Will the DOL Use the 2002 Form 5500 as an Audit Trigger? (Part II)

By Nicholas J. Waddles

In our last Audit Newsletter, we wrote to you about certain changes to the 2002 Form 5500 and whether these changes--specifically, the wording of Question 4a of Schedules H and I--would lead to increased investigative activity by the Department of Labor (DOL). You will recall that Question 4a asks whether the employer transmitted any employee deferrals to the plan beyond the time permitted in the DOL regulations. The point of that article was to raise the issue of how the DOL planned to use that information, and if it would be used to trigger investigations.

Although we have not heard directly from the DOL on this point, it appears that at this time the DOL may be using that information to encourage employers to correct the delinquent deposits through the Voluntary Fiduciary Correction (VFC) Program. That is, some of our clients who answered "yes" to Question 4a have received letters from the DOL inviting them to make a submission under VFC to correct the late deposits and receive a no-action letter. Generally, VFC is not available once a sponsor is under investigation. And, the letters we have received suggest that the failure to make a VFC filing--or at least demonstrate to the DOL that the delinquent deposits have been corrected--may lead to an investigation.

If you or one of your clients answered yes to Question 4a and have not corrected the delinquent deposits under VFC or other method, you should do so immediately.

If you or one of your clients has received a "warning" letter from the DOL, you should start planning your response strategy with qualified ERISA counsel. Act quickly before you hear from the DOL again, because the next letter might be the start of an investigation.

© 2004 Reish Luftman Reicher & Cohen. All rights reserved. The ERISA Audit Report is published as a general informational source. Articles are general in nature and are not intended to constitute legal advice in any particular matter. Transmission of this report does not create an attorney-client relationship. Reish Luftman Reicher & Cohen does not warrant and is not responsible for errors or omissions in the content of this report.

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