DOL Revises Electronic Filing Procedures

EFAST2 Part 7

In our continuing series of FAQs on EFAST2, we are addressing the issues and procedures with which the 5500 preparers and plan sponsors will need to familiarize themselves to make the transition to electronic filing.

Recently, we received a call from a DOL official informing us that the DOL was modifying its procedures regarding processing electronically filed 5500s. The DOL also indicated it was modifying its position regarding when it considered a 5500 filed. To understand the modification, a brief review of the DOL’s previous position is necessary. Originally, the DOL indicated that it would employ a two-step process in processing 5500s. Under the first step, the DOL would make a minimal determination whether the filing was in a proper format (i.e., processable or unprocessable). If unprocessable, the preparer would need to correct and resubmit. If processable, during the subsequent 24-hour period, the DOL would review the filing to determine whether the 5500 was complete and error free. If the filing was error free and complete, the DOL would accept the filing and consider the 5500 filed. If the filing was incomplete or contained errors, the DOL would not consider the 5500 filed and the preparer would need to correct the errors and resubmit. The DOL’s position, of course, would have placed preparers filing close to a deadline in a precarious position. The following FAQs address the DOL’s new position regarding the DOL’s processing of a filing and when it considers a 5500 filed.

Under EFAST2, what does the acronym IFAS mean?

Internet Filing Acceptance System. The DOL uses this system to process and review a 5500 transmitted under EFAST2.

Once a preparer electronically transmits a 5500 to the DOL, what are the DOL’s procedures for processing the 5500?

Once a preparer transmits the 5500 to the DOL, the IFAS will apply a two-step process in reviewing the filing electronically to determine whether the format is proper and whether the filing is complete and error free. Under step one, IFAS will determine whether the filing is processable or unprocessable. If IFAS can process the filing, IFAS will provide an acknowledgment identification (ID). However, if IFAS cannot process the filing (i.e., IFAS does not recognize the format), it will display a status of unprocessable. The preparer then should resubmit the filing. If, after resubmitting the filing, IFAS still cannot process the filing, the preparer should contact the DOL helpline or its software vendor. The DOL is indicating that it should be able to determine if the filing is processable within 90 seconds of the submission. Under step two, IFAS will determine whether the filing is complete and error free. If the filing is processable (i.e., IFAS provides an acknowledgment ID), IFAS will display one of four status indicators:

  1. Processing. The DOL has not completed its review and the preparer should return to IFILE (or 3rd party application) later for an updated status.
  2. Filing stopped. The DOL recognizes the filing as a 5500 but some problem in the filing has caused the DOL’s review to stop. The employer should file an amended return correcting the problem.
  3. Filing error. The DOL recognizes the filing as a 5500 but the DOL has determined that there is an error or omission. The employer should file an amended return correcting the error or omission.
  4. Filing received. The DOL recognizes the filing as a 5500 and the DOL has determined that there are no errors or omissions but the filing may contain a DOL warning. Therefore, a preparer will need to review a status completely to determine if the status contains a warning.
What is the difference between the filing stopped and filing error?

A 5500 will receive the status of "filing stopped' if the preparer fails to provide information necessary to validate the 5500. For example, if the preparer failed to include the characteristics codes in line 8 of the 5500, IFAS would not be able to validate the 5500 and schedules because it is unable to determine if the plan is a profit sharing or pension plan. Consequently, after the preparer amends the plan and adds the characteristics codes, the DOL may discover additional errors. A "filing error", on the other hand, occurs when a required question is left unanswered, a schedule is not included, calculation error or an audit or attachment is not included. These errors roughly correspond to the types of errors which in earlier years would have generated DOL correspondence.

What is a DOL warning?

The DOL has identified a list of situations in which it will consider a 5500 filing received but the preparer should review the question subject to the warning to determine if the preparer completed the question properly or whether the answered question may require additional action. For example, if a preparer files a 5500 late, the 5500 may receive a “filing received” status but the DOL may issue a warning that indicates the plan sponsor will be subject to late filing penalties unless the preparer corrects the late filing under the Delinquent Filer Voluntary Compliance program.

Is it possible that a preparer will receive no message with respect to a filing?

Yes. In circumstances where the transmission is interrupted, the DOL will not have received the filing so there will be no message on IFAS. In such a situation, the preparer needs to re-transmit.

Once a 5500 has been transmitted, will DOL assign any code to a filing?

Yes, if DOL determines the filing is processable, IFAS will assign an acknowledgement ID to the filing. A preparer (or the application the preparer uses to transmit the filing) will use this acknowledgement ID to determine the status of the plan (processing, filing stopped, filing error or filing received). The preparer also uses the acknowledgment if it needs to amend the 5500.

When does the DOL consider a 5500 filed?

The DOL will consider a 5500 filed when IFAS indicates one of the following statuses: filing stopped, filing error or filing received. If IFAS indicates a status of processing or unprocessable, the DOL does not consider the 5500 to have been filed.

How long after submission will IFAS take to display one of the four statuses (other than unprocessable )?

The DOL is indicating that IFAS should be able to indicate a status within 20 minutes of transmission. Note: At peak filing periods, the time to process a filing and indicate a status may take longer.

If IFAS determines that a filing status is filing stopped or filing received, what steps must the preparer take?

The preparer must amend the 5500 and resubmit the filing to the DOL. The preparer will need to use the acknowledgement ID when it re-transmits the filing.

Will the plan sponsor need to go through the signing ceremony again (i.e., electronically enter the plan signer credentials)?

Yes. The plan sponsor will use the same filing signer credentials it used with the original filing.

What is the deadline for amending a 5500 if IFAS determines its status is filing stopped or filing error?

The DOL has not yet determined the deadline for amending a 5500 that receives a status of filing stopped or filing error.

What are the consequences if a plan sponsor does not amend a 5500 which receives a status of filing stopped or filing received?

If a plan sponsor does not amend a 5500 which receives a status of filing stopped or filing received, the DOL will turn the filing over to its enforcement division. DOL enforcement has the authority to consider the filing as incomplete and assess penalties for late filing. A preparer should note that a plan sponsor contacted by DOL enforcement regarding an uncorrected 5500 filing would not be eligible for the DOL’s delinquent filing voluntary compliance program. However, it is unlikely that the DOL’s initial contacts would involve penalties.

May a plan sponsor file a Form 5500 without the accountant’s opinion?

Apparently yes. However, unlike current filing procedures (EFAST), under EFAST2, the DOL will know immediately that a filing is missing the accountant’s opinion. Currently, the DOL may take up to a year before it processes a filing and determines that a filing is missing the accountant’s opinion. Generally, by the time the DOL processes the 5500 under EFAST, the preparer has amended the filing and included the accountant’s opinion. Under EFAST2, preparers should warn accountants that the time period for amending a 5500 and attaching the missing audit will be shortened significantly.

What is the penalty for failing to include an accountant’s opinion?

Generally, the DOL will assess a $50,000 penalty for failing to include an audit with the 5500.