[Federal Register Volume 60, Number 81 (Thursday, April 27, 1995)]
[Rules and Regulations]
[Pages 20874-20876]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-10403]




[[Page 20873]]

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Part IV





Department of Labor





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Pension and Welfare Benefits Administration



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29 CFR Parts 2560 and 2570



Delinquent Filer Voluntary Compliance Program; Final Rule

Federal Register / Vol. 60, No. 81 / Thursday, April 27, 1995 / Rules 
and Regulations
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[[Page 20874]] 


DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

29 CFR Parts 2560 and 2570

RIN 1210-AA49


Employee Retirement Income Security Act of 1974; Administration 
and Enforcement, Delinquent Filer Voluntary Compliance Program

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Rule related notice, reduced civil penalty.

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SUMMARY: This Notice announces the implementation of a new Delinquent 
Filer Voluntary Compliance Program by the Department of Labor's Pension 
and Welfare Benefits Administration (PWBA). This Program is intended to 
encourage, through the assessment of reduced civil penalties, 
delinquent plan administrators to comply with their annual reporting 
obligations under Title I of the Employee Retirement Income Security 
Act of 1974, as amended, (ERISA).

EFFECTIVE DATE: April 27, 1995.

FOR FURTHER INFORMATION CONTACT: PWBA's Delinquent Filer Voluntary 
Compliance Program Hotline, (202) 219-8776 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Executive Order 12866 Statement

    Under Executive Order 12866 (58 FR 51735, Oct. 4, 1993), the 
Department must determine whether the regulatory action is 
``significant'' and therefore subject to review by the Office of 
Management and Budget (OMB) and the requirements of the Executive 
Order. Under section 3(f), the order defines a ``significant regulatory 
action'' as an action that is likely to result in a rule (1) having an 
annual effect on the economy of $100 million or more, or adversely and 
materially affecting a sector of the economy, productivity, 
competition, jobs, the environment, public health or safety, or State, 
local or tribal governments or communities (also referred to as 
``economically significant''); (2) creating serious inconsistency or 
otherwise interfering with an action taken or planned by another 
agency; (3) materially altering the budgetary impacts of entitlement 
grants, user fees, or loan programs or the rights and obligations of 
recipients thereof; or (4) raising novel legal or policy issues arising 
out of legal mandates, the President's priorities, or the principles 
set forth in the Executive Order.
    Pursuant to the terms of the Executive Order, the Department has 
determined that this program creates a novel method for statutory 
compliance that will reduce paperwork and regulatory compliance burdens 
on businesses, including small businesses and organizations, and make 
better use of scarce federal resources, in accord with the mandates of 
the Paperwork Reduction Act, the Regulatory Flexibility Act, and the 
President's priorities. Therefore, this notice is ``significant'' and 
subject to OMB review.

Regulatory Flexibility Act Statement

    The Regulatory Flexibility Act of 1980 requires each Federal agency 
to perform a regulatory flexibility analysis for all rules that are 
likely to have a significant economic impact on a substantial number of 
small entities. Small entities include small businesses, organizations, 
and governmental jurisdictions.
    Given the existing requirement on small businesses to file the Form 
5500 Series Annual Return/Reports, we believe this delinquency program 
imposes no significant additional burden on small entities. First, no 
entity is required to file under this program. Thus, unless a plan 
sponsor chooses to take advantage of the relief offered by this 
program, this program would not impose any increased burden on small 
entities that sponsor pension and welfare benefit plans. Second, the 
additional documentation that would be required to be submitted under 
this program is minimal. Third, the program offers a substantial 
reduction in the penalties that might otherwise be imposed on the 
entities, including small entities, that participate in the program. A 
second tier of requirements, in the form of further reduced penalties, 
has been provided for small plans (those filing Form 5500-C).

Paperwork Reduction Act Statement

    Public reporting burden for this collection of information is 
estimated to average 21 minutes per response, including the time for 
reviewing instructions, searching existing data sources, gathering and 
maintaining the data needed, and completing and reviewing the 
collection of information. If you have any comments regarding this 
estimate or any other aspect of this information collection, including 
suggestions for reducing this burden, please send them to the 
Department of Labor, Office of IRM Policy, Room N-1301 (1210-0XXX), 200 
Constitution Avenue, NW, Wash., DC 20210, and to Allison Herron Eydt, 
PWBA Desk Officer, Office of Management and Budget, Room 10235, New 
Executive Office Building, Washington, DC 20507.

