VFC - Delinquent Contributions

I have a client that got a notice from the DOL regarding potential prohibitive transactions due to there being delinquent contributions during the Plan Year.  I haven't experienced this before, so can someone tell me what the fix/response is and what is involved?

Thanks in advance, I really appreciate it!

Did they report  late contributions on the 5500? These letters are usually sent in response to that.

It's just the DOL saying, "Hey, we noticed you had some late contributions, you might want to correct the fiduciary failure under VFCP." You don't have to - the "V" stands for "voluntary," after all - but if the client wants to dot every i and cross every t they could.

The fix under VFCP is basically to make up the lost earnings and pay the excise tax under IRC 4975. Hopefully the plan sponsor already did that. Then they would just need to file the VFCP form.

3 minutes ago, C. B. Zeller said:

Did they report  late contributions on the 5500? These letters are usually sent in response to that.

It's just the DOL saying, "Hey, we noticed you had some late contributions, you might want to correct the fiduciary failure under VFCP." You don't have to - the "V" stands for "voluntary," after all - but if the client wants to dot every i and cross every t they could.

The fix under VFCP is basically to make up the lost earnings and pay the excise tax under IRC 4975. Hopefully the plan sponsor already did that. Then they would just need to file the VFCP form.

Got it, so it's not mandatory but will we keep getting letters until we respond?  Also, does the fact that this is a multi-employer, collectively bargained plan?  We would obviously have to bill the contributing employer for the interest on the deferrals/loan repayments (that's what was deemed "late" by the accountant)

1 minute ago, Stash026 said:

Got it, so it's not mandatory but will we keep getting letters until we respond?  Also, does the fact that this is a multi-employer, collectively bargained plan?  We would obviously have to bill the contributing employer for the interest on the deferrals/loan repayments (that's what was deemed "late" by the accountant)

They may or may not send more letters in the future. They may or may not also decide to audit the plan.

I am not aware of anything that would allow a multiemployer plan to be exempt from the fiduciary rules that apply to plan assets, but multiemployer plans are outside my area of expertise.

I think it should be pointed out that it is a little more involved than just filling out the form.  You need to put procedures in place to prevent it from happening again. 

It is entirely voluntary to correct using VFCP.  Just be aware that they will probably start an investigation if you do not.  When an earlier round of these letters came out 4-5 years ago (maybe more), ASPPA GAC protested the threatening tone of this "invitation to voluntarily participate".  I believe the DOLs answer was that it would change some of the wording, but the message was that they were aware of a possible PT and an investigation may follow.  

@Stash026 would you be comfortable sharing some more detail?  Like date of the letter and what regional office it came from? 

5 minutes ago, RatherBeGolfing said:

I think it should be pointed out that it is a little more involved than just filling out the form.  You need to put procedures in place to prevent it from happening again. 

It is entirely voluntary to correct using VFCP.  Just be aware that they will probably start an investigation if you do not.  When an earlier round of these letters came out 4-5 years ago (maybe more), ASPPA GAC protested the threatening tone of this "invitation to voluntarily participate".  I believe the DOLs answer was that it would change some of the wording, but the message was that they were aware of a possible PT and an investigation may follow.  

@Stash026 would you be comfortable sharing some more detail?  Like date of the letter and what regional office it came from? 

It was the NY regional office that sent the letter.  I believe it was dated early April, but the scan my client sent cut it off.

The plan obviously isn't to ignore the letter, just wanted to get a feel for what's involved in the response.