When is it too late for DFVC?

[Bird]

Sigh. Accountant tells me about a client that filed their 2013 5500 a couple of months ago and got a bill for $8800 or so from the IRS for late filing penalties.

Can they amend and file under DFVC? Might it be worthwhile to just beg forgiveness?

[ESOP Guy]

I am not an expert on DFVCs but it is my understanding that yes it is too late. Once you have the letter saying the amount of the fine you can't use DFVC. But I am willing to be told I am wrong on that.

On the other hand if it is determined that it is too late to use DFVC I would ask for a waiver of the penalty.

Over the decades I have had good results doing that. If you can show there isn't a pattern of missed forms and give a good reason for why this form was missed I have had the penalty waived every time. I really think I am batting 1000 on getting the penalty waived.

I will admit I have never tried it with a form filed this long after the deadline. But to me it will cost the client maybe a few hundred to pay you to write a good letter and it could save them $8800 is a good cost/benefit/risk ratio.

[Belgarath]

Q12: May plans participate in the DFVCP if they have already received correspondence from the Department or the IRS?

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 a failure to file a timely annual report under Title I of ERISA.

An IRS late-filer letter 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.

[Bird]

Thanks. I'm not sure that Q12 applies; I'd think it is for correspondence in the nature of "you didn't file yet."

Anyway, not my client; I will pass on the info.

[rcline46]

Have them look CAREFULLY at the IRS letter. It may have a check-off box for the DFVCP program, the ones sent to our clients do, and we get it filed before the response date.

[hr for me]

Years ago, we got a letter from the IRS looking for missing 5500s from an old plan that had never been filed (when I was hired I wasnt' even told that plan existed and it was fully terminated!) I had started a new plan and used the same plan number without realizing it (we were with a PEO in between the last HR/benefits employee and myself)

I was able to DFVCP but our letter from the IRS didn't have any late penalties. I have to wonder if this isn't the first letter, but the one that finally got someone's attention? At the time I was told in our situation that since we hadn't been notified by the DOL that we could still do the DFVCP, but it's been a few years and the rules could have changed.