Late Deposits new DOL program

[Guest CGBS]

Will you all be using the new DOL VFC program for the problem of late deposits of employee deferrals. Is this now the only right method of correcting the problem? I understand the 5330 must still be filed. Is the 15% on the interest that must be deposited only? Thanks for any help!

[John A]

The description of the DOL VFC program I read made it seem like the program was an invitation to a DOL investigation. The description said a lot more about what was not protected by using the program than it did about what any advantage to using the program would be.

I'd also be interested in whether others will be using the VFC program for the situation you describe - we have not decided for sure one way or the other at this point.

[Guest svatty]

The DOL (at the ALI-ABA conference last week) informed us that the new VFC program is not the "only" way to get correction for these late salary deferral problems. They stated that an employer may self correct (using the guidelines established in the VFC) and as far as the DOL was concerned, if the problem was discovered on audit, and the employer had corrected using the VFC procedure (but not submitted to DOL) they would be "protected" on audit because the problem was still corrected. Important to note that you only get this protection if you actually followed the DOL guidelines in the VFC.

The 5330 must still be filed, because as the DOL put it, you still committed a prohibited transaction, and you are still responsible for paying the IRS required excise tax.

Yes, the excise tax is only owed on the amount of the "prohibited transaction" and thus in the late salary deferral problem, would only be owed on the "interest" of the loan from the plan to the employer for the use of the late salary deferrals.

I personnally will try and get my clients to take advantage of the program as I feel it will offer the greatest protection. However, if they have any fears of other issues which may arise on a DOL audit, I would then recommend we just restore the plan on our own (without DOL filing) and follow their procedure).

Just my two cents.