DFVCP

[J Simmons]

I was contacted today by a fellow attorney who learned that a 401k plan he set up in the 1990s has never had a Form 5500 filed by the employer's accountant.

The DFVCP of EBSA immediately comes to mind. It is a small plan, so the cumulative penalty will cap out at $1,500. However, I'm concerned that it might take two to three months to locate the necessary information for those years' Forms 5500 to be prepared, before we can then formally file the DFVCP application (along with the fee of $1,500).

In the meantime, is there a way that I can put the DFVCP office on notice that we've found the problem ourselves, are voluntarily coming forward, but need a few months' time to prepare all the Forms 5500? I want to do this to 'inoculate' the situation against possible detection in the interim by the DoL/IRS outside the voluntary program, under which circumstance the government agency might assess devastating financial penalties.

Also, what procedure is there to avoid IRS late penalties?

[jpod]

1. If you file DFVCP before dol contacts you, there cannot be any additional dol penalties or any irs penalties.

You have a tough problem for which there is no clear solution, but your problem is not uncommon. Consider the following.

2. Unlikely that either agency will ever contact you, especially dol, because if no 5500s were ever filed as far as they know the plan does not exist.

3. In the unlikely event that irs contacts you notwithstanding what I said in 2, the "first time filer" status, coupled with evidence that you are in fact working on the problem and getting ready to submit under dfvcp, should allow you to avoid being hit with penalties prior to the dfvcp submission.

4. If neither 2 nor 3 gives you sufficient comfort, I would consider filing the 3 most recent 5500s asap under dfvcp along with incomplete 5500s for the earlier years (i.e., fill in the plan and plan sponsor identifying information and whatever other information immediately available), and explain in your dfvcp cover letter that you are working on securing the data for the earlier years. DFVCP is designed to encourage voluntary compliance; dol will not be eager to test a hard line position in court if you've done what I suggest in the preceding sentence.

[J Simmons]

Thanks, jpod.

Does anyone know of the name and phone number of anyone that works in DFVCP?

[Kevin C]

The Federal Register listing of the program on 3/28/2002 included this:

FOR FURTHER INFORMATION CONTACT: Jennifer C. Warner or Scott C. Albert,

Office of the Chief Accountant, Pension and Welfare Benefits

Administration, telephone (202) 693-8360. This is not a toll-free

number.

The DOL website gives the same phone number.

[Monica Barnard]

What about IRS penalties for late filing? I've read Rev Pro 2008-50, and see no mention of relief for late filing of Forms 5500.

Also, the DOL may not be aware a plan exists, but what about IRS? Isn't the corporation filing a tax return annually? Don't they claim a deduction for qualified plan contribution? Shouldn't the IRS be able to pick up on the fact that the corp. is taking a deduction but they aren't seeing any 5500s?

[Kevin C]

For the IRS penalties, look at Notice 2002-23. It is mentioned on the DFVC page on the DOL website.

ADMINISTRATIVE RELIEF FROM CERTAIN INTERNAL REVENUE CODE PENALTIES FOR DFVC PROGRAM PARTICIPANTS

The Service will not impose the penalties under §§6652©(1), (d), (e), and 6692 (as these sections relate to the filing of a Form 5500) on a person who is eligible for and satisfies the requirements of the DFVC Program with respect to the filing of a Form 5500. Once the late filer satisfies the requirements of the DFVC Program, including paying the reduced civil penalty under section 502©(2) of ERISA, the relief under this notice will apply. The late filer need not file a separate application for relief with the Service. The Service will coordinate with DOL in determining which late filers are eligible for the relief under this notice.

[Guest SuzieQNEC]

A related but different question: Small plan client just found their 5500 due 7/31 on 8/17 and went ahead and mailed it in even though 5558 was not filed. Apparently they attached a letter saying they never received it on time. We do not know if they filed an extension on their federal income tax return.

Normally I understand 5500 would be reprepared with extension/dfvc checked off and $10/day fee paid to the dfvc. What is best approach? Hope it is accepted and nothing happens? Amend it with extension box checked off if they did file federal extension and resubmit? Pay penalty to DFVC anyway (what form is used to pay penalty?)?