[Federal Register Volume 67, Number 60 (Thursday, March 28, 2002)]
[Rules and Regulations]
[Pages 15052-15060]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-7514]



[[Page 15051]]

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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. 67, No. 60 / Thursday, March 28, 2002 / Rules 
and Regulations  

[[Page 15052]]


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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

29 CFR Parts 2560 and 2570

RIN 1210-AA86


Delinquent Filer Voluntary Compliance Program

AGENCY: Pension and Welfare Benefits Administration, Department of 
Labor.

ACTION: Notice, Delinquent Filer Voluntary Compliance Program.

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SUMMARY: This Notice modifies the Delinquent Filer Voluntary Compliance 
Program (``DFVC Program'' or ``Program'') announced by the Department 
of Labor's Pension and Welfare Benefits Administration in 1995. The 
DFVC 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). Following a 
review of the DFVC Program, as adopted in 1995, the Department has 
determined to update the Program and adjust the civil penalty structure 
under the Program in an effort to further encourage and facilitate 
voluntary compliance by plan administrators with ERISA's annual 
reporting requirements. Because the modifications to the DFVC Program 
include lower civil penalty assessments, the modifications are being 
put into effect upon publication of this notice in the Federal 
Register. Nonetheless, the Department is seeking comments from the 
public on the modified Program.

DATES: Effective Date: March 28, 2002. The modified Program adopted 
herein supercedes and replaces, as of its effective date, the DFVC 
Program as adopted on April 27, 1995 (60 FR 20874).
    Comment Date: Written comments must be received by the Department 
no later than May 28, 2002.

ADDRESSES: Interested persons are invited to submit written comments on 
the DFVC Program to: DFVC Comments, Office of Regulations and 
Interpretations, Room N-5669, Pension and Welfare Benefits 
Administration, U.S. Department of Labor, 200 Constitution Ave., NW., 
Washington, DC 20210. All submissions will be open to public inspection 
at the Public Documents Room, Pension and Welfare Benefits 
Administration, Room N-1513, U.S. Department of Labor, 200 Constitution 
Ave., NW., Washington, DC 20210.

FOR FURTHER INFORMATION CONTACT: Jennifer C. Warner or Scott C. Albert, 
Office of the Chief Accountant, Pension and Welfare Benefits 
Administration, telephone (202) 693-8360. This is not a toll-free 
number.

SUPPLEMENTARY INFORMATION:

A. Background

    The Secretary of Labor has the authority under section 502(c)(2) of 
ERISA to assess civil penalties of up to $1,100 \1\ a day against plan 
administrators who fail or refuse to file complete and timely annual 
reports as required under section 101(b) of ERISA and the Secretary's 
regulations. Pursuant to 29 CFR 2560.502c-2 and 29 CFR 2570.60 et seq., 
the Pension and Welfare Benefits Administration (PWBA) has maintained a 
program for the assessment of civil penalties for noncompliance with 
ERISA's annual reporting requirements. Under this program, plan 
administrators filing late annual reports may be assessed $50 per day 
for each day an annual report is filed after the date on which the 
annual report was required to be filed, without regard to any 
extensions of time 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. 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 or that there was reasonable cause why the penalty, as 
calculated, should not be assessed.
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    \1\ In accordance with the requirements of the Federal Civil 
Penalties Inflation Adjustment Act of 1990, as amended, the 
Department's regulation at 29 CFR 2575.502c-2 increased the maximum 
civil penalty from $1,000 a day as stated in section 502(c)(2) of 
ERISA to $1,100 a day for violations occurring after July 29, 1997.
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    In an effort to encourage delinquent filers to voluntarily comply 
with the annual reporting requirements under Title I of ERISA, the 
Department adopted, on April 27, 1995, the Delinquent Filer Voluntary 
Compliance (DFVC) Program (60 FR 20874). The Program, as adopted in 
1995, permitted administrators otherwise subject to the assessment of 
higher civil penalties for failing to file a timely annual report to 
pay reduced civil penalties for voluntarily complying with the 
requirement to file an annual report under Title I of ERISA.
    Under the 1995 DFVC Program, plan administrators filing the Form 
5500-C (plans with fewer than 100 participants at the beginning of the 
plan year or plans filing the Form 5500-C pursuant to the ``80-120'' 
participant rule in Sec. 2520.103-1(d) (``small plans'')) were subject 
to a civil penalty assessment of $50 per day up to $1,000 when the 
annual report was twelve months or less late, and $2,000 when the 
annual report was more than twelve months late.\2\ Plan administrators 
filing the Form 5500 (plans with 100 or more participants at the 
beginning of the plan year other than a plan filing pursuant to the 
``80-120'' participant rule (``large plans'')) were subject to a civil 
penalty assessment of $50 per day up to $2,500 when the annual report 
was one year or less late, and $5,000 when the annual report was more 
than one year late. A civil penalty assessment of $2,500 applied to 
late filings by plan administrators for apprenticeship and training 
plans described in Sec. 2520.104-22 and ``top hat'' plans described in 
Sec. 2520.104-23(a). Under the terms of the DFVC Program, the 
Department reserved the right to modify or terminate the Program upon 
publication of a notice in the Federal Register.
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    \2\ Plan administrators were not allowed to use the Form 5500-R 
when filing annual reports under the DFVC Program.
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B. Modifications to the DFVC Program

    The Department is modifying the DFVC Program in order to further 
facilitate and encourage voluntary compliance with the annual reporting 
requirements. These modifications take the form of reducing civil 
penalty assessments, as well as simplifying and updating the process 
governing participation in the DFVC Program. A discussion of the 
changes follows.

