Form 5500 Late Filing Relief

On May 9, 2014, the IRS issued two new guidance items concerning late-filing relief programs related to Form 5500. One of the guidance items, Revenue Procedure 2014-32, created a one-year pilot program providing penalty relief to plan administrators who fail to file Form 5500 EZ in a timely fashion. The pilot program is limited in application, as it only applies to non-ERISA benefit plans, and will not be examined in-depth in this post; however, individuals wishing to learn more about the plan should review the link posted above.

The second guidance item released on May 9, Notice 2014-35, has a much broader application, as it pertains to the previously established Delinquent Filer Voluntary Compliance Program (“DFVC”) providing relief to ERISA benefit plans. The DFVC program was created in 1995 by the Department of Labor (“DOL”) and adopted by the IRS in 2002. Prior to the creation of this program, and presently for employers choosing not to participate in the DFVC program, late or improper filing of Form 5500 may result in large fines from both the DOL, $1,100 per day, and the IRS, $25 per day and up to $15,000 per return. However, with the creation of the DFVC program in 1995, employers were provided an opportunity to save money by voluntarily participating in the program. For DFVC program participants, the DOL penalties are reduced from $1,100 per day to $10 per day, with a $750 limit per report and a $1,500 maximum penalty per plan for small plans with less than 100 participants and a $2,000 limit per report with a $4,000 limit per plan for large plans with more than 100 participants. Additionally, since 2002, proper filing and participation in the DFVC program resulted in a waiver of any IRS late filing penalties.

Prior to 2013, an employer would be eligible for relief, for both the DOL and IRS, by filing a completed Form 5500, including all requisite schedules and attachments, and paying the reduced penalty. The DFVC program’s filing process allowed for employers to submit IRS Form 8955-SSA, or Schedule SSA for plans in 2008 and before, with the DOL in order to receive relief from the IRS. However, due to a recent shift to electronic filing, this is no longer the case, and there are extra steps employers must take in order to receive relief from the IRS.

Beginning in 2013, all late annual reports filed with the DOL in accordance with the DFVC program must be filed electronically, using the DOL’s EFAST2 Program. By filing a completed Form 5500 electronically, and paying the applicable fees, employers will receive relief from the DOL. However, the DOL will no longer permit late filers to submit IRS Form 8955-SSA, or Schedule SSA, as part of the DFVC program. Therefore, as of 2014, in order to receive relief from the IRS, employers will have to not only satisfy the requirements of the DOL’s DFVC program, outlined above, but will also have to separately file a completed Form 8955-SSA, or Schedule SSA, with the IRS either within thirty days from the time of completing the DFVC program filing or by December 1, 2014.

Employers believing they have filed Form 5500 in an incomplete or untimely fashion should be aware of the DFVC program, including its recent changes, and take advantage of it, as it presents an opportunity to save a significant amount of money. In doing so, employers should be cognizant of the recent changes in filing requirements to insure they receive the maximum benefits offered by this program.

About Jim Hamilton

I am an employee benefits partner with Bose McKinney & Evans LLP. My broad-based practice covers health and welfare arrangements, insurance, executive compensation and federal and state taxation. Among other areas, I have specific experience with PPACA, HIPAA, COBRA, ERISA and numerous other state and federal laws affecting employee benefit plans.
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