The Department of Labor has been actively auditing the filed 5500s filings to find missed reports, particularly around the 2021 Form 5500. Once they spot a potential missed filing, they are issuing out a “Letter of Inquiry Notice” to the Plan Sponsor. These letters cannot be ignored with the hope that they go away. If the DOL does not hear back within the time stipulated in the letter, they will release a second letter. This time the letter states that the penalty assessed is $30,000 and the DOL’s DFVC program is no longer an option. We have seen a number of these second letters come in recent weeks. The following paragraphs go into more detail.
The first letter is simply an inquiry. The Plan Sponsor is asked if they should have filed the Form 5500 for a particular year as the DOL does not see it on the EFAST2 site. Whether they did or if they did not need to file the 5500, they are to contact the DOL within 15 days from the date of the letter to specify the reasoning and next steps. If they are late, the DOL will still allow the usage of the DOL’s Delinquent Filer Voluntary Compliance Program (DFVCP). The crucial step is to respond via email or upload a letter to the DOL’s Office of Chief Accountant’s response system.
We cannot emphasize the critical nature of providing a response back to the DOL enough. Some have not responded and are now being issued with a $300 per day late fee, up to $30,000. We have seen a handful of these letters this week alone.
This penalty letter states that a penalty of $30,000 will be imposed unless the Plan Sponsor provides a reasonable cause response within 35 days. At this point, we have not heard of a response that has removed the penalty.
Furthermore, if the second letter is ignored, an additional penalty of $2,586 per day late could be imposed, and there is no cap.
Below for your reference, we have a copy of the letter just brought to our attention.
Please note, Wrangle is here to help. If you have received these letters please contact Ann McAdam as soon as possible at email@example.com.