Plan sponsors of employee benefit plans subject to the requirements of the Employee Retirement Income Security Act (ERISA) are required to annually file a Form 5500 with the U.S. Department of Labor (DOL). The Form 5500 was developed by the DOL in cooperation with the Internal Revenue Service (IRS) and Pension Benefits Guarantee Corporation (PBGC) as a means of evaluating the economic stability and enforcing the operational compliance of these benefit plans, and according to the DOL is “part of ERISA's overall reporting and disclosure framework, which is intended to assure that employee benefit plans are operated and managed in accordance with certain prescribed standards.”
Both the IRS and the DOL consider the information disclosed by these ERISA-governed benefit plans on the Form 5500 to be vital for effectively carrying-out the enforcement provisions of ERISA, and for that reason impose severe monetary penalties on benefit plans failing to file their required Form 5500 each year by the required due date as a tool for discouraging delinquent filings. The penalty imposed by the IRS is equal to $25 per day, but has a cap of $15,000. On the other hand, the penalty imposed by the DOL is $1,100 per day, with no cap on the penalty amount. Yes, you read that correctly – $1,100 per day, with no cap on the penalty! These can be potentially debilitating penalties to the continued success of an employee benefit plan.
With the above-noted potential sanctions, most would agree that timely filing your Form 5500 is a wise course of action. The deadline for filing your plan's annual Form 5500 is the last day of the seventh month of the following plan year. Thus, plans operating on a calendar year basis for their plan year, for example, will want to make sure that their Form 5500 for the preceding year is filed no later than July 31. Extensions to file your plan's Form 5500 are also available, provided they are timely filed.
But there is good news. Even if your plan missed the filing deadline and did not obtain the required extension, you are still able to significantly reduce the penalties noted above – so long as your plan has not yet received a notice of the delinquency from the IRS or the DOL. Basically, if you make the IRS and the DOL aware of your error before they catch you, by submitting an application under the Delinquent Filer Voluntary Compliance Program (DFVCP) created by the DOL, they will be much more lenient when imposing penalties on the plan.
Contact Butterfield Schechter LLP if you require assistance with the proper completion and filing of your employee benefit plan's annual Form 5500 or requesting an extension to file. Additionally, if your plan has missed its Form 5500 filing deadline and has failed to seek an extension, contact one of our highly qualified attorneys today to assist you in the completion of a DFVCP application to the DOL in order to significantly reduce the potential monetary penalties to your benefit plan.