Plan administrators who fail to timely file Form 5500 annual returns/reports are subject to penalties under both Title I of the Employee Retirement Income Security Act of 1974 (“ERISA”) and the Internal Revenue Code (the “Code”). The Department of Labor (the “DOL”) has the authority to assess civil penalties of up to $1,100 per day against plan administrators that fail to file complete and timely returns/reports. In addition, the Internal Revenue Service (the “IRS”) may impose further penalties of $25 per day up to a maximum of $15,000 per return against administrators that fail to file complete and timely returns/reports.
In an effort to encourage pension and welfare plan administrators to file overdue Form 5500 filings, the Department of Labor’s Employee Benefits Security Administration (EBSA) is providing plan administrators with the opportunity to pay reduced civil penalties for voluntarily complying with Form 5500 annual reporting requirements. Plan administrators are eligible to pay reduced civil penalties under the program if the required filings under the DFVC Program are made prior to the date on which the administrator is notified in writing by the DOL of a failure to file a timely annual report under Title I of the Employee Retirement Security Act of 1974 (ERISA).
The following penalty structure generally applies to filers using the DFVC Program:
Per filing cap
The maximum penalty for a single late annual report 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
This cap is designed to encourage reporting compliance by plan administrators who have failed to file an annual report for a plan for multiple years. The “per plan” cap limits the penalty to $1,500 for a small plan and $4,000 for a large plan regardless of the number of late annual reports filed for the plan at the same time. There is no “per administrator” or “per sponsor” cap. If the same person is the administrator or sponsor of several plans required to file annual reports under Title I of ERISA, the maximum applicable penalty amounts would apply for each plan.
Small plans sponsored by certain tax-exempt organizations
A special “per plan” cap of $750 applies to a small plan sponsored by an organization that is tax-exempt under Internal Revenue Code §501(c)(3). The $750 limitation applies regardless of the number of late annual reports filed for the plan at the same time. It is not available, however, if as of the date the plan files under the DFVCP, there is a delinquent annual report for a plan year during which the plan was a large plan.
Top hat plans and apprenticeship and training plans
The “per plan” cap for plans eligible to use the “top hat” plan and apprenticeship and training plan options is $750.
The relief under the DFVC program is available only to the extent that a Form 5500 is required to be filed under Title I of ERISA. For example, Form 5500-EZ filers and Form 5500 filers for plans without employees (as described in 29 CFR § 2510.3-3(b) and (c)) are not eligible to participate in the DFVCP because such plans are not subject to Title I of ERISA.
Participation in the DFVCP is a simple, 3 part process:
- Go to our online questionnaire and submit your plan information for a confidential, complimentary, no obligation quote for our DFVC services.
- We will promptly provide you with an estimate of cost for our preparation and filing services as well as your penalty amount, if applicable.
- We will electronically file a complete Form 5500 Annual Return/Report, including any required schedules and attachments, for each year relief is requested, along with any penalty using our proprietary penalty payment service and eliminate the need for you to deal directly with the IRS or Department of Labor.
Benefits Compliance Consultants, Inc. is the nation’s leader in ERISA compliance solutions and specializes in helping our clients with their current or delinquent Form 5500 preparation and filing needs. Our fees are reasonable and all inclusive, our work is guaranteed and our service is beyond compare. Let us help provide you with peace of mind knowing that you have an established and respected ERISA compliance firm like ours to count on.