How long do we have to go back and file Form 5500s?

[Guest Gibson]

We sponsor a group health plan and a 403(B) program. We have been under the assumption that our plans are church plans, and that we have not been required to file 5500s. Now, we are not so sure and are looking into our potential penalty exposure under ERISA and the Code. Under ERISA, how many years do we have to go back and file?

[pjkoehler]

The statute of limitations with respect to the tax filing/reporting positions taken on Form 5500 doesn't run until the filing of the form. Nonfilers do not have the benefit of the statute of limitations defense. What you can do is file all the prior year returns back to 1988 under the Department of Labor's Deliquent Filer Program. That will significantly abate the penalty per return, which depending on the number of participants and extent of the delinquency will run from $2500-$5000 per return (compared to the statutory penalty of $1000 for each day the return is deliquent). The IRS is not obligated to waive its late filing penalty ($25 per day, up to $15,000 per return), but has unofficially stated that it will not pursue enforcement if the taxpayer filed under the DOL's delinquent filer program before it detected the failure to file. You must file all the delinquent returns and pay the cumulative DOL penalty to enter the program. The program doesn't cover returns for plan years before 1988. However, where a plan sponsor comes forward and files all prior year returns through the program, I've never seen an instance where either the DOL or the IRS pursued penalties on the pre-1988 returns.

[This message has been edited by PJK (edited 04-17-2000).]

[This message has been edited by PJK (edited 04-17-2000).]

[BeckyMiller]

The regulations under ERISA Section 502©(2) (This is the $1,000 per day penalty that PJK mentions) do provide for relief from such penalty in the event that the sponsor can demonstrate reasonable cause. The DOL has repeatedly and firmly announced that this reasonable cause demonstration is pretty harsh. However, we had a case where all of the officers, members and advisors to what was ultimately held to be an ERISA plan were employees of a governmental unit or specialized service providers to governmental units. As such, none had any experience with ERISA. In this case, the DOL did waive the penalties for late and non-filing. The sponsor did bring all of the filings up to date. As noted above, the IRS also passed on any penalties.

So, if all of your members, advisors, etc. have a church affiliation, you might find yourself presented with the same grace!

Since you mention a group health plan and a 403(B) plan, be advised that even if you are subject to ERISA you may not have to file. If it is a fully insured plan covering fewer than 100 lives or a 403(B) plan with little employer involvement, there may be no Form 5500's required anyway.

Good luck!

[Kirk Maldonado]

I don't think that the DOL had the authority before 1988 to assess any penalties. I seem to recall that they had to amend ERISA to provide them with authority to assess penalties in this situation.