Welfare Plan - Never Filed Form 5500

[MarZDoates]

We have a client that sponsors a large welfare plan. They have never filed Form 5500. It has been in existance since before 1988. We are going to file through the DFVC program. Has anyone else had any experience with filing returns that go back that far? Yuck!

[Guest mjb]

Yes- no brainer- just file the current version of the 5500 form for each open year and send to address listed in DFVC program. Last time I used it the fine was $1500 for all open years. (my client failed to file 5500s for 403(b) plan back to 1976).

[E as in ERISA]

All years are generally "open" if you've never filed. (Filing is generally required for the statute of limitations to run on the return and for the year to "close.") But some choose only to go back three years or so.

[MarZDoates]

Thanks for the input!

[Guest ehs]

What if you filed only one current open year, none of the priors and either begged for mercy for failing to file or just sent it in? Not that I would do that, we have a client who never filed and they are "encouraging" us to explore all the options.

[jpod]

I don't understand what the responders mean by the word "open" in the context of a welfare plan, but in any event DFVC requires that all past due 5500s be filed. Nevertheless, under the circumstances, I would take a shot at using DFVC and filing the 3 most recent 5500s with all required Schedules and explaining, in the cover letter, how difficult (if not impossible) it would be to secure the data required to prepare all 5500s and Schedules for prior years (especially Schedule A data). I like "3" better than "1" because it shows willingness to make a greater effort.

By the way, I am assuming as MarZDoates stated that the plan was subject to the filing requirement for all years. However, given that there is no track record of previously-filed 5500s, is it possible to take the position in this case that there actually are multiple "plans" none of which ever crossed the 100-participant threshold? For example, if you offer 5 medical options, could each option be a single plan? This is highly fact sensitive, but depending upon the numbers it may be worth considering.

[Guest ehs]

We spoke with the DFVC in Washington and were advised to file all the way back (or at least until 1988), even if the information on the earliest returns was incomplete. We were also told to send all returns to Kansas City, with a copies to the DFVC including a check, per plan, of $4000 (medical, dental, vision, life no wrap document = $16,000!). We acknowledge if there were multiple health carriers, it constitutes one health "plan", thus one filing for health insurance. We also determined that the magic "3 years" has to do with the DFVC expecting at least those prior returns to be perfect, whereas the priors could presumably lack accurate information. If we winged it (or wung it) and filed only the current year, bypassing the DFVC, we were told you can try but "we'll get you one way or the other, it just depends how far back we get you".

A Kansas City representative told us to contact the DFVC to inquire as to the amount of the penalty. We found that to be somewhat contrary to what Washington said. However, I think the best approach is let the client know the upside and definite downside, let them determine which approach is best, and go from there. I'd rather only file the last three, but I'm not the one looking at penalties.