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DOL Updates Delinquent Filer Voluntary Compliance Program: Time to File Those Late Form 5500s and Top Hat Letters

February 12, 2013

On January 29, 2013, the United States Department of Labor (the “DOL”) issued what it described as a “comprehensive update and restatement” of its Delinquent Filer Voluntary Compliance (“DFVC”) Program. The DFVC Program affords the plan administrator of a retirement or welfare benefit plan the opportunity to file previously unfiled IRS Form 5500s and avoid costly DOL and IRS penalties, which can run as high as $30,000 per year and $15,000 per Form, respectively. (Relief does not extend to an incomplete or otherwise deficient IRS Form 5500.)

To participate in DFVC, the plan administrator must pay, from its own assets (not plan assets), an “applicable penalty amount,” which generally cannot exceed $750 per Form and $1,500 per plan for a “small plan” (less than 100 participants) or $2,000 per Form and $4,000 per plan for a “large plan” (at least 100 participants). Given the economics involved, it behooves most employers with delinquent Forms to consider participating in the DFVC Program.

Key elements of the updated and restated DFVC Program include the following:

  • Eligibility: No DOL Notification – The plan administrator must file the delinquent Form 5500(s) before it is notified in writing by the DOL of a failure to file the same on a timely basis. An IRS late-filer letter will not disqualify a plan from participating in the DFVC Program. (Notably, the IRS letter to which the Program refers is CP 283, Penalty Charged on Your 5500 Return, as the IRS ceased mailing CP213N, Proposed Penalty Notice for Late Filing of Form 5500, effective as of January 1, 2013.)
  • Schedules Must Be Attached – The plan administrator must attach pdf copies of all required schedules for all IRS Form 5500s being filed. This may require compilation of data from various service providers (e.g., recordkeepers, third party administrators, insurers and investment advisors).
  • Electronic Filing Required and Payment Optional – All submissions must be made using EFAST2, the DOL’s electronic filing program for IRS Form 5500s. Payment of the “applicable penalty amount” may be made electronically or by check.
  • Special Penalty Rule for 403(b) Plans – The “applicable penalty amount” cannot exceed $750 for a small plan, irrespective of the number of delinquent Forms involved, but only if, at the time of the submission, the plan administrator does not have a delinquent filing due for any plan year in which the plan qualified as a large plan.
  • Top Hat Filings – A “top hat” plan is a plan maintained for a “select group of management or highly compensated employees.” Such a plan is exempt from the vast majority of federal pension law (ERISA) requirements (e.g., funding and vesting) provided that the administrator makes a one-time filing of a top hat letter with the DOL. Unlike delinquent Form 5500s, top hat letters still must be filed in paper form. The “applicable penalty amount” cannot exceed $750 per DFVC Program submission, irrespective of the number of top hat plans involved.

Please feel free to call Adam B. Cantor or Carl B. Levy should you have any questions about the DFVC Program.

Adam B. Cantor | Chair, Employee Benefits and Executive Compensation Group | (973) 530-2020 |

Carl B. Levy | Of Counsel | (973) 530-2035 |