Form 5330 -v- VFCP

[Guest Pensions in Paradise]

We have our clients file Form 5330 and pay the excise tax, but I'm wondering how many people are using the Voluntary Fiduciary Correction Program. All responses are appreciated.

[JanetM]

I have a silly question, am sure the answer is no, but thought I would ask the experts.

I have a late contributions for one participant - seems payroll forgot an EE and then ran additional payroll. The total lost earnings are $3.26 of you combine the loan and deferral or $3.49 if you calc them separate.

My quesion is........ is there a de minimis amount clause for either the VFCP or filing a 5330? Not sure if software will even let me do 5330 for less than a dollar.

[E as in ERISA]

PiP -- They are not mutually exclusive answers. Both the DOL and IRS have potential penalties and/or excise taxes on prohibited transations. The two things that you need to do are restore the participants for their loss of earnings and then file a 5330 to pay the excise tax on the employer's prohibited transaction.

If you do that, you may avoid DOL penalties. If it comes in and audits you, it is going to look at your restoration of participants. If the restoration is the same as what they think it should be/what it would be if you filed for a VFCP, then you're generally not going to be imposed any penalties even though you made a late payment. No need to have filed a VFCP to avoid the penalty. If your restoration is less than what it would be if you filed a VFCP, then you're generally going to pay a penalty on the additional correction you have to make. So the point of filing the VFCP is to make sure you pay the right amount and that you're not going to pay any penalties (but there is generally a cost to preparing a VFCP filing that may be more than potential penalties or cost of dealing with an audit). I think that many feel that if their corrections are pretty accurate, not a lot of value in doing the VFCP.

You can't avoid the IRS penalty. You're supposed to self-impose that by filing a 5330 even if you correct. This is a completely separate calculation. You pay the penalty based on the value that the employer benefited from the loan -- generally using the applicable federal rate.

[Blinky the 3-eyed Fish]

You can't avoid the IRS penalty. You're supposed to self-impose that by filing a 5330 even if you correct. This is a completely separate calculation. You pay the penalty based on the value that the employer benefited from the loan -- generally using the applicable federal rate.

E it sounds like you are saying you need to pay the excise taxes even if you file under VFCP. That is not the case if you meet the criteria of PTE 2002-51. See the EBSA website or the 5500 instructions.

[austin3515]

Janet de minimis is $15 for terminated participants with no account - for everyone else there is no de minimis. That's in the VFCP somewhere...

[JanetM]

austin,

thanks a bunch!