Amended 5500

[J2D2]

Plan was first required to file accountant's report with Form 5500 for 2000 plan (calendar) year. For reasons yet to be determined, the plan did not include the report with the 5500. Appropriate correction appears to be filing an amended 5500 with the report (and any other corresponding changes).

Section 2.01 of DFVC Program says that relief is not available for "annual reports that are determined by the Department to be incomplete or otherwise deficient." So it looks like we don't file an amended 5500 under that Program.

DOL Reg. 2560.502c-2(B)(3) indicates that no penalty will be assessed under ERISA 502©, provided that a revised report is filed within 45 days after the DOL rejects the initial filing. However, I haven't found any DOL position on the assessment of penalties when an incomplete filing is voluntarily corrected before the DOL rejects the initial filing.

Does anyone have any experience with the DOL position on the assessment of the civil penalty when you simply file an amended 5500 before receiving a formal notice of rejection from DOL?

[E as in ERISA]

I think that it's a "Catch 22."

I usually advise that they file the amended return. I think that the client's voluntary filing of an amended return demonstrates that the client is being very diligent with respect to its filing requirements and shows good faith on the part of the client. If you're later trying to negotiate penalties I think that it puts the client in a better light.

However, I simultaneously warn clients that I have seen situations where it probably would have been better to wait for a notice. Returns are processed very slowly and the government's tracking system seems to be less than 100% perfect. As a result, I have seen situations where both returns continue through the system and the clients get double notices. In fact, I have seen a client pay $5,000 in DOL penalties (which was a reduction from the $50,000 that was originally assess), because the client didn't timely respond to notices, provided poor responses, kept poor records of its responses, and was confused about which errors had previously been corrected. The client was unable to prove that it had ever filed the accountant's report with the 5500.

So if an amended 5500 is filed, the client needs to realize that it may be "crossing in the mail" with the notices. Each response should be as timely and accurate as possible, even if the information has previously been provided to the government.

[Kristina]

At one time the EFAST people thought that only they would be able to determine the need for an amended filing. (Hence, the crossing in the mail issue.) It was not until a number of people had pointed out to them that, gee, they may have answered all of the questions in a manner to pass the edit checks, but still need to make a change in the filing that EFAST had a revelation.

EFAST has changed the way they treat the amended forms in order to eliminate the confusion from prior years. So, that crossing issue should not happen in the future.

To be on the safe side, however, I would include a letter explaining why the amended return is being filed; i.e., at EFAST request or at one's own volition

[Steve72]

I believe the DOL considers a 5500 without the accountant's report (if required) to be a NON filing, rather than an incomplete filing. Therefore, I think you use the DFVCP procedure.

[J2D2]

Just to close the loop . . . According to the DOL Office of Chief Accounting (I was directed there after calling the general PWBA help number), DFVC is not available to correct this issue. DOL views this as a deficiency, not a failure to file. Their position is that we file an amended 5500, with appropriate schedules and the accountant's report, and that no penalties will be assessed. Penalties will be assessed only if you do not respond to a notice from the DOL requesting the appropriate items.

[Blinky the 3-eyed Fish]

J2D2, I believe you are correct. We had a similar situation where we had to go ahead and file the 5500 without the accountant's report, only to follow up later with an amended 5500 that included the missing report. I have yet to hear from the DOL with any problems.