I am working with a 403(b) plan that is required to file an annual Form 5500, although just the limited information. Due to administrative chaos in 2003, a Form 5500 was not filed for 2002. The error was discovered with the HR person called the Department of Labor for help with the 2003 Form 5500. This person was new and was looking for some general information and how-tos. The DOL agent told the HR person that the 2002 Form 5500 was not filed. Immediately, the HR person filed the Form 5500, but did not mark that it was filed under DFVC. This probably raised a red flag with the IRS who sent a letter assessing penalties.

Do you think DFVC is still available since they never got a writing from the DOL that the Form 5500 was late (i.e. they can file an amended Form 5500 and comply with the DFVC program)? Or do you think the only hope is to to write a reasonable cause letter to the IRS and beg forgiveness?

Any ideas?

You should be ok. The rules say you can file under DFVC until the plan administrator receives a written request for the delinquent 5500.

See http://www.dol.gov/ebsa/faqs/faq_dfvc.html

Who is eligible to participate in the DFVC Program?

Plan administrators are eligible to pay reduced civil penalties under the program if the required filings under the DFVC Program are made 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 the Employee Retirement Security Act of 1974 (ERISA).

Why is the IRS assessing penalities? 403(b) plans are not required to file a 5500 under the IRC, only under Title I.