Certain taxpayers with employee benefit plans annually file Form 5500: Annual Return/Report of Employee Benefit Plan to report information to the U.S. Department of Labor (DOL). Occasionally, some taxpayers who have become delinquent in filing, fail to file the form at all, which is not the best approach. There are strict penalties for failure to file or for filing late. Fortunately, the DOL has a Delinquent Filer Voluntary Compliance Program (DFVCP) to help those taxpayers get back to “Go.”
What is the DFVCP?
Simply because a taxpayer chooses not to file Form 5500 does not mean they are relieved of the obligation to do so. There is no statute of limitations after which the filing obligation is terminated. As a result, ignoring the requirement will not make it go away. The DOL now gives delinquent taxpayers the option to file all unfiled returns, allowing them to pay a one-time fee in lieu of potential penalties that would be assessed for late filing. In almost every case, the fee will be significantly smaller than the penalties.
Generally, only employers that are required to file Form 5500 are eligible for the DFVCP. Filers of Form 5500-EZ for a one-participant plan (this is commonly filed by self-employed individuals) are not eligible for the DFVCP. Additionally, taxpayers already under audit by the DOL, or who have received written notification of delinquency, are not eligible. This program is only available for taxpayers to voluntarily identify themselves as non-compliant and immediately come into compliance.
What steps must an employer take to comply with the DFVCP?
The first step to qualify under the DFVCP is to electronically file all delinquent returns. On each return, the taxpayer must check the “DFVCP program” box on Line D of Form 5500 Part I. The taxpayer can use either the services and electronic filing software of a paid tax preparer or the DOL EFAST2 system to electronically file the delinquent returns. If there are multiple years to file, it is best to prepare and file all of the returns at one time. As covered in the fees section, there is an upper cap to the fees—an enticement for taxpayers to take care of all delinquent filings at one time.
The second step is to calculate the fees, which can be seen in the following table. Fortunately, the per-plan maximum fee applies no matter how many delinquent returns organizations have.
| Single Delinquent Filing | Multiple Delinquent Filings | |
| Small Plan (<100 participants) |
$10/day $750 max |
$10/day/filing $1,500 max |
| Large Plan (>100 participants) |
$10/day $2,000 max |
$10/day/filing $4,000 max |
| Small Plan 501(c)3 Tax-Exempt |
$750 max |
Any fees incurred and paid under the DFVCP should be paid directly by the plan administrator. It is not permissible to use plan assets to pay fees assessed under the DFVCP. The fees may be calculated and paid online here, or payment may be made via check by printing out the electronically filed Form 5500 and mailing it and the check to the DOL.
It should be noted that the fees indicated under the DFVCP only apply to DOL fees. There may be Internal Revenue Service (IRS) or Employee Retirement Income Security Act (ERISA) penalties. There may be relief through those agencies for late filings, but the DFVCP does not automatically relieve a taxpayer from penalties assessed by other agencies.
If you have questions about employee benefit plans, or would like assistance with any matter involving tax preparation and accounting, contact a PYA executive below at (800) 270-9629.
