![]() ![]() In the 401(k) Workshop, a topic is included to discuss the DOL regulations and guidance on the new safe harbor rule for transmitting elective deferrals and the allocation of fiduciary responsibility for collecting delinquent contributions. In the Form 5500 Workshop, we not only explain how to complete the Form 5500 and its schedules, we also discuss how to report and handle late deposit of deferral situations. If the plan sponsor decides to self-correct, the preparer should prepare the plan sponsor for the eventual DOL letter. In every situation of which we are aware, once the DOL receives information that the late deposit has been corrected, it does not pursue the matter further. In some circumstances, the DOL may request some evidence that the correction has been made (e.g., copies of checks calculation of earnings). In situations where the plan sponsor self-corrects, the plan sponsor simply should respond to the DOL that it has corrected the late deposit using the VFCP methodology (with the exception of using the online calculator) and has paid the prohibited transaction excise tax. Since the prohibited transaction excise tax usually is negligible, these plan sponsors generally prefer to self-correct and pay the excise tax. Many small and medium sized plan sponsors will conclude the costs of the program outweigh its benefit. A plan sponsor should weigh the benefits of the program (elimination of the prohibited transaction excise tax) against the costs of filing under the program (cost of hiring an attorney to file). Although a plan sponsor always should consider VFCP, the plan sponsor should not feel unnecessarily pressured into filing under the program. The plan sponsor may fear the DOL will commence an investigation if it does not file under VFCP. The letter, with its emphasis on VFCP, often creates concern for the plan sponsor. The sentence encouraging the plan sponsor to file under VFCP is in bold. In the DOL letter regarding the late deposit of elective deferrals, the DOL notes the late deposit and encourages the plan sponsor to correct the late deposit under the Voluntary Fiduciary Correction Program (VFCP). Since the DOL generally reviews the Form 5500 before commencing an investigation, we believe the attachment describing the correction will influence the DOL to focus on plans where Form 5500 does not disclose whether a correction has occurred. Despite the fact that the attachment is optional for a Schedule I and despite the fact that the DOL apparently does not review the schedule or the attachment before sending the letter, we continue to encourage the use of the attachment (or a footnote describing the correction) to forestall a potential DOL investigation. The DOL continues to require the plan sponsor to include the attachment with the filing of a Schedule H (large plan). ![]() The receipt of the letter has unnerved some plan sponsors and has made some Form 5500 preparers question the value of the attachment describing the correction, in particular in a Schedule I situation (small plan) where the attachment is not required. Apparently, the DOL generates the letter even though the plan sponsor has included an attachment (or a footnote) in which it indicates that the late deposit has been corrected. Recently, the Department of Labor (DOL) has been automatically generating letters to plan sponsors who answer line 4a (Schedule H or I) with a “yes.” Line 4a asks if the plan sponsor failed to transmit elective deferrals to the plan within the time period described in the plan asset regulations. DOL Correspondence on Late Deposit of Elective Deferrals ![]()
0 Comments
Leave a Reply. |