DFVCP & IRS Penalties on late 5500

[Dennis Povloski]

If the IRS has sent out anotice saying that the Form 5500 is late and that a penalty will be assessed, can the plan sponsor participate in the DoL's DFVC program and get a waiver of the IRS penalty?

That is, can they get a waiver of the IRS penalty if the participate in the DoL program after they've received notice from the IRS? or is there no hope because they already got the letter from the IRS?

[Belgarath]

I think this issue is frequently misunderstood. Here's the FAQ from the DFVCP program:

May plans participate in the DFVCP if they have already received correspondence from the Department of Labor or the Internal Revenue Service?

Plan administrators are eligible to pay reduced civil penalties under the program if the required filings under the DFVCP are made prior to the date on which the administrator is notified in writing by the Department of Labor of a failure to file a timely annual report under Title I of the Employee Retirement Security Act of 1974 (ERISA).

IRS late-filer penalty letters will not disqualify a plan from participating in the DFVCP.

A Department of Labor Notice of Intent to Assess a Penalty will always disqualify a plan.

[Dennis Povloski]

Thanks for pointing that one out! I actually scanned the FAQ's on the website, and missed this one all together!

[Guest Sieve]

And, to take that one step further, I just this week received a notice from the IRS that they were forgiving a penalty where the client filed under DFVCP after the IRS sent a penalty notice--and for a return that had, in fact, already been filed late (i.e., DFVCP was the second filing of the same Form 5500).

So, the chain of events was (i) Form 5500 filed late, (ii) client receives IRS penalty notice for late filed Form 5500, (iii) Form 5500 filed under DFVCP, (iv) IRS penalty forgiven (at our request when additional notice of overdue IRS penalty payment was received after DFVCP filing).

Presumably, that's all possible because the DFVCP filing was before DOL sent any notice of untimely filing.

[Belgarath]

Yes, we've had the same experience as well.