Multiple Late filings

[MBCarey]

We just aquired a plan that has not filed a Form 5500 since 2003. They tell me they have never received a letter from the IRS regarding a delinquent filing. Is there anyway I can find out if the IRS did mail these notices or not? Also, if a notice was received, does that mean we can no longer file under the Delinquent Filer program?

I am not even sure that testing has been done on the plan since 2005.

Any advice as to where to even start? Or perhaps should we just resign before we begin?

[SFSD]

Carefully consider resignation. Do you really want this client? If you decide you do, be sure to let them know the estimated fees to get the plan back into compliance. As to DFVCP, last I heard you can file unless the plan is under audit.

[Guest Sieve]

First of all, receipt of an IRS notice of delinquency does NOT preclude filing under DFVCP--only a notice from DOL does. So, I disagree with SFSD. Per DVFCP (unless there's something out there that I'm not aware of), an audit will not prevent filing of delinquent 5500s under the program, but the filing must occur "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 ERISA."

In any event, if the plan has never filed a Form 5500 since its inception, then it's highly unlikely that they'd have received an IRS Notice--how would the IRS even know that a 5500 was delinquent?

[MBCarey]

We have carefully considered resignation......

And, unfortunately, they did file at least in 2002 & 2003

First of all, receipt of an IRS notice does NOT preclude filing under DFVCP--only a notice from DOL would.

In any event, if the plan has never filed a Form 5500 since its inception, then it's highly unlikely that they'd have received an IRS Notice--how would the IRS even know that a 5500 was delinquent?

[Andy the Actuary]

First, this discussion assumes were not talking about a one-person plan with less than $250K in assets.

There once was an infamous actuary around town who used to make up numbers. Now, I don't mean the actuary made miscalculations. The actuary simply made up numbers. The Joint Board disenrolled the EA but the actuary continued to sign Schedule B's nonetheless. So the JB reinstated the actuary because they had no way to otherwise sanction the actuary. At least that is how the story went. The actuary subsequently left town.

About 10 years ago someone refers me this DB plan. Before contacting the prospect, I go out to FreeErisa to look at the 5500 and low an behold the Schedule B was signed by the infamous actuary. Now, I had two choices: (a) walk or (b) disclose to the client that based upon past experience, there was a chance that I might have to go back at least three years and redo the work ad nauseum. With (b) I could only envision not getting the case but also facing possible legal action by the actuary. This kind of case could only have a favorable outcome if the prospect had come to me as a result of having been burnt in an IRS/PBGC audit.

I walked.

In your case, the client already knows about the possibility of trouble. So, you might want to offer that as a condition of proceeding, you would need to conduct a thorough review for which they would be charged. Further, the result of this review might mean if you are retained that you might need to redo what they've previously paid for. In short, you will be delivering bad news but you have no way of assessing a priori just how bad. Then, it is the client's choice of whether or not you should walk and you might end up a rich hero.