1. Applicable Penalty Amount

    Since the adoption of the DFVC Program in 1995, the Department has 
received input from plan administrators, as well as from accountants, 
third party administrators, and other members of the employee benefits 
community, indicating that the civil penalty assessments provided for 
under the 1995 Program, while less than the otherwise applicable 
penalties, nonetheless may be an impediment to many delinquent filers, 
especially administrators of small plans, because of the absence of a 
per plan, rather than a per annual report, based cap on the penalty 
amount. For example, under the 1995 Program, the administrator of a 
small pension plan with respect to which no annual reports were filed 
for plan years 1995--1999 would have to pay a civil penalty assessment 
of $2,000 per report and, therefore, would be required to pay a civil 
penalty

[[Page 15053]]

assessment of $10,000 ($2,000  x  five plan years), a sizeable amount 
for many small employers. Public input in this area is consistent with 
the Department's finding that, although small employers constitute 
about 80 percent of the Title I of ERISA filers, the majority of plan 
administrators electing to comply under the DFVC Program are 
administrators of large plans.
    Accordingly, the Department, in an effort to encourage voluntary 
compliance with ERISA's annual reporting requirements, is modifying the 
civil penalty structure under the DFVC Program. Specifically, the per 
day late filing penalty amount for plan administrators taking part in 
the DFVC Program has been reduced for large and small plans from $50 
per day to $10 per day. In the case of a single late annual report 
filing for a plan, the cumulative daily penalty amount for a plan year 
is capped at $750 for small plans and $2,000 for large plans. The DFVC 
Program, as modified, also contains a new per plan cap on the penalty 
to address the concerns about the cumulative effect of the per annual 
report penalties when a plan has annual reporting delinquencies for 
multiple plan years. The per plan cap is $1,500 for a small plan and 
$4,000 for a large plan and applies on a submission-by-submission 
basis. Thus, in the case of the previous example where the plan 
administrator for a small plan did not file an annual report for a 
five-year period, the applicable penalty amount under the revised DFVC 
Program would be $1,500 (rather than $10,000 under the 1995 DFVC 
Program) provided the plan administrator included the annual reports 
for all five plan years in the same DFVC Program submission.\3\
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    \3\ There is no ``per administrator'' or ``per sponsor'' cap. 
Thus, if the same person is the administrator of several plans 
required to file annual reports under Title I of ERISA, the 
administrator would need to calculate the applicable penalty amount 
for each plan.
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    The Department believes that this approach to applying the caps 
will encourage complete annual reporting compliance reviews with 
respect to specific plans, while facilitating Program administration. 
Although there is nothing in the DFVC Program that precludes a plan 
administrator from making separate or multiple submissions under the 
Program, the per plan cap on penalties starts over for each separate 
submission for a plan that is made under the DFVC Program.\4\
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    \4\ For purposes of determining whether there is one or more 
submissions, the mere fact that a submission is transmitted in 
multiple envelopes or packages will not affect the submission's 
status as a single submission where there is evidence (e.g., an 
accompanying letter or note) indicating that submission has been 
transmitted contemporaneously in multiple envelopes or packages.
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    The Department also is revising the applicable penalty structure 
under the DFVC Program for apprenticeship and training plans and ``top 
hat'' plans, as well as adding another class of plans that are eligible 
to pay special reduced penalties under the Program. In lieu of the 
$2,500 penalty amount for apprenticeship and training plans and ``top-
hat'' plans, the applicable penalty amount under the modified DFVC 
Program for such plans is $750. As was the case under the 1995 Program, 
the applicable penalty will be applied without regard to the number of 
apprenticeship and training or ``top hat'' plans maintained by the same 
plan sponsor and without regard to the number of plan participants 
covered under such plan or plans. In addition, the Department is 
establishing a maximum $750 per plan penalty cap for administrators of 
small plans sponsored by Internal Revenue Code (Code) section 501(c)(3) 
organizations (including small Code section 403(b) plans). This special 
penalty amount, however, will not be available if, as of the date the 
plan files under the DFVC Program, there is a delinquent or late annual 
report due for a plan year during which the plan was a large plan. The 
Department is establishing this reduced penalty for administrators of 
such small plans in recognition of the special character of these 
organizations, and in light of the fact that the administrators/
sponsors of such plans may receive most or all of their funding from 
government programs and other charitable, educational, or scientific 
grants, and, in the case of Code section 403(b) plans that are required 
to file annual reports under ERISA, because the information that is 
required to be filed annually is similar to the registration-type 
information required to be filed by apprenticeship and training plans 
and ``top hat'' plans under Secs. 2520.104-22 and 2520.104-23.

2. Simplification of Process

    As noted above, the Department is simplifying the procedures 
governing participation in the DFVC Program. These changes are intended 
to make the Program easier for plan administrators to use and to 
conform the Program to the recent streamlining of the annual report and 
the implementation of the computerized ERISA Filing Acceptance System 
(EFAST).
    As with the 1995 DFVC Program, the Program adopted herein 
conditions relief on the filing of a complete annual report, including 
all required statements and schedules, for each plan year for which 
relief is sought under the Program. Under the Program, this requirement 
can be satisfied by the administrator filing an annual report for each 
plan year for which relief is sought using either: (1) The annual 
return/report form issued for the plan year(s) for which relief is 
sought; or (2) the most current annual return/report form available at 
the time the administrator elects to participate in the Program. By 
affording this option, administrators can choose to file the Form which 
is most efficient, and least burdensome, for their particular plan and 
circumstance.
    Also, as with the 1995 Program, the modified Program provides that 
penalty amount payments must be accompanied by a paper copy of the 
filed annual return/report (excluding any required statements or 
schedules).\5\ Unlike the 1995 Program, however, the forms and penalty 
payment no longer have to be annotated in bold red print identifying 
the filing as a DFVC filing.
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    \5\ While electronic filing of DFVC submissions and deposit of 
penalty amounts is not currently available, the Department will be 
evaluating this area for possible future improvements.
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3. Scope of Program

    As with the 1995 DFVC Program, the modified Program only applies to 
the correction of reporting violations under Title I of ERISA.\6\ 
Filings that are not required under Title I of ERISA, such as Form 
5500-EZ filings, are not eligible for the DFVC Program. Annual reports 
filed under the DFVC Program may be subjected to the usual edit tests 
and plan administrators have an opportunity to correct identified 
deficiencies in accordance with the procedures described in 
Sec. 2560.502c-2. The failure to correct deficiencies in accordance 
with these procedures may result in the assessment of further 
penalties, and the payment of DFVC Program penalties do not serve to 
reduce the additional civil penalties that may be assessed for the 
filing of a deficient annual report.
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    \6\ Although this Notice does not provide relief from late 
filing penalties under the Code or Title IV of ERISA, both the IRS 
and PBGC have agreed to provide certain penalty relief under the 
Code and Title IV of ERISA. Sections 5.02 and 5.03 of this Notice 
include information furnished to the Department by the Internal 
Revenue Service (IRS) and the Pension Benefit Guaranty Corporation 
(PBGC) regarding the penalty relief they are providing for 
delinquent Form 5500 Annual Returns/Reports filed for Title I plans 
when the condition of the DFVC Program have been satisfied.
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Request for Comments, Effective Date and Requests for Refunds

