Non Title 1 Plans

[Guest smac]

A new client has let us know he is extremely behind on filing the Form 5500 EZ for his plan. He is the only employee and assets are well over $100,000. In reviewing the information for the DFVC program, it appears it only applies to Title 1 plans. Obviously, this plan is not a Title 1 plan.

Is anyone aware of a voluntary correction program for non Title I plans?

Thanks!

[Jim Chad]

A non title one plan does not to deal witht the DOL for 5500's. My experience with the IRS is if you turn yourself in, they will abate all fees and penalties. I would include in with 3 years 5500's, a letter explaining the oversight and how arrangements have been made so it will not happen again.

Here is a letter I have used. I don't know if the address is still the same.

Department of the Treasury October 24, 2001

Internal Revenue Service

Memphis, TN 37501

RE: , Inc.

Cafeteria Plan.

5500 2000 EIN 38-

Dear Sir or Madam:

Here is the form 5500 for the 2000 plan year. This is the first one filed because of confusion over who was taking care of this. When this plan was set up, there was confusion over who would actually prepare this form. We recently discovered this oversight and immediately prepared the form. Steps have been taken to ensure that all future filings will be completed on time.

Internal Revenue Code Section 6724(a) states that "no penalty shall be imposed under this part with respect to any failure if it is shown that such failure is due to reasonable cause and not to willful neglect".

The good faith effort on the part of the employer is shown by their initiative in taking care of this. For this reason, we respectfully request that all penalties be waived. If there is anything I have not made clear, please call me directly. Thank you for your consideration in this matter.

Sincerely

[Belgarath]

I've been wondering if the IRS would start taking the very reasonable approach that although these are not eligible for DFVC, that they would voluntarily limit their penalty structure to be the same as what would be charged under DFVC. This seems to be a fair compromise for everyone involved, but I haven't heard if this is being considered or actually being done. I'm guessing that now that DFVC is formal and available, that they would be more reluctant than they were in the past to completely waive penalties for EZ filers. Anyone had any recent experience with this situation?