The ERISA consultants at the Columbia Management Retirement Learning Center Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs and qualified retirement plans. A recent call with an advisor in Florida is representative of a common inquiry related to IRS Form 5500 filings. The advisor asked:
“I suspect a prospective plan sponsor client has not been filing Form 5500 for his business’s retirement plan in a timely manner. Is there any guidance I can give him on how to correct this possible issue?”
Highlights of Discussion
The Department of Labor has a compliance program that fits the bill to a “T”: the Delinquent Filer Voluntary Compliance (DFVC) program.
• As the name implies, the DFVC program is designed to encourage plan sponsors to voluntarily step forward and fix any late Form 5500 fillings for the current plan year or past plan years. By satisfying the program’s requirements and voluntarily paying a reduced penalty amount, the DFVC program gives plan sponsors a way to avoid potentially higher civil penalty assessments that would apply if the DOL first discovers the late filings.
• Eligibility for the DFVC program continues to be limited to plan sponsors: (1) with Form 5500 filing obligations under Title I of the Employee Retirement Income Security Act of 1974 (ERISA); (2) who comply with the provisions of the program; and (3) who have not been notified in writing by the DOL of a failure to file a Form 5500 on time. For example, Form 5500-EZ filers and Form 5500 filers for plans without employees are not eligible to participate in the DFVC program because such plans are not subject to Title I of ERISA.
• Although the DFVC Program does not cover late filing penalties that may be assessed by the IRS or PBGC, both organizations have agreed to provide penalty relief for delinquent Forms 5500 where the plan sponsor has satisfied the conditions of the DFVC program.
For more information, interested parties can access the DOL’s recently updated DFVC program frequently asked questions as of Sept. 13, 2012.
Conclusion
The DOL’s DFVC program has been a popular and cost effective compliance avenue for plan sponsors. In Fiscal Year 2011 alone, more than 25,000 delinquent Form 5500 filers were brought into compliance through the program. [1. 2013 Congressional Budget Justification for the Employee Benefits Security Administration division of the DOL] Financial advisors who are familiar with the program are better positioned to help their plan sponsor clients and prospects.
The Columbia Management Retirement Learning Center Resource Desk is staffed by the Retirement Learning Center, LLC, a third-party industry consultant that is not affiliated with Columbia Management. For informational purposes only. Please consult a tax advisor or attorney for specific tax or legal needs. © 2013 Columbia Management Investment Advisers, LLC. Used with permission.
