For plans subject to ERISA, failure to timely file an Annual Report on Form 5500 (“Form 5500”) may subject the responsible plan fiduciary to severe monetary penalties under ERISA and the Internal Revenue Code (up to $2,063/day for post-2015 failures), adjusted for inflation, or $1,100/day for pre-2015 failures, plus potential IRS and PBGC penalties. Willful or continued failures to timely and properly file Form 5500s is a separate serious offense which can result in criminal sanctions or other equitable relief (such as removal of the plan fiduciaries and appointment of an independent fiduciary).
The good news is that most late Form 5500 filings can be voluntarily corrected through the “Delinquent Filer Voluntary Compliance Program” (“DFVCP”). DFVCP is not available if the plan has been contacted by the DOL about the late filing. If not resolved through DFVCP, a plan fiduciary must timely appeal any penalty assessed by demonstrating reasonable cause for the late filing. Non-ERISA covered plans, although not eligible to seek relief under DFVCP, may seek penalty relief under a separate IRS program, the Penalty Relief Program.
To use DFVCP, the plan fiduciary must electronically file the incomplete or missing Form 5500sfor which relief is being sought, including all required schedules and must check the appropriate box on the Form 5500. It must also calculate and pay penalties using the online calculator provided by the DOL.See: https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/correction-programs/dfvcp. Both the IRS and PBGC also extend relief from late filing penalties where the plan has satisfied DFVCPconditions for correction.
Penalties under DFVCP are fixed and may not be appealed or negotiated.
Please feel free to contact us if you need advice about late filings.
This handout is for information purposes only and should not be construed as legal advice. If you have questions or would like our advice with respect to any of the information, please contact us.