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Did You Fail to File a Form 5500?

Most private-sector employee benefit plans are required to file an annual Form 5500. The Department of Labor (DOL) may impose a penalty of $1,100 for each day a Form 5500 was not timely filed. In addition, the Internal Revenue Service (IRS) may impose a penalty of $25 per day (up to $15,000 per year) for failure to file a Form 5500 for retirement plans.

The DOL and the IRS recently announced that they are searching various databases to identify employee benefit plans that have not filed Form 5500s. Beginning in December, 2002, the agencies will mail letters to those identified as non-filers.

The DOL sponsors a Delinquent Filer Voluntary Correction Program (DFVCP) under which Form 5500s may be filed late with a specified penalty. The DOL recently updated the DFVCP to further reduce the penalty amounts for late Form 5500s and the IRS has stated that it will not assess its penalties on plan sponsors using the DOL program. Under DFVCP, the penalty is $4,000 for large plans (100 or more participants) and $1,500 for small plans (less than 100 participants), regardless of the number of late Form 5500s filed. A special maximum of $750 applies to small plans maintained by 501(c)(3) organizations. Plan sponsors who have been contacted by DOL about a late filing are not eligible to participate in DFVCP.

It is highly likely that the penalty under the DFVCP will be significantly less than the penalty imposed if the DOL contacts a plan sponsor about a late filing. Plan sponsors of employee benefit plans who have not filed Form 5500s should consider utilizing DFVCP.