This time of year, many employers are struggling to satisfy the independent auditors of their employee benefit plans so that they can obtain opinions and file their Forms 5500 on time. For a calendar year plan that filed a Form 5558 extension, the deadline is generally October 15 (but is October 17 this year, given that the 15th is a Saturday). As the deadline nears, employers may also encounter problems with electronic filing (now in its second year) and with getting answers to their questions regarding the filing. The potential penalties for failure to timely file a Form 5500 are substantial – up to $1,100 per day per return assessed by the DOL, and $25 per day up to $15,000 per return assessed by the IRS. We want to make certain that any employers who are frustrated by a lack of control over the impending deadline know that a correction program is available for late returns.

Under the Delinquent Filer Voluntary Compliance Program (DFVC), an employer can file a late Form 5500 for a penalty of $10 per day measured from the original, unextended filing deadline. Penalties may be capped depending up on the circumstances. If an audit reveals a prior year issue that necessitates an amended return, the employer may select the correct form with the DOL’s new correction tool.

Before filing the Form 5500, an employer needs to review the Form, auditor’s opinion, financial statements and other attachments to identify any “flags.” For example, if the documentation indicates “delinquent contributions,” this has a number of potential ramifications, and several corrective steps need to be taken to ensure that the issue has been completely resolved. Taking these steps may be a fiduciary responsibility, and taking these steps before the Form 5500 is filed (or as soon as possible thereafter) will help limit exposure in the event that a flag triggers an audit or investigation.

We encourage employers to obtain any assistance needed to make sure that they are taking the right steps and using the right correction programs, where applicable. Likewise, if an employer receives notice of an IRS audit or DOL investigation, it is important to start by reviewing the last few years’ Forms 5500 to confirm that any flags were properly resolved.