    Although the Department is not required to seek public comments on 
an enforcement policy, the Department

[[Page 15054]]

solicits comments from the public on all aspects of this Program, 
including whether the reduced penalty amounts being adopted are set at 
appropriate levels and whether additional classes of filers should be 
provided special reduced penalty amounts. At the same time, the 
Department has determined that the relief afforded by this Program 
should be made available during and after the comment period. Delaying 
implementation of the revisions to the DFVC Program until after the end 
of the comment period would only deprive plan administrators of the 
ability to pay reduced penalties during the comment period. 
Accordingly, the DFVC Program adopted herein will be effective upon 
publication in the Federal Register.
    In general, the Department will consider requests for refunds under 
the DFVC Program only when it is determined, upon review, that there 
was no reporting violation (e.g., the plan was not required to file an 
annual report or the report was filed timely) or the penalty assessment 
was otherwise improper. In this regard, the Department will not make 
refunds with respect to any DFVC filings merely because they were 
submitted prior to the effective date of the Program adopted herein. In 
the Department's view such filers received the relief with respect to 
which the paid penalty related. With regard to DFVC filings received on 
or after the effective date of the Program adopted herein and with 
respect to which the plan administrator incorrectly determined the 
penalty amount by referring to the superceded 1995 Program, the 
Department intends to return the DFVC Program submission (but not the 
annual report filing that is submitted to EFAST) to afford the filer 
the opportunity to make a DFVC submission in accordance with the 
modified program.

Summary of Economic Impact of the Amended DFVC Program

    This amendment to the DFVC Program is intended to increase 
compliance with reporting requirements by increasing Program 
participation, especially among small plans. Under the existing 
Program, administrators of small plans, which are likely to represent a 
large majority of delinquent filers, have made up only a minority of 
Program participants. This amendment will reduce Program penalties for 
many participants, especially for administrators of small plans that 
have failed to file reports for many years, thereby encouraging more 
delinquent plan administrators to participate.
    By increasing compliance with reporting requirements, the amended 
Program will yield economic benefits. Greater compliance will improve 
the quality and availability of information on plans. Plans' annual 
reports are the principal source of information about the operation, 
funding and investments of employee benefit plans. Information derived 
from these reports is integral to PWBA's enforcement, research and 
policy development programs, and is widely used by other Federal 
agencies, Congress and the private sector in assessing employee 
benefit, tax, and economic trends and policies. Plans' reports also 
serve as the primary means by which participants, beneficiaries and the 
general public can monitor plan operations. For all of these reasons, 
better information will serve to improve the security of plan assets 
and benefits and to promote sound employee benefits policy. Plans that 
comply with reporting requirements also tend to stay in compliance with 
reporting requirements, redoubling the benefit of bringing plans into 
compliance at the earliest opportunity. Finally, participating plan 
administrators will benefit insofar as they will be relieved of the 
risk of incurring larger penalties outside the Program, and insofar as 
the penalties that many must pay in order to participate in the Program 
will be reduced.
    The Department believes that the benefits of the amended Program 
will exceed its costs. Participating plan administrators will incur a 
cost in connection with the payment of penalties. Participation in the 
Program is voluntary, however, so it is reasonable to conclude that 
participating plans derive an economic benefit equal to or greater than 
this cost. The Department also notes that the payment of such penalties 
constitutes a transfer from plan administrators to the U.S. Treasury, 
thereby benefiting taxpayers at large. The only potentially meaningful 
economic cost of the Program is the potential for the loss of income to 
the U.S. Treasury from reduced penalties. This loss of income will be 
partly or fully offset by penalties paid by plan administrators that 
would not have participated at the existing Program's higher penalty 
levels. Moreover, any loss of Treasury revenue will be nominal and more 
than offset by the benefits of fuller reporting outlined above.
    Because the amended program will substantially reduce Program 
penalties for many participating plan administrators, the Department 
expects that participation in the Program will grow. The Department 
lacks an empirical basis on which to estimate the amount by which it 
will grow, however. In order to assess potential growth, the Department 
adopted conservative assumptions regarding responsiveness to decreases 
in Program penalties. On that basis, it is projected that participation 
by plan administrators in the amended Program will increase to about 
2,500 plans per year, up from 1,400 plans under the current Program, an 
increase of about 75 percent. Participation by administrators of large 
plans will increase by more than 50 percent to reach about 1,300, while 
participation by administrators of small plans will grow by more than 
100 percent to about 1,100. Total penalties paid under the Program are 
projected to fall by about one-half, however, from about $9.3 million 
annually to about $4.7 million. The Department believes that these 
estimates are highly conservative, and that participation might 
increase more, while penalties paid might decrease less or even 
increase. The derivation of these estimates and basis for the 
Department's conclusion that they are conservative is detailed below.

Executive Order 12866

    Under Executive Order 12866, the Department must determine whether 
a regulatory action is ``significant'' and therefore subject to the 
requirements of the Executive Order and subject to review by the Office 
of Management and Budget (OMB). 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, it has been determined that this action is 
``significant'' and subject to OMB review under section 3(f)(4) of the 
Executive Order because it offers a novel method for encouraging 
compliance while reducing regulatory burden.
    As described earlier in this preamble, PWBA introduced the DFVC 
Program in

[[Page 15055]]

