VFCP - late deposit of deferrals

I know this has been discussed in the past, but I'd like to see what, if any, experience you've had. And if so, has it been different for 401(k) and 403(b).

We just had a 403(b) client receive a letter from the DOL, inviting them to use the VFC program. First one we've seen. This was generated from the 2019 5500 form, which showed late deposit of deferrals. Total interest correction was something like 30 dollars, it was corrected promptly, and excise tax was paid. The DOL calculator was used to determine the lost interest, but VFC program was NOT utilized. I know that the Philadelphia region was saying that the DOL could consider it not "fully corrected" if the DOL calculator was used but not VFC filing was done.

This letter was out of the Boston region, not Philadelphia.

So, first, is everyone getting these letters, and in other regions? Or maybe this was just random.

Second, has anyone yet contacted the DOL person listed on the letter in such a situation with extremely minor amounts involved, and if so, with what result?

Third, has anyone heard of/experienced an audit that was initiated because, after receiving this letter, they did not utilize the VFC program?

It just goes against the grain to have to do a whole VFC filing on some of these plans where the lost interest is $1.18. But if an audit is triggered absent a VFC filing...

Thank you for any thoughts or actual experience on this.

Our rule of thumb is if the DOL "invites" a plan sponsor to do something, do it.  We see these a couple times a year - and usually they include both an invite to the VFCP program as well as an invite to a "fiduciary responsibility webinar they have available....  And document that it has happened.  The DOL does not consider the matter "fixed" without the VFCP filing - so even if an earnings adjustment occurred, and even if a 5330 was filed, we advise to accept the invite, and file.  $1.18 or not - you never know what they will decide to look at *if* they audit....

12 minutes ago, MoJo said:

you never know what they will decide to look at *if* they audit....

DOL doesn't audit.  They investigate.  Sounds more sinister.

16 minutes ago, BG5150 said:

DOL doesn't audit.  They investigate.  Sounds more sinister.

Well, not to nit-pick, but they do "audit" but do them using those they call "Senior Investigators"  who have badges and guns (I hired one, once).

Ah.  Noted.

But let’s ask Belgarath’s key question:

If an employer does not take up EBSA’s suggestion (and the correction involves small amounts), how often does Labor pursue actual enforcement?

Is the letter’s implied threat somewhat likely or highly improbable?

What is the actual experience BenefitsLink people have seen?

Is the cost-benefit analysis as simple as estimating the probability-discounted cost of what would result if EBSA both detects a fiduciary’s breach and vigorously pursues enforcement, and comparing it against the expenses (including professionals’ fees) of using the VFC program?

Or do you advise a different analysis?

Hey MoJo - we had a client that was "audited" by the DOL, yet the DOL "investigator" was actually rather huffy when we committed what was evidently an unpardonable sin, and referred to it as an audit. We were told in no uncertain terms that it was an investigation. Probably someone new with a chip on their shoulder...

14 minutes ago, Belgarath said:

Hey MoJo - we had a client that was "audited" by the DOL, yet the DOL "investigator" was actually rather huffy when we committed what was evidently an unpardonable sin, and referred to it as an audit. We were told in no uncertain terms that it was an investigation. Probably someone new with a chip on their shoulder...

Yes, but we get correspondence from the DOL talking about an "audit."  But then again, I mentioned that they have guns - so I'll call them whatever they want me to call them......  🙂

46 minutes ago, Peter Gulia said:

But let’s ask Belgarath’s key question:

If an employer does not take up EBSA’s suggestion (and the correction involves small amounts), how often does Labor pursue actual enforcement?

Is the letter’s implied threat somewhat likely or highly improbable?

What is the actual experience BenefitsLink people have seen?

Is the cost-benefit analysis as simple as estimating the probability-discounted cost of what would result if EBSA both detects a fiduciary’s breach and vigorously pursues enforcement, and comparing it against the expenses (including professionals’ fees) of using the VFC program?

Or do you advise a different analysis?

Simply put - I don't know.  The effort expended to comply with the invite is insignificant to the trouble an "investigation" would cause should they choose to do so - even if the change of such an investigation is small.  We advise compliance with the invite, and our clients always do so - and therefore have no experience with whether it might trigger a review.  I can say that when our clients have complied, I've *never* seen a follow up of any kind from the DOL - so, "cheap insurance"?

MoJo, I’m glad your clients fall-in with your guidance.

My limited experience is different.  (I lack direct experience with employers that would face the question Belgarath described.  I see them only indirectly through my work as counsel to other law firms.)

No matter how carefully and thoroughly a lawyer explains the potential consequences and the “cheap insurance” sense, those firms’ clients won’t bite on paying anything for a VFC submission.  That’s even when they say the work would be done by a nonlawyer assistant, with supervision and review not billed.

And the question gets to a law firm only after a recordkeeper or TPA declined to work on a VFC submission.

Do others have different experiences?

We’ve had two of these this year (2021) responding to letters from Philadelphia DOL- we follow the “take their suggestion “ philosophy and duly filed DFVC and already received compliance letters for each client.

My experience has been in line with MoJo's when "invited", but declined if not prompted by agency action of some sort.  The only exception would be cases where it was bad enough that we said "we either fix it all the way or you need to find another service provider"

17 hours ago, Peter Gulia said:

MoJo, I’m glad your clients fall-in with your guidance.

My limited experience is different.  (I lack direct experience with employers that would face the question Belgarath described.  I see them only indirectly through my work as counsel to other law firms.)

No matter how carefully and thoroughly a lawyer explains the potential consequences and the “cheap insurance” sense, those firms’ clients won’t bite on paying anything for a VFC submission.  That’s even when they say the work would be done by a nonlawyer assistant, with supervision and review not billed.

And the question gets to a law firm only after a recordkeeper or TPA declined to work on a VFC submission.

Do others have different experiences?

Interestingly, our clients don't hire counsel to do so.  It isn't difficult, and if they have actually done the correction, all of the data necessary to file is at their fingertips.  They routinely ask us to do it for them, but when we explain the process (and sometimes hold their hands), it is a no-brainer.  Indeed, just last week I got an email from an RM at our organization forwardin an email from a client indicating it was a completely painless process....