On January 29, 2013, the Department of Labor (DOL) issued a notice announcing various changes to the Delinquent Filer Voluntary Compliance Program (DFVC Program), along with a Fact Sheet and Frequently Asked Questions. Although the DFVC Program has been periodically updated by the DOL over the last few years, the last comprehensive update was in 2002.

The January 29, 2013 notice is intended to be a comprehensive update and restatement of the DFVC Program — it incorporates the changes that have been made since 2002, and became effective immediately on publication.

Background — Form 5500 Filing Requirement

Under the Employee Retirement Income Security Act of 1974 (ERISA), plan administrators are required to file the Form 5500 ("Annual Return/Report of Employee Benefit Plan") by the last day of the seventh calendar month after the end of the plan year. For calendar year plans, this is July 31. Under ERISA section 502(c)(2), the DOL may assess civil penalties of up to $1,100 per day against a plan administrator who fails or refuses to file a complete and timely Form 5500. If a plan administrator fails to comply, the Employee Benefits Security Administration arm of the DOL may assess the following penalties:

  • For Non—Filers

A penalty of $300 per day, up to $30,000 per year, may be assessed on a plan administrator until a complete Form 5500 is filed.

  • For Late Filers

A penalty of $50 per day, with no limit, for each day the Form 5500 was required to be filed, determined without regard to any extensions for filing, may be assessed on a plan administrator who files a late Form 5500 (i.e., filed after the date the Form 5500 was required to be filed, including extensions).

DFVC Program Description

The DFVC Program provides plan administrators with the opportunity to file overdue Form 5500 annual reports and pay significantly reduced penalties for prior non—compliance, thereby encouraging voluntary compliance with the Form 5500 annual reporting requirement.

Who Can Participate

To be eligible to participate in the DFVC Program, a plan administrator must file the delinquent Form 5500 before the administrator is notified in writing by the DOL of a failure to file a timely annual report under Title I of ERISA. A late—filer letter from the Internal Revenue Service, however, will not disqualify a plan from participating in the DFVC Program.

Capped Penalties under the DFVC Program:

The basic penalty under the DFVC Program is $10 per day for each day a Form 5500 is filed after the date on which the Form 5500 was due (without regard to any extensions). Two types of penalty caps apply:

  • Per Filing Cap

The maximum penalty for a single late Form 5500 is $750 for a small plan (generally a plan with fewer than 100 participants at the beginning of the plan year) and $2,000 for a large plan.

  • Per Plan Cap

The DFVC Program also includes a per plan cap which limits the penalty to $1,500 for a small plan and $4,000 for a large plan regardless of the number of late Forms 5500 filed for the plan. For the per plan cap to apply, all delinquent Forms 5500 for the plan must be filed at the same time. This cap is intended to encourage reporting compliance by plan administrators who have failed to file a Form 5500 for a plan for multiple years.

It is important to note that the plan administrator is personally liable for the payment of civil penalties assessed under ERISA section 502(c)(2). Civil penalties, including amounts paid under the DFVC Program, may not be paid from the assets of an employee benefit plan.

In addition, payment of a penalty under the DFVC Program constitutes, with regard to the filings submitted, a waiver of:

  • the right to receive a Notice of Intent to Assess a Penalty from the DOL; and
  • the right to contest the DFVC Program penalty amount. A waiver of the penalty amount is not available even if the plan administrator can demonstrate reasonable cause as to why the penalty should not be assessed.

Also, a Form 5500 filed under the DFVC Program is still subject to review by the DOL. Relief under the DFVC Program does not extend to penalties that the DOL may assess for an incomplete or deficient Form 5500.

Key Updates to the DFVC Program

The January 29, 2013 notice incorporates the following changes to the DFVC Program:

Requirement to File Electronically with EFAST2:

The DFVC Program was updated to reflect the DOL’s final regulation mandating electronic filing of Forms 5500 as part of the implementation of a wholly electronic ERISA Filing Acceptance System (EFAST2). The DFVC Program is fully integrated into EFAST2, meaning that all forms must be submitted electronically. Paper filings are no longer accepted for either timely or delinquent filings.

Use of forms, schedules, and attachments:

Filers must use the Form 5500, including the required schedules and attachments, for the plan year for which the delinquent Form 5500 is being filed, subject to the following exceptions:

  • For plan years commencing before January 1, 2009 (i.e., 2008 and earlier plan years), filers must use the latest plan year Form 5500 and schedules available (entering the correct plan year dates in the space provided at the beginning of the Form 5500). Filers, however, must attach as a PDF the correct year Schedules B, SB, MB, E, P, R, and T, as applicable, completed in accordance with the applicable instructions for these schedules.
  • If a delinquent filing is for a plan year beginning on or after January 1, 2009, and that plan year is more than three years prior to the most recent plan year forms available for filing, the filer must use the latest available plan year Form 5500, completed in accordance with the applicable instructions. Schedules for the latest available plan year should also be used, except that filers must attach as a PDF the correct year Schedule SB or Schedule MB, as applicable, completed in accordance with the applicable instructions for these schedules.

To help filers determine which version of the Form 5500 and schedules to use when filing a delinquent Form 5500, the DOL added the Form 5500 Version Selection Tool to its website. The selection tool is available at DOL Form Selector and the instructions are available at 5500 Selector Instructions Filers enter the beginning date of the plan year for which the late filing is being made, and the tool identifies which plan year version of the Form 5500 and which schedules to use.

Online penalty calculator and Internet—based payment system:

An online calculator was added to the DFVC Program website to help filers accurately calculate the applicable penalty amount. The online calculator is available at DFVC Calculator and the instructions are available at DFVC Calculator Instructions

Also, an electronic payment option was added to the DFVC Program. Filers who opt out of the electronic payment option must submit the penalty payment by check to the DOL, along with a paper copy of the electronically submitted Form 5500 (without the schedules or attachments).