April of 1995 in an effort to encourage compliance with annual 
reporting requirements, which are met generally by filing the Form 5500 
Annual Return/Report of Employee Benefit Plan. This amendment to the 
Program is intended to increase compliance with reporting requirements 
by increasing Program participation, especially among administrators of 
small plans. Under the existing Program, small plan administrators, 
which are likely to represent a large majority of delinquent filers, 
have made up only a minority of Program participants. (Among the 
approximately 1 million plans expected to file annual reports normally 
this year, about 750,000 are expected to be small plans.) This 
amendment will reduce Program penalties for many Program participants, 
especially for small plan administrators that have failed to file 
reports for many years (whose penalties will be capped at $1,500 per 
plan), thereby encouraging more delinquent administrators to 
participate and come into compliance with reporting requirements.
    To date under the existing Program, 17,545 separate filings have 
been made by 8,634 separate plans, involving total penalties to plan 
administrators in excess of $50 million. This amounts to approximately 
1,400 participating plans filing about 2,900 annual reports each year, 
and the administrators of those plans paying penalties of about $9 
million. Of the 17,545 filings, 10,082 were for large plans, and 6,781 
were for small plans. In addition, there were 672 ``top hat'' filers 
and 10 apprenticeship and training plan filers.
    About 70 percent of both large and small plan DFVC Program filings 
were made twelve or more months after they were otherwise due. About 63 
percent of participating plan administrators filed for one plan year, 
about 16 percent filed for two plan years, and 21 percent filed for 
three or more plan years. The average was approximately two plan years. 
As a result, most DFVC Program participants paid the applicable maximum 
for each filing based on the size of the plan and the filing's original 
due date. Participating plan administrators filing two or more years' 
reports paid such maximum penalties separately for each report filed.
    In developing the amended Program, the Department endeavored to 
select penalty levels that will maximize reporting compliance, 
especially among small plans. Maximizing compliance means maximizing 
Program participation, and with it the prompt submission of now 
delinquent filings, while at the same time maximizing on-time 
submission of future filings. The amended Program's penalties are 
therefore calibrated to be at once low enough so that delinquent plan 
administrators will not be dissuaded from participating, and high 
enough to hold plan administrators appropriately accountable for filing 
on time.
    This amendment to the DFVC Program generally will reduce the 
penalties owed by participating plan administrators. For example, the 
penalty owed by small and large plan administrators submitting single 
filings more than 12 months late will be reduced from $2,000 and 
$5,000, respectively, to $750 and $2,000. The penalty owed by 
administrators of small and large plans submitting five years' worth of 
filings all more than 12 months late will be reduced from $10,000 and 
$25,000 to $1,500 and $4,000.
    To gauge the potential impact of the interaction of the new per 
plan caps for delinquencies involving multiple plan years, which are 
$1,500 for small plans and $4,000 for large plans, with the single plan 
year maximum penalties of $750 and $2,000, we computed the penalties 
that would have been paid by the past DFVC filers under the amended 
structure, assuming no changes in Program participant characteristics 
or increase in participation in response to the reduced penalties. This 
simple calculation of penalties under the prior and amended structures 
shows a reduction in total penalties paid of about $39 million or 70 
percent.
    The amended Program will yield economic benefits. Fuller compliance 
will improve the quality and timeliness of information on the operation 
and assets of employee benefit plans, which will help to secure plan 
benefits and assets and promote sound public policy. Participating plan 
administrators will benefit from shedding the risk of incurring larger 
penalties outside the Program and from reductions in the penalties they 
must pay under the Program.
    The amended Program's benefits are expected to exceed its costs. 
Because participation in the Program is voluntary, it is reasonable to 
conclude that participating plan administrators derive an economic 
benefit at least equal to the cost of the penalty. The payment of such 
penalties also enriches the U.S. Treasury to the benefit of taxpayers. 
Because the amended Program imposes smaller penalties, total penalties 
paid to the Treasury may fall. The economic cost associated with such a 
loss of Treasury revenue is expected to be small and more than offset 
by the benefits of fuller reporting.
    The Department estimates that plan participation in the amended 
Program will increase to about 2,500 filings per year, up from 1,400 
under the current Program. Total penalties paid by plan administrators 
under the Program are projected to fall by about one-half, from about 
$9.3 million annually to about $4.7 million. These estimates are highly 
conservative; participation might increase more, while penalties paid 
might decrease less or even increase.

Basis for Estimate of Economic Impact

    As noted above, under the existing DFVC Program, 17,545 separate 
filings have been made by 8,634 separate plans, involving total 
penalties to plan administrators in excess of $50 million. This amounts 
to approximately 1,400 plans participating each year, paying penalties 
of about $9 million. Based on the discounts available under the amended 
penalty structure, the Department expects the number of plan 
administrators participating annually to increase to about 2,500, 
resulting in annual penalties of about $4.7 million.
    Assuming a plan administrator is aware of a plan's reporting 
obligations, and of any failure to satisfy them, the decision whether 
or not to participate in the Program is essentially an economic one. 
The plan administrator must weigh the alternative of remaining out of 
compliance--and the attendant risk of becoming subject to larger 
penalties--against the cost of paying reduced penalties under the 
amended Program. The penalty under the Program can be thought of as a 
price the administrator can pay to achieve compliance and be relieved 
from the risk of larger penalties. The size and risk of unreduced 
penalties represents the value of such relief. Reduced penalties under 
the Program and potential full penalties will be different for 
different plans, reflecting their differing characteristics and 
circumstances. All else equal, the smaller the penalties under the 
Program relative to the potential unreduced penalties--that is, the 
lower the price of participation relative to its value--the larger the 
number of plan administrators that will participate.
    Assuming that the risk and potential amount of full penalties are 
fixed, the increase in participation in the amended Program will depend 
on the number of delinquent plans, the amount by which penalties under 
the amended Program are discounted relative to those under the existing 
Program, and the responsiveness of plan administrators to this price 
reduction. Price responsiveness is commonly expressed in terms of 
``elasticity,'' or the percent increase in quantity demanded that will 
result from a one percent decrease in price. If administrators' 
elasticity of

[[Page 15056]]

