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Terminated plan, ER doesnt want to pay for 5500

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Who is responsible for filing the 5500--plan administrator or trustee?

We have a client whose business closed.  Unbeknownst to us, they terminated the plan and paid all the assets in 2021.

Obviously, they have to file 2020 and 2021 5500s.

Client says "who will know"  if they don't file any more 5500s?  I know that answer. Plus, he says, there's no more money to pay us for the 5500.

But if they don't file, who does the IRS/DOL go after?  The plan administrator or trustee?

Can IRS/DOL go after his personal finances?  I know for fiduciary breaches they can do that.  Is filing the 5500 a fiduciary act?

I want to impress upon him the gravity of the situation, but I want to properly put the fear of God in him.


Two wrongs don't make a right, but three rights make a left.

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The penalties may be imposed on either the Plan Administrator or the Employer. (Usually one and the same for small plans, but not always). You can strike fear into him by quoting the penalty amount. And don't forget that the IRS can impose penalties as well. Also, was the plan amended as required (or restated) for the termination? Yet another landmine.

Probably goes without saying that you should get paid up front before doing any work...

Note the following from the DOL FAQ's on the DFVCP program:

Q15. Can plan assets be used to pay the civil penalties assessed under ERISA § 502(c)(2)? No. The plan administrator is personally liable for the payment of civil penalties assessed under ERISA § 502(c)(2). Civil penalties, including penalties paid under the DFVCP, cannot be paid from the assets of an employee benefit plan.

Willful failure to file can result in CRIMINAL penalties on top of all the other fun.

I'll bet you can scare him sufficiently, but if not, tell him to enjoy bankruptcy and possible criminal charges. Playing Russian Roulette with the DOL is an unrewarding form of entertainment. (I know I'm preaching to the choir on this.)

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That sounds like a question that should be referred to the Plan Administrator's or Plan Sponsor's attorney or bankruptcy attorney, if applicable.

I'm not a lawyer but if the Plan Sponsor is the Plan Administrator and fails to perform the duties I think the IRS could probably go after the officers or owners of the company, but again I'm not a lawyer and suggest referring that question to qualified legal counsel.

And you already know that not filing will trigger a letter from the IRS.

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I had a similar situation happen years ago, the IRS eventually got in touch with a plan trustee for a late Form 5500 Filing(s) and penalties.  Suddenly it was a priority to get the final 5500 done!  The trustee was a former owner and anyone that actually worked on the plan was long gone and not answering their phones so he was left on the hook with the plan that he mostly ignored until the letter came. 

They were able to avoid the penalties but not without a lot of aggravation, pleading and added legal fees paid by the trustee, in addition to the fees to prepare the late filings.

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Under ERISA’s title I, the command to file a yearly report is on the plan’s administrator.  Under Internal Revenue Code § 6058, the command to file a yearly information return is on the employer.

If the plan’s employer/administrator is a corporation, limited-liability company, registered partnership, or other organization, either agency will pursue any human they assert could have acted to file the Form 5500 report.

If the plan’s trustee is a human who would have had knowledge of the employer/administrator’s breach, EBSA can pursue such a trustee for failing to meet a co-fiduciary’s duty under ERISA § 405(a)(3).

Even if the corporation or other organization named as the plan’s administrator is legally dissolved, under many States’ laws a dissolved organization still has some powers as needed to wind up the organization’s duties and obligations.  Likewise, a former shareholder or member, director or manager, or officer might still have powers to act for the organization.  Even if one might lack a power, how would filing a Form 5500 report harm the organization or a third person?

Sometimes, EBSA can be assertive.  Among other abandoned-plans cases I handled, in one EBSA asserted that a former assistant vice-president who had ended all associations with the employer many years before EBSA’s contact (and also years before the employer/administrator’s business failure and abandoning of the plan) was responsible to administer her former employer’s plan.  Even after we showed EBSA proof of her resignations from all possible roles with the former employer, EBSA persisted.  They guessed (correctly) that their target would learn that the expense of paying me to fight the Labor department would be much more than the expense of paying me to work the final administration.  The recordkeeper and the trustee, also motivated to get rid of the abandoned plan, never questioned that my client lacked authority to instruct them.

About “no more money”: Fighting EBSA would chew up many hours of a lawyer’s time, and in many of these situations has little prospect for a successful defense.  Many lawyers would want an advance retainer against the first $10,000-worth of time, and would stop work when the advance retainer isn’t replenished.

Paying BG5150’s fees to prepare the needed Form 5500 reports might be much less expensive than trying to show EBSA or IRS why they lack a right against the individual.

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Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania



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