Realistically, what is our exposure for several missed 5500s?

[ERISA-Bubs]

Client missed filing Form 5500 SF in 2019, 2020, 2021, and 2022.  According to the DOL's current penalty of $2,670 per day, the total penalty could come out to over $7m -- the IRS penalties would be almost $500k.  

We can't use the VFCP (at least not without permission) because we've already been told by the DOL that we are delinquent.

This is not a big plan.  A $7m penalty would be WAY more than the plan is even worth.

What should our expectation be?

[justanotheradmin]

what is the notice number?  was a penalty amount listed? 

is this you? your client? who is responsible for filing? are you asking about the sponsor's exposure or your exposure as a service provider? 

[Paul I]

The DOL and IRS are most interested in plans being operated in compliance.  They do not want to destroy the plan or the plan sponsor.  The penalties are the big stick.  The client is going to have to provide an explanation of the what and why the filings were missed, and the tone and nature of that explanation will contribute to the negotiation of an agreed-upon penalty.  Given the dates, it would not be surprising if somehow the pandemic contributed to the plan going off the rails.

If the DOL says you can't use VFCP without permission, then expect any agree-upon penalty to be more than the cost of a VFCP filing.  Hiring an attorney or consultant experienced in working with the DOL on delinquent filings and that has a reputation with the DOL of being helpful and reasonable can go a long way to reaching a viable resolution.

[ERISA-Bubs]

21 hours ago, justanotheradmin said:

what is the notice number?  was a penalty amount listed? 

is this you? your client? who is responsible for filing? are you asking about the sponsor's exposure or your exposure as a service provider? 

It's a client.  There is no notice number or penalty amount listed -- the DOL pointed out that we missed several Form 5500 filings, but they weren't looking into 5500 filings at the time.  The DOL issued a Closing Letter that basically said, "our issue is resolved, but be advised you have missed 5500 filings and this letter doesn't resolve that issue."

Since the DFVCP rules provides that DFVCP can only be used "prior to the date on which the administrator is notified in writing by the Department of Labor (Department) of a failure to file a timely annual report under Title I of the Employee Retirement Security Act of 1974 (ERISA)" and we have been notified, I assume we are not eligible.

[Paul I]

You will find the information in the Department of Labor's Reporting Compliance Enforcement Manual Chapter 5: Enforcement Programs Procedures in the section titled Non-Filer Program Enforcement Procedures very educational:  https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/enforcement/oca-manual/chapter-5

Enforcement actions a highly structured with controlled timing, and it may be the case that comment in the Closing Letter does not formally preclude the plan from using the DFVCP.  Again, having an attorney or consultant experienced in working with the DOL on delinquent filings could review the Closing Letter and provide guidance on whether you can still use DFVCP.

The DFVCP penalties are the lowest available, and no matter what course of action the plan takes, it will have to prepare and file all of the delinquent forms.  Receiving a formal penalty letter definitely takes the DFVCP option off the table, so the client should move forward with seeking confirming guidance and preparing the missing filings for prior years.

[401 Chaos]

ERISA Bubs, just curious if you had resolved this.  I sort of wonder if the DOL didn't say what they did and how they did to provide a potential path to DFVCP.  I wonder if a no names call to the DOL's Office of Chief Accountant might provide some insight / support for moving forward with DFVCP