demand for the Program is one, then a one percent decrease in the 
penalty will result in a one percent increase in the number of 
administrators participating.
    The Department has no empirical basis on which to estimate the 
price elasticity of demand for the Program. Estimating elasticity 
generally requires observation of demand at different price levels. 
Casual observation reveals that the number of plan administrators 
participating in the existing Program generally is higher at lower 
penalty levels. In particular, relatively few participating plan 
administrators--and very few participating small plan administrators--
submitted several years of delinquent filings and consequently owed 
relatively large penalties. This observation seems consistent with the 
premise that lower penalties encourage higher participation, but it 
falls short of providing formal supporting evidence. The Department 
lacks data on the number and circumstances of nonparticipating 
delinquent plan administrators. Therefore, it is not possible to 
determine whether variations in the number of plans participating at 
different penalty levels under the existing Program reflects 
responsiveness to those levels or the numbers and circumstances (and 
potential full penalties) of unobserved, nonparticipating delinquent 
plan administrators whose participation would trigger penalties at 
those levels. The Department also lacks any longitudinal basis for 
estimating the elasticity, because prior to this amendment the penalty 
levels under the Program had not been changed.
    The Department nevertheless attempted to assess the potential 
magnitude of increased participation in the amended DFVC Program. To do 
this, the Department examined historical data on participation in the 
Program, relying on the general assumption that the potential users of 
the amended Program will resemble the past users of the existing 
Program. Then, by adopting assumptions regarding the elasticity of 
demand for the Program and comparing the penalties owed by past 
participants in the existing Program with the penalties they would owe 
under the amended Program, the Department projected participation in 
the amended Program.
    Lacking a basis for estimating plan administrators' true 
elasticities, the Department adopted what it believes are conservative 
assumptions (that is, assumptions which are likely to be lower then the 
true elasticities). In the face of uncertainty, it is generally 
appropriate to adopt conservative assumptions, in order to avoid over 
estimating the potential benefits of the Program.
    The Department assumed that the price elasticity of demand for the 
Program among administrators of large plans (those with 100 or more 
participants) is one, and that among administrators of small plans is 
two. More precisely, it assumed that demand is linear and that large 
and small plans' price elasticities of demand at the starting positions 
on their demand curves (the equilibria under the current Program) are 
equal to one and two, respectively. A large decrease in price will 
result in movement down the demand curve into a region where elasticity 
is less than at the starting position. (As a result, total penalties 
collected under the amended Program are expected to be less than the 
assumed starting-point elasticities alone would imply.) The Department 
believes that these assumptions conservatively represent the likely 
price responsiveness of nonparticipating delinquent plan 
administrators.
    First, the assumption of linear demand (and attendant decreasing 
elasticity) is inherently conservative in connection with large price 
decreases. A more plausible, nonlinear demand function with constant 
elasticity would suggest much larger increases in Program 
participation.
    For administrators of many plans, the price decrease associated 
with movement from the existing to the amended Program will be large. 
This is especially true of administrators that are delinquent in 
connection with several plan years' filings, because the amended 
Program caps penalties for such plans, while the existing Program caps 
them only for each separate filing by such plans. For example, 
historical penalties owed under the existing Program equaled or 
exceeded $25,000 for 74 participating large plans each year. These 
would include plan administrators that submitted five or more years' 
reports, all 12 months or more late, who would owe the maximum $5,000 
per filing. Historical penalties equaled or exceeded $10,000 for 52 
participating small plans annually, which similarly would include plan 
administrators owing the maximum $2,000 penalty for each of five or 
more years' worth of filings. Under the amended Program, similar large 
plans' penalties will be capped at $4,000 per plan, small at $1,500, 
representing price reductions of at least 84 percent and 70 percent, 
respectively.
    Microeconomic theory suggests that demand for most goods and 
services is likely to be better represented by a demand curve with 
constant elasticity than by a linear one, especially in connection with 
large price changes. Consider the administrator of a large plans in 
this example. The Department, assuming linear demand and a starting 
elasticity of one, projects that an 84 percent fall in price results in 
an 84 percent increase in participation. However, this implies that the 
elasticity of demand at the new equilibrium would be just 0.09--that 
is, an additional one percent price decrease would increase 
participation by less than one-tenth of one percent. In the case of a 
small plan administrator, and assuming a starting elasticity of two, 
elasticity at the new equilibrium would be just 0.37. Under the 
potentially more plausible assumption of constant demand elasticities 
of one and two respectively for large and small plans, the 84 percent 
price decrease available to the large plan administrator would increase 
participation by 525 percent, while small plan administrators' price 
decrease would increase their participation by 1,011 percent. This 
suggests that the Department's assumptions are highly conservative and 
that the increase in participation, particularly among small plans that 
are many years delinquent, could be much larger than projected.
    Second, the increase in the Program participation is unlikely to be 
constrained by market saturation anytime soon, and this is especially 
true for administrators of small plans. Thus, the premise that demand 
might exhibit a constant elasticity (and that therefore large price 
decreases could result in very large participation increases) is 
especially plausible for administrators of small plans.
    Participation by both large and small plan administrators over the 
life of the Program is ultimately constrained to no more than the 
number of nonparticipating delinquent plans that exist. The Department 
has no way of knowing this number. As yet, however, there is no 
evidence that participation in the Program is nearing this constraint. 
Participation in the Program has been quite consistent since its 
inception, at about 2,900 filings per year, with small plans 
representing about 40 percent of each year's total. Small plans in 
particular are likely to represent a large majority of nonparticipating 
delinquent plans, just as they represent a large majority of plans that 
file annual reports on time. For example, among the approximately one 
million plans expected to file reports this year, about 250,000 will be 
large and about 750,000 will be small.
    Consider again the above example of plans that submitted five or 
more years'

[[Page 15057]]

filings 12 or more months late under current Program. Is it plausible 
that demand could exhibit constant elasticity and that participation 
increases could therefore be very large? If participation by large plan 
administrators in similar circumstances increased by 525 percent, the 
number participating each year on average would grow from about 74 
plans to about 463, which is equal to approximately 0.2 percent of 
large plan filers. A 1,011 percent increase in small plan administrator 
participation would mean that the number participating each year would 
grow from about 52 plans to about 578, which is equivalent to about 
0.08 percent of small plan filers. Given these relative magnitudes, 
even these large increases in participation might be viewed as 
plausible. This would seem to confirm that the Department's assumptions 
of linear demand, with starting elasticities for large and small plans 
of one and two respectively, are conservative.
    The Department requests comments on all aspects of this analysis, 
including the penalty levels as they apply to large and small plan 
administrators, assumptions concerning price responsiveness, and the 
characteristics of future filers as compared with the actual Program 
participants. The Department is particularly interested in information 
on existing rates and reasons for non-compliance with reporting 
requirements, and specific factors that may influence the decision 
whether or not to participate in the DFVC Program in light of the 
penalty reductions being implemented.

