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Retirement Plans Blog

The Delinquent Filer Voluntary Compliance Program - Over-The-Counter Relief

[fa icon="calendar"] Dec 16, 2016 9:00:00 AM / by Marcel Weiland

Marcel Weiland

In 1995, the Department of Labor (DOL) established its Delinquent Filer Voluntary Compliance (DFVC) Program to enable plan sponsors to file all the appropriate returns and to pay reduced penalties.

If you have an employee benefit plan for which an annual report should have been filed, but which was not, the DOL DFVC Program provides an improved way to find relief from both DOL and IRS penalties. It is simple to use! It does not require a prescription. The medicine almost tastes good. It sounds almost too good to be true.

As you may be aware, the DOL and the IRS require most employee benefit plans to file an annual return/report (Form 5500 series). Failure to file these returns, on time or at all, may result in significant DOL and IRS penalties. The DOL may assess penalties of up to $2,063 for each day an annual report is late.  The IRS penalty for late filing of an annual report is $25 per day up to a maximum of $15,000.

The plans required to file annual reports include:

  • Qualified retirement plans.
  • Nonqualified deferred compensation plans which are either not eligible for the special "top hat" plan alternative compliance statement or which have failed to file the top hat plan statement on time.
  • Tax Sheltered annuity plans (TSAs or 403(b)s) with significant employer involvement (e.g., employer contributions or determining whether an employee is eligible for a hardship distribution).
  • Health and welfare plans with at least 100 participants or with benefits funded through a trust.

Per Day Late Filing Penalty

The DFVC Program provides for a basic penalty of $10 per day.

Per Filing Penalty Cap 

The DFVC Program provides for a maximum penalty for a single late annual report for a large plan (generally over 100 participants), a small plan (generally under 100 participants) of $2,000. The penalty cap for small plans (generally under 100 participants) is $750 per report. There is no separate maximum penalty for reports that are less than 12 months late compared to those that are more than 12 months late.

Per Plan Penalty Cap

The DFVC Program provides for a maximum penalty per plan of $1,500 for small plans and $4,000 for large plans when reports for more than one year are submitted at the same time. This is a very belated change for those plan administrators who discover that no annual reports have been filed for many years. A non-profit entity exempt from taxation under Internal Revenue Code section 501(c)(3) that sponsors a small plan may file all delinquent reports together and pay only a single $750 penalty.

Flexibility Regarding Forms That Plan Administrator May Use

The sponsor or plan administrator may file under the Program using either (i) the Form 5500 for the actual year(s) for which relief is sought, or (ii) the most current Form 5500 available at the time the administrator files under the DFVC Program by simply changing the year on the form.

IRS And PBGC Penalty Amnesty

In conjunction with the DFVC Program, the IRS has agreed to waive all penalties for delinquent reports filed under the DFVC Program. In addition, the Pension Benefit Guaranty Corporation, which only governs defined benefit plans, has agreed to the same relief.

No Per Plan Administrator/ Sponsor Penalty Cap

If an employer sponsors two employee benefit plans with delinquent filings, separate penalties will apply to each plan. This can be of great concern for retirement plan administrators, but even more so for welfare plan administrators. An annual report must be filed for each welfare plan with at least 100 participants or with benefits funded through a trust. Each individual welfare coverage (e.g. life, dental, medical) could be considered a separate "plan" and therefore could have its own annual reporting requirement. In addition, there may be a separate reporting requirement for each insurance policy. If one has two separate medical insurance policies that each has over 100 participants, an annual report must be filed for each policy.

Electronic Filing For DFVC Program

Plan administrators must file annual reports by using the electronic ERISA Filing Acceptance System2 (EFAST2).  The box labeled "DFVC Program" should be checked. The DOL provides for electronic payments in the DFVC Program.

What To Do

If you wish to file late Forms 5500 under the DFVC Program, you should use a Form 5500 for a large plan and a Form 5500SF for a small plan. The full Form 5500 with all attachments and schedules is to be filed in EFAST2.  You can pay the DFVC fees electronically. You may also make your payment by check by printing out and mailing a paper copy of the electronically completed and filed Form 5500 or Form 5500-SF without schedules or attachments, and a penalty check made out to the Department of Labor for the applicable penalty amount. The penalties must be paid from the assets of the plan administrator/ sponsor, not from plan assets. For assistance with the DFVC Program or other employee plan compliance issues, phone or contact our office.


Editor's Note: We did the best we could to make sure the information and advice in this article were current as of the date of posting to the web site. Because the laws and the government's rules are changing all the time, you should check with us if you are unsure whether this material is still current. Of course, none of our articles are meant to serve as specific legal advice to you. If you would like that, please call us at (916) 357-5660 or contact our office.

Marcel Weiland

Written by Marcel Weiland