What is DFVCP?
Under the Employee Retirement Income Security Act (ERISA), plan administrators must file annual reports for employee benefit plans to disclose information about the plan’s financial condition and operations. Failure to file these annual reports can result in penalties and enforcement action by the EBSA.
The DFVCP provides a way for plan administrators to comply with the reporting requirements by voluntarily filing delinquent annual reports and paying reduced penalties. The program is available to plan administrators who are delinquent in filing an annual report for a plan year more than one year past the due date.
By participating in the DFVCP, plan administrators can avoid potentially higher penalties and enforcement actions that could result from a failure to file the required annual reports. The program also provides a way for plan administrators to maintain compliance with the reporting requirements under ERISA and to continue to provide vital information to plan participants and beneficiaries.
Which companies need DFVCP?
Often, employers are unclear or unaware of the general requirements to file a Form 5500 for their Health and Welfare Benefit Plans. However, plan administrators can typically find themselves in a delinquent situation due to systemic growth, changes in management, mergers & acquisitions, and control group issues.
For Non-Trust Plans:
- 100 or more enrolled employees in the plan on the first day of the plan year.
For Trust Plans and MEWAs:
- The participant count is not a determining factor. A filing is required.
Some other factors that can lead to delinquency, such as:
- Systemic growth
- Changes in management
- Changes in the administration of benefits offered to participants
- Mergers & Acquisitions
- Accidental establishment of Trusts
- Control group issues
How to avoid penalties?
To avoid penalties under the Delinquent Filer Voluntary Compliance Program (DFVCP), it’s essential to ensure that you file annual reports for your employee benefit plan on time. Here are some tips to help you avoid DFVCP penalties:
- Know your filing requirements: Make sure you understand the filing requirements for your employee benefit plan under the Employee Retirement Income Security Act (ERISA). This includes understanding the due date for your annual report, which can vary depending on the type of plan you have and the plan’s size.
- Keep accurate records: Maintain accurate records of plan transactions and financial information to ensure that you can easily compile the information needed to file your annual report.
- Be aware of changes in the law: Stay up to date on changes in the law that may impact your filing requirements. This includes changes to ERISA reporting requirements or changes in the regulations governing your plan.
- Work with experienced professionals: Consider working with experienced professionals, such as an accountant or attorney, to help ensure that your annual report is accurate and complete. They can also help you navigate any changes in the law or regulations that may impact your filing requirements.
By following these tips and taking proactive steps to stay on top of your annual reporting requirements, you can avoid the need to participate in the DFVCP and the associated penalties.
Here are the penalty amounts below:
Penalty Amounts for Large Plans
- Daily penalty amount: $10
- Per Plan maximum penalty for one-year late filing: $2,000
- Capped per Plan penalty for multiple year late filings (same Plan number): $4,000
(IRS waives its penalties when the Plan Administrator uses the DFVC program)
If the DFVC Program is not utilized, the following penalties may be assessed if discovered by the Department of Labor:
- For Non-Filers: A penalty of $300 per day, up to $30,000 per year, may be assessed on a plan administrator until a complete Form 5500 is filed.
- For Late-Filers: A penalty of $50 per day, for each day an annual report is filed after the date on which the annual report was required to be filed, without regard to any extensions of time for filing.
(The Employee Benefits Security Administration (EBSA) has maintained a program for the assessment of civil penalties (Under 29 CFR 2560.502c-2 and 29 CFR 2570.60 et seq.)
Frequently asked questions about DFVCP