DOL VFCP Marketing Letter

[austin3515]

Client got a letter from DOL about late deposits.  The old version made it clear that no response was required.  This has a little more of the "respond or else we're coming for you" interpreation.  Has anyone else gotten this letter?  This is the first one we have received.  If this is the new version of the old approach it would be tempting to use the same solution (not respond).  Curious to know if this is just a new template to get a higher response rate or they are really coming after clients who do not respond.

[MoJo]

I don't see this example as being any more stern than those we've seen in the past.  Keep in mind that each regional office can have a different letter in use.  It was just a few years ago that the Chicago office got into trouble by sending a "very stern" letter, which caused some backlash - and they changed it.

 

Our approach, by the way, is to ALWAYS accept an invitation from the DOL when they are so kind as to invite you to their party.  A VFCP is generally not too difficult to prepare, and provided you give them the right information concerning the deposits, earnings deposits, and excise tax (whether paid to the plan under the exemption or to the IRS on a 5330), the no action letter is "cheap" insurance.

 

...just don't file every year or they'll think you are incapable of playing by the rules....

[david rigby]

The portion of the letter does not allow for the "other side" of the question, such as:

"If our report is in error, please provide dates and amounts of contributions for plan year XXXX"

[austin3515]

26 minutes ago, MoJo said:

A VFCP is generally not too difficult to prepare, and provided you give them the right information concerning the deposits, earnings deposits, and excise tax (whether paid to the plan under the exemption or to the IRS on a 5330), the no action letter is "cheap" insurance.

I have generally found the VFCP experience to be horrible.  They nitpick you like crazy.  And the clients who have  a lot of late deposits are teh same clients where nothing ever ties out.  Our fees have to be at least $750 to do the whole thing which is nuts for a deposit that was 4 days late and interest of $150 (or less).   

[austin3515]

I can't put my fingers on it now, but in the old later the last paragraph made it 100% clear that response was voluntary. 

"The purpose of this letter is to give you an opportunity to self-correct" was the language I wasn't crazy about.

[MoJo]

Well, first, if you have clients who have lots of late deposits, then it's time for a heart to heart with them about the FIDUCIARY requirement of being timely.  It really shouldn't be hard - and with automated payroll, electronic submission of contribution data, and ACH pulls of contributions (even for smaller employers) it isn't hard.

Second, what one must remember in doing a VFCP filing is that you NEED to always provide payroll summaries (from a payroll provider or program) showing the date the contributions were withheld, deposit confirmation showing the date those contributions were accepted by the trustee, proof of lost earnings calculations (usually a screen shot of the DOL calculator page, and a deposit of lost earnings confirmation from the trustee.  We did several hundred last year - and while the first few were a little glitchy, we found that having everything templated and checklisted resulted in speedy no-action letters.

I don't like having to do them - but clients need to understand the rules - and if you check the box on the Form 5500 (which you MUST do if you have a late contribution lest it someday be deemed no timely filed as not being 100% accurate), you will get the DOL invitation.....

[austin3515]

But do I have RSVP 👍  That;s the question. 

And telling clients to be better is a dangerous client relationship technique in my experience so I'll probably tread lightly there.  But again $750 in fees (at least) for a $150 interest calculation for a 4 day late deposit is just way out of whack in my judgment.

[MoJo]

46 minutes ago, austin3515 said:

But do I have RSVP 👍  That;s the question. 

And telling clients to be better is a dangerous client relationship technique in my experience so I'll probably tread lightly there.  But again $750 in fees (at least) for a $150 interest calculation for a 4 day late deposit is just way out of whack in my judgment.

I've actually found that by being "consultative" (an overused word, to be sure) and explaining things to them to be a good client relations technique....  Something about striving to be a "trusted advisor" by giving them what they *need* instead of what they *want*.

[austin3515]

My consultation is this proram is a pain in the neck and not worth the time or the effort.  Same policy for 15 years on thousands of plans and it hasn;t failed me yet 👍

[Coleboy1]

One of my clients recently received this same letter. I actually spoke with someone at the DOL. She said it was entirely voluntary. That VFCP application looks daunting. I'm going to leave it up to the client as to whether they wish to proceed with it. Most of the information requested is only information that they and I'm not even sure they are willing to do it.

[RatherBeGolfing]

14 hours ago, Coleboy1 said:

hat VFCP application looks daunting.

Its really not.  Yes it takes a bit of time and as @MoJo points out, you need to gather the documents to state your case.

It is absolutely a better experience than a DOL initiated investigation though.  For some reason I just don't buy that there is no note or referral if they have notified you of an issue and you choose to not accept the invitation.  Is it voluntary?  Yes, but you are on their radar, and that is not where I want to be.

[austin3515]

I just hope they quickly add this self-correction program.  Not everything  I would have hoped for but a helluva lot better than the actually filing.

[Peter Gulia]

Here is the agency’s record of comment letters, which includes two filed in the reopened comment period:

https://www.regulations.gov/docket/EBSA-2022-0026/comments?postedDateFrom=2022-11-01&postedDateTo=2023-06-12.

Among other points, some comment letters advocate:

Allowing correction of delinquent participant contributions or loan repayments up to the due date for filing the Form 5500 report for the year in which the breach happened. Or allowing 365 calendar days from the date an amount was or ought to have been segregated from wages.

More use of government website calculators to count to-be-restored investment earnings and excise taxes (or excise-tax amounts instead included in restoration of participants’ accounts).

Omitting a condition of notifying the Labor department about a self-correction.

Increasing the $1,000 limit on to-be-restored earnings to make self-correction available for more plans, including plans with thousands of participants.

And if there are other points on your wish list, one might read the fifteen comment letters to see whether anyone raised the point.

[Spencer]

I have a client who just received the VFCP invite letter.   Who usually prepares the filing?  TPA?  I've never done one.  😬

[RatherBeGolfing]

18 hours ago, Spencer said:

Who usually prepares the filing?

Depends on how fee sensitive the client is.  I have had clients do their own to save a buck, I have also had them say "just take care of it".

Its really not difficult to complete if you understand industry terms