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Hi Donna, this is Wendy Terry with Withum and the practice leader for employee benefit plan services. And it’s interesting that this COVID environment has gotten us in a place where things are not quite the same this year. And, you know, I attended the Employee Benefit Plan Audit Quality Center, which is run by the AICPA and they had the Department of Labor on. And one of the questions that came up was: will there be an extension this year for the October 15th filing deadline? And, interestingly enough, they were pretty adamant that there wasn’t a need for an extension. And I think, you know, there was an alert put out. Did you have an opportunity to look at that alert?
I did, yes. And, so that was, that was interesting because I think everybody expected that there would be an extension of time to file just like there was for individuals and corporations. So I was surprised to read that there won’t be an extension of time to file which is going to be kind of interesting. I know there are a lot of companies that are able to get their 5500s filed on time, but there are some that have run into difficulties getting the information needed to complete their filings. And so, you know, that is something that needs to be addressed, that people need to understand how they can actually file an incomplete 5500 instead of just ignoring the deadline. They really need to be filing in October, by the deadline on October 15th they should be filing an incomplete 5500.
Yeah, I think the Department of Labor’s biggest issue was, you know, primarily it’s the big filers, right? 5500 forms that require the audit report and the audit opinion. And, you know, sometimes whether it be the auditors’ issue or the plan sponsors issue, the audit can’t be completed on time. So what they were saying, an incomplete filing is better than no filing at all, which makes a lot of sense. An incomplete filing means that you file a 5500, but you just don’t attach the audit report and the completed audit report. So a big question came up as to, well, what do you do? Because I know that these filings will not accept, you know, they’ll basically reject if there is not an attachment and it doesn’t have the, you know, obviously the computer doesn’t read the audit opinion, although is somebody at the Department of Labor that looks to make sure it is a real audit opinion. What the computer looks for is that there is an attachment. And so this question did come up and the Department of Labor representative said, well, they can just attach a simple sheet that gives an explanation as to why. A brief explanation that the audit opinion is not complete and that the filing will be amended in the future. So again, that would meet the definition of a filing, although, incomplete.
Yeah. Which is great to know because, you know, not filing at all, there would be tremendous penalties, right? For a company, if they didn’t file their 5500 at all on time, then they would get hit with late filing penalties, which can be very, very hefty. Right?
Yeah. I think the IRS can assess penalties, in addition to the Department of Labor. Obviously the IRS penalties were changed this year. I think they’re $250 per day up to $150,000 per year. Whereas the Department of Labor can also assess a penalty and this is for failure to comply with ERISA – title one of ERISA – and a penalty for a late filer is $2,000 or more per day. So there’s no maximum. So, you know, it’s not something that you want to take the chance of having to get this assessed penalty. Um, you know, it’ll take them a while sometimes to get you a notice that the filing is not complete or it’s incomplete or it’s incorrect.
So one of the questions is, what would the Department of Labor do? Let’s just say a company files, an incomplete filing, with a statement saying that, you know, the audit will be completed soon and they’ll have to file an amended 5500. What does the Department of Labor do?
That’s a great question. So typically, and again, the timing on this is not specific, but as soon as they notice that the filing is incomplete, they’ll send in a letter to the plan sponsor that says, Hey, your filing is being rejected because it’s incomplete. You will be given 45 days from the date of the letter to file an amended return. You do have to amend the filing that has the audit opinion. Now that letter could come 30 days after you filed the original one, it could come 45 days after, it could come six months. There’s no – it all depends on when the Department of Labor actually notices that the filing is incomplete. And, you know, from that date, there’s an additional 45 days. So that was actually one of the discussion points that we had, that they felt that there wasn’t a real need to change the date of the filing because there was reasonable processes already in place to assist with late filings. Again, they felt like, you know, okay, even if it’s incomplete, we’re going to send you a letter and you’re going to have 45 days. So why would we extend it when you’re going to have 45 days basically. And, and we all understand COVID affected some people. And so, you know, that’s going to be a reasonable cause that we would accept. So I think their perspective was, our process that we have in place is sufficient to allow for a reasonable time for individuals to get this done.
That’s great. So, so it really is good to know. I mean, it sounds like they’re giving you a little bit of leeway, right? So we’ll have 45 days to complete the audit after October 15th. Even if you got a notice right away, that brings you to the end of November to get the audit completed. So hopefully that would, that’s the earliest, right. So that definitely does help. And most likely, you know, the DOL is not going to turn around and send the letter that fast.
I think the Department of Labor is always looking to have compliant filers. So, you know, even if you didn’t have – and I’ve had situations like this where you couldn’t get through that 45 days – if you reach out to them and they have phone numbers usually on those letters and you explain your circumstances and your situation, they’re pretty lenient and they’re pretty willing to accept a reasonable cause for being delayed. So I would just advise anyone listening that, again, don’t ignore the letters. I know sometimes it seems easier to do that, but it’s always better to respond to the notices as quickly as you can. And then, you know, if things continue to be delayed, obviously continue to correspond directly with the Department of Labor. And, and maybe, you know, at some point you may need to hire Withum or a labor attorney or ERISA attorney to assist you. But at some point, they just really want to get the filings complete so that employees are treated fairly. That’s their goal.
Yep. Sounds reasonable. Thank you!