“We have a delinquent filing!” At some point, every broker will hear that a client’s filing is delinquent. Unfortunately, the Department of Labor has stated in their FAQs that they do not accept reasonable cause letters. Instead, they have set up the Delinquent Filer Voluntary Compliance Program (DFVCP) as the best option for bringing these filings current. Wrangle is ready and prepared to help guide the plan sponsor on the steps to take and what are the penalty fees to expect.
TOP 4 KEY DETAILS
1. If the plan sponsor has a late filing and has not been notified by the DOL with a failure to file the letter, the best practice is to use the Department of Labor (DOL)’s DFVC program. This program will waive the IRS’s potential late filing penalties as well.
2. The DOL would expect the plan sponsor to go as far back as when there were 100 or more enrolled participants on the first day of the ERISA Plan year or as far back as 1988. This can be the hardest step to take in terms of hunting down past enrollment details but is critical in mapping out what to expect. Wrangle had a plan sponsor discover six late filings. A year later, they discovered two more delinquent plans for a total of $32,000 in penalties!
3. For old filings, sometimes the data is not available to complete a Schedule A. For instance, a carrier may no longer be in business. In these instances, a placeholder is used in the 5500 report to acknowledge that a benefit was part of the plan. Commissions and premium data will be left blank, and a footnote will be added to alert the DOL that the carrier was not available. This reporting approach is much accepted by the DOL, especially for filings that are beyond the three most current filings.
4. The forms used are the two most current ones. This year, the DOL will accept the form year 2019 and the form year 2020 5500.
Key Note: As we are getting closer to the end of the year, and the expiration of the form year 2019, if we have prepared 5500s for the DFVC program that used the 2019 form and they are not e-filed by 12/31/2021, we will need to re-enter the 5500 data into the form year 2021. This will result in a fee of $100 for the additional preparation.
HOW WRANGLE CAN HELP
For over seven years, Wrangle has had a dedicated 5500 Consultant team that is 100% focused on multiple-year delinquent filings (if your filing is one year or less late, you will work with your designated 5500 consultant). They have worked on thousands of files over the years.
Their first order of business is to help the Plan Sponsor determine which ERISA Plans are delinquent in their filings. Once this is determined, Wrangle will conduct the following:
1. Provide an intake worksheet for the plan and policy data (the dashboard is not used for these types of reports).
2. Provide the DFVC payment acknowledgment form that outlines the fees for the project and then roll up our sleeves to get to work.
3. If we collect the schedules, we allow the carriers approximately 60 days to provide that information, and then two to three weeks for preparation and review.
4. Provide the ready-to-sign 5500 report(s), and then work with the plan sponsor to coordinate the penalty payment with the date the 5500s are filed.
5. The client may pay the penalty either by mailed check or use of the DOL’s online payment system (we recommend using the online system) to pay with a credit card or ACH. You can find the online payment system link here.
Checks are to be made out to the US Department of Labor and mailed to:
| Regular | USPS Overnight |
| DFVCP | U.S. Bank |
| P.O. Box 6200-35 | Attn: DFVC 6200-35 |
| Portland, OR 97228-6200 | 17650 NE Sandy Blvd.
PD-OR-C1GL Portland, OR 97230 |
Important note: If the fee is paid, and the signed 5500 pages weren’t e-filed, the penalty fee will keep adding up until the 5500 is e-filed. EBSA may send a bill if what was paid is incorrect.
**As a result, Wrangle will not e-file until we hear the payment has been made and we have received the signed 5500s via DocuSign.
PENALTY FEES
The DOL has an easy-to-use online calculator to help determine the penalty fee. Wrangle will provide the penalty fee amount when we lay out the project scope with you. See link.
Penalty Amounts for Small Plans (under 100 enrolled participants)
- Daily penalty amount for the first 199 days late: $10
- Per plan maximum from 200 days to one year: $750
- Capped per plan penalty for multiple year late filings (same plan number): $1,500 [if plan is also a 501(c)(3), the cap is $750]
Penalty Amounts for Large Plans (100 or more enrolled participants)
- Daily penalty amount for the first 199 days late: $10
- Per plan maximum from 200 days to one year: $2,000
- Capped per plan penalty for multiple year late filings (same plan number): $4,000
How fast does the $10 per day add up? Very quickly…
- If the original due date is 10/31/20, and the penalty is paid on April 26, 2021, you will have a total penalty of $1,770 for being 177 days late.
WANT TO TAKE A RISK?
The Employee Benefits Security Administration (EBSA) has maintained a program for the assessment of civil penalties (pursuant to 29 CFR 2560.502c-2 and 29 CFR 2570.60 et seq.).
- For Non-Filers: A penalty of $300 per day, up to $30,000 per year, may be assessed on a plan administrator until a complete Form 5500 is filed.
- For Late-Filers: A penalty of $50 per day, for each day an annual report is filed after the date on which the annual report was required to be filed, without regard to any extensions of time for filing.
The IRS could also add fees; however, the IRS waives its penalties when the Plan Administrator uses the DFVC program. The Secretary of Labor could also jump in and charge up to $2,259 per day.
FOR MORE INFORMATION
Feel free to reach out to Ann McAdam at amcadam@wrangle5500.com.