Paperwork Reduction Act

    The Department, as part of its continuing effort to reduce 
paperwork and respondent burden, conducts a preclearance consultation 
program to provide the general public and Federal agencies with an 
opportunity to comment on proposed and continuing collections of 
information in accordance with the Paperwork Reduction Act of 1995 (PRA 
95) (44 U.S.C. Chapter 35). This helps to ensure that requested data 
can be provided in the desired format, reporting burden (time and 
financial resources) is minimized, collection instruments are clearly 
understood, and the impact of collection requirements on respondents 
can be properly assessed. OMB clearance of the information collection 
request (ICR) included in the existing DFVC Program was scheduled to 
expire prior to the implementation of this modified Program. In order 
to maintain OMB approval of the ICR, PWBA published a preclearance 
notice soliciting comments on the ICR (66 FR 44159, August 22, 2001). 
OMB received the submission for continued approval of the ICR on 
December 21, 2001. OMB approved the ICR on February 21, 2002. This 
approval will continue through February 28, 2005, unless the ICR is 
substantively or materially changed.
    Although the Department has updated the Program and adjusted the 
penalty structure in an effort to further facilitate voluntary 
compliance, the information collection provisions of the Program are 
not substantively or materially changed. Under both the existing and 
amended DFVC Program, participating filers must supply a photocopy of 
the Form 5500 (without schedules or attachments) as filed along with 
their penalty check. The Department has, however, adjusted its burden 
estimates to reflect the expectation of additional participation in the 
Program due to the reduced penalty incentive and the addition of a 
penalty cap for small plans sponsored by Code section 501(c)(3) 
organizations. A summary of the effect of the adjustment has been 
provided to OMB.
    Requests for copies of the ICR may be addressed to: Gerald B. 
Lindrew, Office of Policy and Research, U.S. Department of Labor, 
Pension and Welfare Benefits Administration, 200 Constitution Avenue, 
NW, Room N-5647, Washington, DC 20210. Telephone: (202) 693-8410; Fax: 
(202) 219-4745 (these are not toll-free numbers).
    It is estimated that 2,500 filers will avail themselves of the 
opportunity to correct potential violations pursuant to the DFVC 
Program annually. The Department estimates that approximately 30 
minutes will be required to read instructions, prepare a check, 
photocopy the Form 5500, and mail the package. It is further assumed 
that 90 percent of plan administrators sponsors will purchase services 
from a professional (e.g., accountant or attorney) to comply with the 
requirements of the Program, and that 10 percent will use in-house 
staff. The professional wage rate incorporated in the burden cost 
estimates is $75 per hour. Material and mailing costs are estimated at 
$0.70 per mailing.
    The time and mailing cost assumptions have been increased from what 
was used in the past (21 minutes and $0.37) due principally to the 
change in the penalty structure to incorporate a penalty cap for 
multiple plan year delinquencies. It is assumed that multiple plan year 
delinquencies will be filed together, requiring some additional time 
and mailing cost. The method for estimating the number of respondents 
has also changed due to the change in the penalty structure, with 
multiple plan year filings now considered one response. As a result, 
the total number of respondents counted for PRA purposes is reduced, 
despite the fact that participation in the Program is assumed to 
increase.
    Agency: Pension and Welfare Benefits Administration, Department of 
Labor.
    Title: Delinquent Filer Voluntary Compliance Program.
    OMB Number: 1210-0089.
    Affected Public: Individuals or households; Business or other for-
profit; Not-for-profit institutions.
    Frequency of Response: On occasion.
    Total Respondents: 2,500.
    Total Responses: 2,500.
    Estimated Burden Hours: 125.
    Estimated Annual Costs (Operating and Maintenance): $86,000.
    Persons are not required to respond to the collection of 
information unless it displays a currently valid OMB control number.

Regulatory Flexibility Act

    This document constitutes an enforcement policy of the Department 
and is not being issued as a general notice of proposed rulemaking. 
Therefore, the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) 
does not apply. However, PWBA has considered the potential costs and 
benefits of this action for administrators of small plans, that is, 
plans with fewer than 100 participants, in connection with this 
amendment to the DFVC Program. The basis of the definition of a small 
plan is found in section 104(a)(2) of ERISA, which permits the 
Secretary of Labor to prescribe simplified annual reports for pension 
plans that cover fewer than 100 participants. Under section 104(a)(3), 
the Secretary may also provide for simplified annual reporting and 
disclosure if the statutory requirements of part 1 of Title I of ERISA 
would otherwise be inappropriate for welfare benefit plans.
    Small plans represent approximately 75 percent of all annual report 
filers, but have represented only about 35 percent of DFVC Program 
filings, despite lower scheduled maximum penalties for small plans. 
Small plan participants in the Program have represented an average of 
0.4 percent of small Form 5500 filers, while large plans have 
represented about 2 percent of large filers. The reasons for these 
differentials cannot be known with certainty. The rate of participation 
in the Program by small plans has been relatively stable since its 
inception at about 1,000 filings on behalf of 520 plans per year. 
Historical DFVC Program data also show that more than 70 percent of 
both large and small DFVC Program filers are more than 12 months late 
when the filing is

[[Page 15058]]

completed, and small plan filers are about as likely as large plan 
filers to be required to make two or more filings at the same time to 
bring the plan into compliance with reporting requirements. This 
suggests that the penalty structure in effect prior to this amendment, 
though lower for small plan administrators on a per plan year filing 
basis, might have discouraged participation when multiple years were 
involved. Informal comments received by the Department have offered 
this view.
    Under PWBA's program for the assessment of civil penalties for 
noncompliance with reporting requirements, plan administrators filing 
late annual reports may be assessed $50 per day for each day an annual 
report is filed after the date on which the annual report was required 
to be filed, without regard to any extensions of time 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. The distribution of actual DFVC filers based on 
the ratio of their voluntary penalty to the penalty that would have 
been imposed by the Department in penalty enforcement under this 
program shows that 80 percent of small plan DFVC filers, as compared 
with only 30 percent of large plan filers, have paid less than 10 
percent of the enforcement program penalty. Forty percent of small plan 
filers paid less than 5 percent of the enforcement program penalty that 
would otherwise have been imposed. This also seems consistent with the 
conclusion that a large penalty serves as a significant disincentive 
for small plan administrators.
    The reduction in the participating small plan administrators' 
maximum penalty for a single year's filing from $2,000 to $750 and the 
availability of the $1,500 cap for multiple plan year delinquencies is 
expected to significantly reduce the penalties paid by small DFVC 
filers. A comparison of the penalties paid under the existing DFVC 
structure with those that would have been paid under the amended 
structure by small plans shows a reduction of about 72 percent, or 
approximately $8 million, assuming no change in behavior or 
characteristics of the filers.
    Based on the discounts available under the amended penalty 
structure, and assuming an elasticity of two, as described earlier, the 
number of small plans coming into compliance is expected to increase by 
561 plans, to about 1,081 plans per year, with penalties totaling $1.2 
million. This expected outcome is consistent with the stated purpose of 
the amendment.
    The Department believes that the DFVC Program as modified offers a 
flexible and economically advantageous method for administrators of 
small plans to correct reporting delinquencies, which recognizes the 
special circumstances of small plans. The Department invites comments 
on this analysis and on alternatives that might further reduce 
potential burdens for small plans.

Unfunded Mandates Reform Act

    For purposes of the Unfunded Mandates Reform Act of 1995 (Pub. L. 
104-4), as well as Executive Order 12875, this regulatory action does 
not include any Federal mandate that may result in expenditures by 
State, local, or tribal governments, and will not impose an annual 
burden of $100 million or more on the private sector.

