What is the Delinquent Filer Voluntary Compliance Program (DFVCP)?

The Delinquent Filer Voluntary Compliance Program (DFVCP) is a program established by the U.S. Department of Labor (DOL) under the Employee Benefits Security Administration (EBSA). It allows employers and plan administrators to voluntarily correct their failure to file Form 5500, which is a required annual report for employee benefit plans, without facing the full penalties typically associated with non-compliance.

Purpose of the DFVCP

The DFVCP serves as a compliance mechanism for plan administrators and sponsors who have missed deadlines for filing Form 5500, either due to oversight or administrative errors. The primary goal is to encourage plan administrators to come forward and correct these issues without the fear of severe financial penalties. Form 5500 provides essential financial information about employee benefit plans, including retirement and health plans, ensuring transparency and regulatory oversight.

Eligibility for DFVCP

Not all plan administrators or employers are eligible for the DFVCP. The program applies to administrators of employee benefit plans subject to the Employee Retirement Income Security Act of 1974 (ERISA). Specifically, DFVCP is available to the following plans:

• Pension plans: These include defined benefit and defined contribution plans, such as 401(k) and profit-sharing plans.
• Welfare plans: These include health, disability, and life insurance plans.

Additionally, the plan must not be under investigation by the DOL for delinquent filings at the time of application to the DFVCP. If the DOL has already initiated an audit or enforcement action, the employer or administrator is no longer eligible for the program.

How the DFVCP Works

The DFVCP is designed to simplify the process of rectifying late filings while reducing the financial burden of penalties. Here’s a general outline of how the program works:

1. Identify delinquent filings: The plan administrator or employer determines whether they have missed filing deadlines for Form 5500.
2. Submit delinquent filings: The administrator must electronically submit all delinquent Forms 5500 using the DOL’s EFAST2 filing system.
3. Calculate the penalty: The DFVCP provides a reduced penalty structure based on the type of plan and the number of delinquent years. Generally, the penalties are:
4. • Small plans (fewer than 100 participants): $10 per day, up to a maximum of $750 per filing, with a cap of $1,500 per plan.
   • Large plans (100 or more participants): $10 per day, up to a maximum of $2,000 per filing, with a cap of $4,000 per plan.
4. Submit the penalty payment: Payment is made to the DOL, and the participant is considered to be in compliance after submitting both the delinquent filings and the penalty payment.

Benefits of Participating in the DFVCP

Participating in the DFVCP offers several key advantages for employers and plan administrators who have missed their filing deadlines:

• Reduced Penalties: The primary benefit is the significant reduction in penalties. Under normal circumstances, failure to file Form 5500 can result in penalties of up to $2,586 per day (as of 2023). The DFVCP caps these penalties at much lower rates, making it more affordable for employers to rectify their mistakes.
• Avoidance of Full Enforcement: Employers who voluntarily come forward through the DFVCP are shielded from more severe enforcement actions and investigations that could result from non-compliance.
• Simplified Process: The DFVCP offers a streamlined method to bring multiple delinquent filings into compliance, making it easier for employers to correct their errors without going through complex administrative procedures.

How to Apply

Applying to the DFVCP involves several steps:

1. Complete delinquent filings: Use the EFAST2 system to submit delinquent Form 5500 filings. These filings must be for the years where the employer or plan administrator failed to submit the required forms.
2. Calculate the applicable penalty: Depending on the size of the plan (small vs. large), calculate the reduced penalty using the DFVCP’s guidelines.
3. Submit payment: Payments are made electronically or by check, and detailed instructions are provided on the DOL’s DFVCP webpage. It is essential to ensure that the payment is calculated correctly based on the number of participants and the number of delinquent filings.
4. Maintain records: While the DFVCP resolves the issue of delinquent filings, employers should maintain accurate and up-to-date records of all benefit plan filings in case of future audits.

Limitations of the DFVCP

While the DFVCP offers significant relief, there are certain limitations:

• Only for Form 5500: The program is exclusively for delinquent Form 5500 filings. It does not apply to other types of compliance issues or filings with the IRS or other agencies.
• Not available if under investigation: If the DOL has already begun an investigation or enforcement action regarding the delinquent filings, the employer or administrator cannot use the DFVCP.
• No refunds for overpaid penalties: If the penalty is calculated incorrectly or overpaid, there is no provision for refunds, so it’s essential to ensure that the correct amount is submitted.

The Bottom Line

The Delinquent Filer Voluntary Compliance Program (DFVCP) offers plan administrators and employers an opportunity to correct missed Form 5500 filings with reduced penalties, encouraging voluntary compliance and transparency. By participating in the program, organizations can avoid steep fines and further enforcement actions, provided they are proactive in identifying and rectifying their compliance failures before being audited. The DFVCP is a valuable tool for ensuring ongoing compliance with ERISA requirements while minimizing the financial impact of past mistakes.