Section 1--Background

    The Secretary of Labor has the authority, under section 502(c)(2) 
of ERISA, to assess civil penalties of up to $1,000 a day against plan 
administrators who fail or refuse to file complete and timely annual 
reports (Form 5500 Series Annual Return/Reports) as required under 
section 101(b)(4) of ERISA and the Secretary's regulations codified in 
29 CFR Part 2520. Pursuant to 29 CFR 2560.502c-2 and 2570.60 et seq., 
PWBA has maintained a program for the assessment of civil penalties for 
noncompliance with the annual reporting requirements. Under this 
program, plan administrators filing annual reports after the date on 
which the report was required to be filed may be assessed $50 per day 
for each day an annual report is filed after the date on which the 
annual report(s) was required to be filed, without regard to any 
extensions for filing. Plan administrators who fail to file an annual 
report may be assessed a penalty of $300 per day, up to $30,000 per 
year, until a complete annual report is filed. Penalties are applicable 
to each annual report required to be filed under Title I of ERISA. The 
Department may, in its discretion, waive all or part of a civil penalty 
assessed under section 502(c)(2) upon a showing by the administrator 
that there was reasonable cause for the failure to file a complete and 
timely annual report.
    The Department has determined that the possible assessment of the 
above described civil penalties may deter certain delinquent filers 
from voluntarily complying with the annual reporting requirements under 
Title I of ERISA. In an effort to encourage annual reporting 
compliance, therefore, the Department has decided to implement the 
Delinquent Filer Voluntary Compliance (DFVC) Program, described herein, 
under which administrators otherwise subject to the assessment of 
higher civil penalties will be permitted to pay reduced civil penalties 
for voluntarily complying with the annual reporting requirements under 
Title I of ERISA.

Section 2--The Delinquent Filer Voluntary Compliance (DFVC) Program

    .01  General. The DFVC Program is intended to afford eligible plan 
administrators (described in subsection .02 of this Section) the 
opportunity to avoid the assessment of civil penalties otherwise 
applicable to administrators who fail to file timely annual reports for 
plan years beginning on or after January [[Page 20875]] 1, 1988. 
Eligible administrators may avail themselves of the DFVC Program by 
complying with the filing requirements and paying the civil penalties 
specified in Section 3 or Section 4, as appropriate, of this Notice.
    .02  Eligibility for DFVC Program. The DFVC Program is available 
only to a plan administrator who complies with each of the requirements 
of Section 3 or Section 4, as appropriate, of this Notice prior to the 
date on which the administrator:
    (a) is notified in writing, pursuant to 29 CFR 2560.502c-2, of the 
Department's intention to assess a civil penalty under section 
502(c)(2) of ERISA for failure to file a timely annual report; or
    (b) is otherwise notified in writing by the Department of a failure 
to file a timely annual report under Title I of ERISA.
    .03  Effective date. The DFVC Program described herein shall be 
effective April 27, 1995. The Department of Labor intends the DFVC 
Program to be of indefinite duration; however, the Program may be 
modified from time to time or terminated in the sole discretion of the 
Department upon publication of notice in the Federal Register.

Section 3--Administrators Filing Annual Reports

    .01  Plan administrators electing to file a late Form 5500 Series 
Annual Report under the DFVC Program shall:
    (a) File with the Internal Revenue Service. Except as provided in 
Section 3.02, file a complete Form 5500 or Form 5500-C (but not the 
Form 5500-R), as appropriate, with all required schedules and 
attachments, by entering at the top center of the first page of the 
Form, in red, bold print ``DFVC Program'' and mailing the complete 
Form, along with all required schedules and attachments, to the 
Internal Revenue Service Center designated in the Form 5500 Series 
instructions. Do not send checks paying penalties under the DFVC 
Program to the Internal Revenue Service Center.

    Note: If a joint employer-union board of trustees or committee 
is the administrator, at least one employer representative and one 
union representative must sign the Form.