Federalism Statement

    Executive Order 13132 outlines fundamental principles of federalism 
and requires the adherence to specific criteria by federal agencies in 
the process of their formulation and implementation of policies that 
have substantial direct effects on the States, the relationship between 
the national government and States, or on the distribution of power and 
responsibilities among the various levels of government. This action 
does not have federalism implications because it has no substantial 
direct effect on the States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government. Section 514 of 
ERISA provides, with certain exceptions specifically enumerated, that 
the provisions of Titles I and IV of ERISA supercede any and all laws 
of the States as they relate to any employee benefit plan covered under 
ERISA. The requirements implemented in this enforcement policy do not 
alter the fundamental reporting requirements or penalty provisions of 
Title I of the statute with respect to employee benefit plans, and as 
such have no implications for the States or the relationship or 
distribution of power between the national government and the States.

Congressional Review Act

    The DFVC Program is subject to the provisions of the Congressional 
Review Act (5 U.S.C. 801 et seq.) and will be transmitted to Congress 
and the Controller General for review. The Program is not a ``major 
rule'' as that term is defined in 5 U.S.C. 804 because it is not likely 
to result in (1) An annual effect on the economy of $100 million or 
more; (2) a major increase in costs or prices for consumers, individual 
industries, or federal, State, or local government agencies, or 
geographic regions; or (3) significant adverse effects on competition, 
employment, investment, productivity, innovation, or on the ability of 
the United States-based enterprises to compete with foreign-based 
enterprises in domestic or export markets.

Section 1--Delinquent Filer Voluntary Compliance (DFVC) Program

    The DFVC Program is intended to afford eligible plan administrators 
(described in Section 2 of this Notice) 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 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.

Section 2--Scope, Eligibility and Effective Date

    .01 Scope. The DFVC Program described in this Notice provides 
relief from assessment of civil penalties otherwise applicable to plan 
administrators who fail or refuse to file timely annual reports. Relief 
under this Program does not extend to penalties that may be assessed 
for annual reports that are determined by the Department to be 
incomplete or otherwise deficient.
    .02 Eligibility. The DFVC Program is available only to a plan 
administrator that complies with the requirements of Section 3 or 
Section 4, as appropriate, of this Notice prior to the date on which 
the administrator is 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 March 28, 2002. The Department intends that this 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--Plan Administrators Filing Annual Reports

    .01 General. A plan administrator electing to file a late annual 
report (Form 5500 Series Annual Return/Report) under this DFVC Program 
must comply with the requirements of this Section 3.

[[Page 15059]]

    .02 Filing a Complete Annual Report.
    (a) The plan administrator must file a complete Form 5500 Series 
Annual Return/Report, including all required schedules and attachments, 
for each plan year for which the plan administrator is seeking relief 
under the Program. This filing shall be sent to PWBA at the appropriate 
EFAST address listed in the instructions for the most current Form 5500 
Annual Return/Report, or electronically in accordance with the EFAST 
electronic filing requirements. See the EFAST Internet site at 
www.efast.dol.gov to view forms and instructions.

    Note: Do not forward the applicable penalty amount described in 
Section 3.03 to the EFAST addresses listed above.

    (b) For purposes of subparagraph (a), the plan administrator shall 
file either: (1) The Form 5500 Series Annual Return/Report form (but 
not a Form 5500-R) issued for each plan year for which the relief is 
sought, or (2) the most current Form 5500 Annual Return/Report form 
issued (and, if necessary, indicate in the appropriate space on the 
first page of the Form 5500 the plan year for which the annual return/
report is being filed). Forms may be obtained from the IRS by calling 
1-800-TAX-FORM (1-800-829-3676). Forms for certain pre-1999 plan years 
also are available through the Internet sites for PWBA and the Internal 
Revenue Service (IRS) (www.dol.gov/dol/pwba, www.irs.gov). For further 
information on EFAST filing requirements, see the EFAST Internet site 
(www.efast.dol.gov) and the instructions for the most current Form 
5500.
    .03 Payment of Applicable Penalty Amount.
    (a) The plan administrator shall pay the applicable penalty amount 
by submitting to the DFVC Program the information described in 
subparagraph (b) along with a check made payable to the ``U.S. 
Department of Labor'' for the applicable penalty amount determined in 
accordance with subparagraph (c). This separate submission shall be 
made by mail to: DFVC Program, PWBA, P.O. Box 530292, Atlanta, GA 
30353-0292. The annual returns/reports for multiple plans may not be 
included in a single DFVC Program submission. A separate submission to 
the DFVC Program (including a separate check for the applicable penalty 
amount) must be made for each plan.

    Note: Personal or private delivery service cannot be made to 
this address.

    (b)(1) The administrator shall submit to the DFVC Program, with the 
applicable penalty amount, a paper copy of the Form 5500 Annual Return/
Report filed as described in paragraph .02(a), without schedules and 
attachments. In the event that the plan administrator files as 
described in paragraph .02(a) using a 1998 or prior plan year form, a 
paper copy of only the first page of the Form 5500 or Form 5500-C, as 
applicable, should be submitted to the DFVC Program.
    (2) In the case of a plan sponsored by a Code section 501(c)(3) 
organization described in paragraph .03(c)(4), the administrator shall 
clearly note ``501(c)(3) Plan'' in the upper-right hand corner of the 
first page of the Form 5500 Annual Return/Report submitted to the DFVC 
Program (in Atlanta, Georgia). This notation should not be included on 
the annual report filed with PWBA pursuant to paragraph .02 (in 
Lawrence, Kansas) because it may interfere with the proper processing 
of the required report.
    (c) The applicable penalty amount shall be determined as follows:
    (1) In the case of a plan with fewer than 100 participants at the 
beginning of the plan year (or a plan that would be treated as such a 
plan under the ``80-120'' participant rule described in 29 CFR 
2520.103-1(d) for the subject plan year) (hereinafter ``small plan''), 
the applicable penalty amount is $10 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), not to exceed the greater of: $750 
per annual report or, in the case of a DFVC submission relating to more 
than one delinquent annual report filing for the plan, $1,500 per plan.
    (2) In the case of a plan with 100 or more participants at the 
beginning of the plan year (other than a plan that is eligible to use 
and uses the ``80-120'' participant rule) (hereinafter ``large plan''), 
the applicable penalty amount is $10 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), not to exceed the greater of: 
$2,000 per annual report or, in the case of a DFVC submission relating 
to more than one delinquent annual report filing for the plan, $4,000 
per plan.
    (3) In the case of a DFVC submission relating to more than one 
delinquent annual report filing for a plan, the applicable penalty 
amount shall be determined by reference to paragraph (c)(2) if for any 
plan year for which the submission is made the plan was a ``large 
plan.''
    (4) In the case of a plan administrator filing an annual report for 
a ``small plan'' that is sponsored by a Code section 501(c)(3) 
organization (including a Code section 403(b) plan), the applicable 
penalty amount is $10 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), not to exceed $750 per DFVC submission, including DFVC 
submissions that relate to more than one delinquent annual report 
filing for the plan. This paragraph (c)(4) shall not apply if, as of 
the date the plan files pursuant to this DFVC Program, there is a 
delinquent or late annual report due for a plan year for which the plan 
was a ``large plan.'' See paragraph .03(b)(2) for special instructions 
pertaining to small plans sponsored by Code section 501(c)(3) 
organizations.
    .04 Liability for Applicability Amount.
    The plan administrator is personally liable for the payment of 
civil penalties assessed under section 502(c)(2) of ERISA, therefore, 
civil penalties, including amounts paid under this DFVC Program, shall 
not be paid from the assets of an employee benefit plan.

