstances, delinquent filers will need to attach PDF images of the Form 5500 schedules applicable to the particular plan year to which the delinquent filing relates.
Form 5500 Version Selection Tool
EBSA has also added to its website an online tool that will help filers determine which versions of Form 5500 and schedules to use when filing delinquent annual reports or amending prior year annual reports under EFAST2. To use this new tool, filers may enter the beginning date of the plan year for which the late filings are made. The tool then identifies the correct versions of the forms to use.
EBSA hopes that this tool will help plan sponsors find the correct forms; however, care should be given to ensure the proper schedules relating to prior plan years are attached via PDF image when necessary.
The new DFVCP also incorporates an existing voluntary online penalty calculator and web-based payment system into the program. Alternatively, as in the past, penalty payments may be made by check mailed to the address specified on the EBSA website, along with a paper copy of the electronically submitted Form 5500 (without schedules or attachments).
EBSA has also made technical revisions to DFVCP to allow it to make nonsubstantive technical changes to the program via updates posted on the EBSA website instead of having to publish a formal update in the Federal Register. Therefore, it will be important for users to refer not only to the published guidance but to also check for other updates published on the EBSA website before attempting to utilize the program.
Future Guidance from Other Agencies
The IRS intends to release its own guidance, which will provide relief under the Internal Revenue Code (Code) for delinquent filings of Form 5500s where the conditions of the DFVCP and any other requirements are met by plan sponsors. The IRS’s last-issued guidance, in 2002, stated that it will not impose the penalties under the Code on a person who is eligible for and satisfies the requirements of the DFVCP as to the filing of a Form 5500. Such a late filer has not been required to file a separate application for relief with the IRS. This relief has been available only to filers of plans required to file Form 5500s under Title I of ERISA, thus excluding Form 5500-EZ filers.
Also, the Pension Benefit Guaranty Corporation has indicated that it will provide ERISA Title IV penalty relief for delinquent filings of annual reports when the requirements of the DFVCP are satisfied.