Delinquent filing of form 5500 for section 125 plan

[Guest Kathleen1]

I have a client that was unaware they needed to file a 5500 for their section 125 plan. They have not filed for several years. Should we roll the dice and just file going forward? No notices have been received as of yet.

[Kristina]

I would recommend that you bring the filings up to date. You would be throwing the plan on the mercy of the IRS for years prior to 1999 and they have been very cooperative with plan sponsors to date. For 1999 you would be dealing with the DOL for a year in which they are somewhat disorganized and have not yet made it thru all of the filings that were filed for 1999. Also, while there is the tax issue with the participant contributions, there is no continuing trust to complicate things.

Coming clean seems a better choice than hoping there is no audit or that the DOL will not notice that there was no filing for prior years.

[Guest Kathleen1]

Thanks Kristina. I am new at this. If we catch up on the filings, should we attach a letter or statement stating we honestly didn't realize we were supposed to file, etc. or is there a more technical/structured way of doing this?

[Kristina]

Tell the truth (without more detail than you really need) in a cover letter explaining why the filings had not been done in the past and asking that all penalties be waived. Reassure the agencies that the error has been corrected as soon as it was discovered, will never occur again and procedures are in place to ensure that all future filings will be timely.

[Guest aklausner]

You should use the amnesty program -- which employes a deminimis fee....for late filings.

[Linda]

You can’t use the DOL delinquent filer voluntary compliance program for a 125 plan. A 125 plan files a Form 5500 as a fringe benefit plan under the IRC. The 125 plan is not itself a plan subject to ERISA. But, as mentioned above, the IRS had been receptive to accepting Form 5500s for 125 plan under these circumstances.