Section 4--Plan Administrators Filing Notices for Apprenticeship 
and Training Plans and Statements for ``Top Hat'' Plans

    .01 General. 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 notice and statement described in sections 
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 requirements of this Section 4. 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.
    .02 Filing Applicable Notice or Statement with the U.S. Department 
of Labor.
    The plan administrator must prepare and file a notice or statement 
meeting the requirements of Secs. 2520.104-22, or 2520.104-23, as 
appropriate.
    The apprenticeship and training plan notice described in 
Sec. 2520.104-22 shall be sent by mail or by private delivery service 
to: Apprenticeship and Training Plan Exemption, Pension and Welfare 
Benefits Administration, Room N-1513, U.S. Department of Labor, 200

[[Page 15060]]

Constitution Avenue NW., Washington, DC 20210.
    The ``top hat'' plan statement described in Sec. 2520.104-23 shall 
be sent by mail or by private delivery service to: Top Hat Plan 
Exemption, Pension and Welfare Benefits Administration, Room N-1513, 
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).

    .03 Payment of Applicable Penalty Amount.
    (a) The plan administrator shall pay the applicable penalty amount 
by submitting to the DFVC Program the information described in 
subparagraph (b) along with a check made payable to the ``U.S. 
Department of Labor'' for the applicable penalty amount determined in 
accordance with subparagraph (c). This submission shall be made by mail 
to: DFVC Program, PWBA, P.O. Box 530292, Atlanta, GA 30353-0292.

    Note: Personal or private delivery service cannot be made to 
this address.

    (b) The administrator shall submit to the DFVC Program with the 
applicable penalty amount the most current Form 5500 Annual Return/
Report (without schedules and attachments). For purposes of this 
requirement, the plan administrators must complete Form 5500 line items 
1a-1b, 2a-2c, 3a-3c, and use plan number 888 for all ``top hat'' plans 
and plan number 999 for all apprenticeship and training plans. In the 
case of plan sponsors maintaining more than one ``top hat'' plan and 
plan sponsors maintaining more than one apprenticeship and training 
plan described in Sec. 2520.104-22, the plan administrator shall 
clearly identify each such plan on the Form 5500 filed with the 
Department of Labor or on an attachment thereto. The plan administrator 
also must sign and date the Form 5500.
    (c) The applicable penalty amount is $750 for each DFVC submission, 
without regard to the number of plans maintained by the same plan 
sponsor for which notices and statements are filed pursuant to Section 
4 and without regard to the number of plan participants covered under 
such plan or plans.
    .04 Liability for Applicability Amount.
    The plan administrator is personally liable for the payment of 
civil penalties assessed under section 502(c)(2) of ERISA, therefore, 
civil penalties, including amounts paid under this DFVC Program, shall 
not be paid from the assets of an employee benefit plan.

Section 5--Waiver of Right to Notice, Abatement of Assessment and 
Plan Status

    .01 Payment of a penalty under the terms of this DFVC Program 
constitutes, with regard to the filings submitted under the Program, a 
waiver of an administrator's right both to receive notices of intent to 
assess a penalty under Sec. 2560.502c-2 from the Department and to 
contest the Department's assessment of the penalty amount.
    .02 Although this Notice does not provide relief from late filing 
penalties under the Code, the Internal Revenue Service (IRS) has 
provided the Department with the following information. The Code and 
the regulations thereunder require information to be filed on the Form 
5500 Series Annual Return/Report and provide the IRS with authority to 
impose or assess penalties for failing to timely file. The IRS has 
agreed to provide certain penalty relief under the Code for delinquent 
Form 5500 Annual Returns/Reports filed for Title I plans where the 
conditions of this DFVC Program have been satisfied. See IRS Notice 
2002-23.
    .03 Although this Notice does not provide relief from late filing 
penalties under Title IV of ERISA, the Pension Benefit Guaranty 
Corporation (PBGC) has provided the Department with the following 
information. Title IV of ERISA and the regulations thereunder require 
information to be filed on the Form 5500 Series Annual Return/Report 
and provide the PBGC with authority to assess penalties against a plan 
administrator under ERISA Sec. 4071 for late filing of the Form 5500 
Series Annual Return/Report. The PBGC has agreed that it will not 
assess a penalty against a plan administrator under ERISA Sec. 4071 for 
late filing of a Form 5500 Series Annual Return/Report filed for a 
Title I plan where the conditions of this DFVC Program have been 
satisfied.
    .04 Acceptance by the Department of a filing and penalty payment 
made pursuant to this DFVC Program does not represent a determination 
by the Department of Labor as to the status of the arrangement as a 
plan, the particular type of plan under Title I or ERISA, the status of 
the plan sponsor under the Code, or a determination by the Department 
of Labor that the provisions of Secs. 2520.104-22 or 2520.104-23 have 
been satisfied.

    Signed at Washington, DC, this 25th day of March, 2002.
Ann L. Combs,
Assistant Secretary, Pension and Welfare Benefits Administration, U.S. 
Department of Labor.
[FR Doc. 02-7514 Filed 3-27-02; 8:45 am]
BILLING CODE 4510-29-P