    Current forms and instructions can be obtained by dialing 1-800-
TAX-FORM (this is a toll-free number). For prior years, obtain the most 
current form available. If necessary, mark through the year at the top 
of the first page and enter the appropriate prior year in red bold 
print.
    (b) File with the U.S. Department of Labor and Pay Applicable 
Penalty Amount. Send a signed and dated copy of the first page of the 
Form 5500 Series Annual Report filed with the Internal Revenue Service 
and a check payable to the ``U.S. Department of Labor'' in the amount 
of the applicable penalty, as determined under Section 3.03, to: DFVC 
Program, Pension and Welfare Benefits Administration, P.O. Box 277025, 
Atlanta, GA 30384-7025.
    The items that are required to be sent to the Department pursuant 
to this Section 3.01(b) (i.e., the completed first page of the Form 
5500 Series annual report as well as the check made payable to the U.S. 
Department of Labor) also should contain the notation, in red, bold 
print ``DFVC Program''. The notation should be located at the top 
center of each item.
    .02  A plan administrator who filed a complete Form 5500 Series 
Annual Report, including all required schedules and attachments, with 
appropriate Internal Revenue Service Center prior to the effective date 
of this DFVC Program, but after the due date for the report, shall only 
be required to comply with the provision of paragraph (b) of Section 
3.01 and, therefore, shall not be required to refile the Form 5500 
Series Annual Report with the Internal Revenue Service Center solely 
for purposes of the DFVC Program.
    .03  For each annual report filed under this Section 3, the 
applicable penalty amount shall be determined as follows:
    (a) In the case of an annual report which is filed on or before 
twelve (12) months after the date on which the annual report was due 
(without regard to any extensions), $50 per day for each day the annual 
report is filed after the date on which the annual report was due 
(without regard to any extensions), up to a maximum of $2,500 for From 
5500 filers and $1,000 for Form 5500-C filers; or
    (b) In the case of an annual report which is filed more than twelve 
(12) months after the date on which the annual report was due (without 
regard to any extensions), $5,000 for Form 5500 filers and $2,000 for 
Form 5500-C filers.

    Note: The plan administrator is personally liable for the 
payment of civil penalties assessed under section 502(c)(2) of 
ERISA. Therefore, civil penalties, including penalties paid under 
this DFVC Program, may not be paid from the assets of an employee 
benefit plan.

    .04  Annual reports that are filed with the IRS pursuant to the 
DFVC Program may be subject to the usual edit checks. Plan 
administrators will have an opportunity to correct deficiencies, in 
accordance with the procedures described in 29 CFR 2560.502c-2. The 
failure to correct deficiencies in accordance with these procedures may 
result in the assessment of further penalties.
    PWBA has prepared a booklet, ``The Trouble-Shooter's Guide To 
Filing ERISA Annual Reports,'' to assist in preparing the Form 5500 
Series. The booklet explains how forms are processed and how to avoid 
potential filing errors. Copies are available by written request to: 
U.S. Department of Labor, Pension and Welfare Benefits Administration, 
Room N-5656, 200 Constitution Ave. N.W., Washington, D.C. 20210.

Section 4--Administrators Electing To File Statements for 
Apprenticeship and Training Plans or ``Top Hat'' Plans

    .01  Administrators of apprenticeship and training plans, described 
in 29 CFR 2520.104-22, and administrators of pension plans for a select 
group of management or highly compensated employees, described in 29 
CFR 2520.104-23(a) (``top hat plans''), who elect to file the 
applicable statement(s), described in Secs. 2520.104-22, and 2520.104-
23, respectively, as a condition of relief from the annual reporting 
requirements may, in lieu of filing any past due annual report and 
paying otherwise applicable civil penalties, comply with the following 
filing requirements:
    (a) Send Form and Pay Applicable Penalty Amount to the U.S. 
Department of Labor. For purposes of this requirement, plan 
administrators must complete items 1a-1c, 2a-2c, 5a-5c, 6a or 6b (as 
applicable) of the first page of the Form 5500 Annual Report and enter 
at the top center of the Form, in red, bold print, either 
``Apprenticeship and Training Plan/DFVC Program'' or ``Top Hat Plan/
DFVC Program'', as appropriate. For purposes of completing item 5c, the 
plan number for all top hat plans should be 888, and the plan number 
for all apprenticeship and training plans should be 999. The plan 
administrator must sign and date the Form.

    Note: If a joint employer-union board of trustees or committee 
is the administrator, at least one employer representative and one 
union representative must sign the Form.

