Plan administrators who fail to timely file Form 5500 annual reports for their retirement plans may be subject to penalties under both ERISA and the Tax Code. Under previous guidance from the IRS, correcting such a late filing under the Department of Labor’s Delinquent Filer Voluntary Compliance (“DFVC”) Program could relieve the filer from penalties assessed by both the Department of Labor (“DOL”) and the Internal Revenue Service (“IRS”). However, under new guidance from the IRS, relief from its penalties now depends on a separate filing. Moreover, this new IRS requirement will apply retroactively to DFVC Program filings made since 2009.

The Penalties

The DOL may assess civil penalties of up to $1,100 per day against plan administrators who fail to file complete and timely annual reports. The IRS may impose further penalties of $25 per day, up to $15,000 per return, against administrators who fail to file complete and timely annual returns (including actuarial reports).

Penalty Relief

In 1995, the DOL established the DFVC Program to encourage late filers to voluntarily comply with ERISA’s reporting requirements. Under that Program, plan administrators may obtain reduced civil penalties for failure to file a timely Form 5500. And in Notice 2002-23, the IRS stated that it would not impose any penalties under the Tax Code for a late Form 5500 on a plan administrator who satisfies the requirements of the DFVC Program. Thus, a successful DOL filing relieved the late filer from penalties under both ERISA and the Tax Code.

The new requirement for relief from the IRS arises from efforts at both agencies to shift from paper to electronic filing. Before the 2009 plan year, plan administrators had to report information regarding terminated participants with vested benefits on Schedule SSA to Form 5500. But as part of the IRS’s shift to electronic filing, it replaced Schedule SSA with Form 8955-SSA (“Annual Registration Statement Identifying Separated Participants with Deferred Vested Benefits”). Form 8955-SSA is filed separately with the IRS, and not the DOL.

In 2013, the DOL revised the DFVC Program to require that all delinquent annual reports be submitted electronically, using its EFAST2 Program. It also announced that late filers would not be permitted to submit Form 8955-SSA (or Schedule SSA) under the DFVC Program, even for 2008 and prior plan years. Thus, information that the IRS requires to be reported on Form 8955-SSA (or, for plan years before 2009, Schedule SSA) may no longer be submitted as part of a DFVC Program correction.

In Notice 2014-32 (the “Notice”), the IRS has addressed this gap by establishing a new procedure for obtaining relief from the late-filing penalties imposed under the Tax Code.

New Requirement for Relief from IRS Penalties

According to the Notice, the IRS will not impose penalties for the late filing of Forms 5500, 5500-SF, or 8955-SSA, or for late actuarial reports, with respect to any year for which such Form is required, if the plan administrator:

  • is eligible for and satisfies the requirements of the DFVC Program with respect to a delinquent Form 5500 for that year; and  
  • files a complete Form 8955-SSA for that year (to the extent that the required information has not already been provided to the IRS) by the later of: (i) 30 calendar days after the filer completes the DFVC Program filing, or (ii) December 1, 2014.

Ironically enough, considering the electronic origins of the problem, any such Form 8955-SSA must be filed on paper. When completing the Form 8955-SSA, the filer must check the box on Line C, Part I (Special Extension) and enter “DFVC” in the space provided on Line C.

According to the Notice, only the Form 8955-SSA is required. In other words, there is no need to file a separate application for penalty relief with the IRS. Instead, the IRS will coordinate with the DOL in determining which late filers are eligible for relief.

ERISA Plans Only

The relief provided under the Notice applies only to retirement plans that are subject to Title I of ERISA. Thus, filers of Forms 5500-EZ and 5500-SF (for non-ERISA plans) are not eligible. However, the IRS has also established a temporary pilot program under which non-ERISA plans may seek penalty relief. (That program is described in in Revenue Procedure 2014-32.)

What Does This Mean for Plan Sponsors?

Plan administrators who have failed to timely file a Form 5500, Schedule SSA, or Form 8955-SSA should understand the new requirements for relief from penalties assessed under the Tax Code and take advantage of this relief before the deadline expires. Administrators who have already obtained relief from the DOL penalties under the DFVC Program must file the appropriate Form 9855-SSA with the IRS before the December 1, 2014, deadline. Those who have not yet completed a filing under the DFVC Program must first do so, and then file Form 8955-SSA with the IRS before the applicable deadline (the later of 30 days after the DFVC filing is complete or December 1, 2014).