FLASHPOINT: UPDATES TO THE DFVCP:
THE GOOD, THE BAD, AND THE QUIRKY

By Alison J. Cohen, Esq.

Last week, the Employee Benefits Security Administration (“EBSA”) updated its Delinquent Filer Voluntary Compliance Program (“DFVCP) online interface. DFVCP is the program under which a Plan Administrator can correct a late filed Form 5500 or Form 5500-SF. Once the filings are signed and submitted, the Plan Administrator is required to pay the calculated penalty, which is significantly smaller than the Internal Revenue Service or Department of Labor penalties that would otherwise apply.

Under the prior version of the interface, the Plan Administrator would have to key in a lot of data about themselves and the late filings that were submitted before the system would calculate the penalty to be paid. Under the new, spiffy version, the Plan Administrator only needs to enter the Plan Sponsor’s taxpayer EIN and the Plan Number. Once they do that, the program will pull up ALL potentially late filings for the Plan (and the potential penalty), and the Plan Administrator can indicate which are being filed under DFVCP. Note, this is a good investigative tool if you’re researching a new client. Another real perk of this new online tool is that it also reports all filings that were previously corrected through DFVCP. You can use this printout as proof of correction if the IRS has contacted the Plan Sponsor about the late filing to assist you in trying to get an abatement of the IRS penalty. This is the good enhancement.

The bad part of this new enhancement is that the DFVCP payment screen will reflect filings as “late” that were actually filed on time. For several sample clients that we ran through the program, the output reported calendar year filings going back to 1999 as late if they were filed after July 31, but before October 15. We confirmed for most of our sample clients that they did, in fact, timely file a Form 5558 extension for the years reported by the program as late, or qualified for a disaster extension.  So, it appears that there is a systems disconnect between the DOL records of Form 5558 extensions and this new DFVCP program.  The lesson:  if your client is going to be the one to pay the online penalty, you should warn them before they go through the program so they don’t have an anxiety attack upon seeing a bunch of purported late filings.

To pay the DFVCP reduced penalty using the listing, the list must reflect that the Form was filed.  However, we discovered an inconvenient quirk: there is a delay in the posting of the filings on the DFVCP program, usually until the next business day. For example, we filed Forms 5500 for one client on a Tuesday morning. We checked on the DFVCP website several times throughout that day and the filings didn’t appear. The following morning, there they were, so we were able to pay the DFVCP fee at that time. Since this original interaction, the DOL has posted a warning that there is an overnight data integration process that is required before the new filings will appear on the listing. This concerns us, as it is easy to forget to go back in the next day and pay the penalty – which, for our TPA clients, could create some unexpected liability. So, make sure that you put a reminder on your calendar when you do the initial filing!

Overall, we like how the new DFVCP interface has worked for us and can see a number of advantages with it, but watch out for those small quirks!

If you have any questions on this program enhancement, give us a call.  Remember: we are your ERISA solution!