    Send the first page of the completed Form 5500 Annual Report, and a 
check payable to the ``U.S. Department of Labor'' for the applicable 
penalty amount, as determined under section 4.01(c), to: DFV Program, 
Pension and Welfare Benefits Administration, P.O. Box 277025, Atlanta, 
GA 30384-7025. [[Page 20876]] 
    The check that is made payable to the U.S. Department of Labor also 
should contain the notation, in red, bold print ``DFVC Program.'' The 
notation should be located at the top center of the check.
    (b) File Applicable Statement with the U.S. Department of Labor. 
Prepare and file a statement meeting the requirements of 
Secs. 2520.104-22, or 2520.104-23, as appropriate.
    The apprenticeship and training plan statement described in 
Sec. 2520.104-22 must be sent to: Apprenticeship and Training Plan 
Exemption, Pension and Welfare Benefits Administration, Room N-5638, 
U.S. Department of Labor, 200 Constitution Avenue NW., Washington, DC 
20210.
    The ``top hat'' statement described in Sec. 2520.104-23 must be 
sent to: Top Hat Plan Exemption, Pension and Welfare Benefits 
Administration, Room N-5638, U.S. Department of Labor, 200 Constitution 
Avenue NW., Washington, DC 20210.

    Note: A plan sponsor maintaining more than one ``top hat'' plan 
is not required to file a separate statement for each such plan. See 
Sec. 2520.104-23(b).

    (c) Applicable penalty amount. For purposes of the statements filed 
under this Section 4, the applicable penalty amount is $2,500, without 
regard to the number of plans maintained by the same plan sponsor for 
which statements are filed pursuant to Section 4.01(b) and without 
regard to the number of plan participants covered under such plan or 
plans.

    Note: The plan administrator is personally liable for the 
payment of civil penalties assessed under section 502(c)(2) of 
ERISA, therefore, civil penalties, including penalties paid under 
this DFVC Program, may not be paid from the assets of an employee 
benefit plan.

    (d) Multiple ``top hat'' plans. In the case of plan sponsors 
maintaining more than one pension plan for a select group of management 
or highly compensated employees described in Sec. 2520.104-23, the plan 
administrator shall, for purposes of the DFVC Program, be required to 
send a copy of the first page of the Form 5500, completed in accordance 
with Section 4.01(a), without regard to the number of such plans 
maintained by the plan sponsor, provided that each plan maintained by 
the sponsor is clearly identified on the first page of the Form 5500 or 
attachment thereto filed with the Department of Labor.
    .02  Administrators who have complied with the requirements of this 
Section 4 shall be considered as having elected compliance with the 
exemption(s) and/or alternative method of compliance prescribed in 
Secs. 2520.104-22, or 2520.104-23, as appropriate, for all subsequent 
plan years.
    .03  Acceptance by the Department of a filing and penalty payment 
made pursuant to this Section 4 does not represent a determination by 
the Department of Labor as to the status of the arrangement as a plan 
or particular type of plan under Title I or ERISA or a determination by 
the Department of Labor that the provisions of Secs. 2520.104-22, or 
2520.104-23 have been satisfied.

Section 5--Waiver of Right to Notice and Abatement of Assessment

    .01  Payment of a penalty under the terms of this DFVC Program 
constitutes a waiver of an administrator's right both to receive notice 
of assessment under 29 CFR 2560.502c-2 from the Department and to 
contest the Department's Assessment of the penalty amount. It should 
also be noted that payment of a penalty under the DFVC Program does not 
preclude the assessment of non-filing or late-filing penalties by other 
Federal agencies, including the Internal Revenue Service and the 
Pension Benefit Guaranty Corporation.
    .02  The Internal Revenue Code (Code) and regulations thereunder 
require information to be filed on the Form 5500 Series Annual Return/
Report and provides penalties for failing to timely file. Under the 
Code, these penalties apply unless it is shown that the failure to 
timely file is due to reasonable cause. If the late filing of a Form 
5500 Series Annual Return/Report required by the Code may be due to 
reasonable cause, a cover letter, demonstrating that the failure to 
timely file was due to reasonable cause, should be attached to the 
completed Form 5500 Series Annual Return/Report that is filed with the 
IRS.

    Signed at Washington, DC, this 24th day of April, 1995.
Olena Berg,
Assistant Secretary, Pension and Welfare Benefits Administration.
[FR Doc. 95-10403 Filed 4-26-95; 8:45 am]
BILLING CODE 4510-29-M