How Can a Late 403(b) Plan Remittance Be Corrected?

Q: We had a late remittance in 2023 for our ERISA 403(b) plan, which we corrected under the Department of Labor’s Voluntary Fiduciary Correction Program. We understand that we must complete IRS Form 5330 as well to pay the excise tax on the lost earnings on the late remittances. However, the excise tax only amounts to about $100. Do we still need to file the form?

Kimberly Boberg, Kelly Geloneck, Emily Gerard and David Levine, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

A: No, but not because of a de minimis exception, because there isn’t one.

403(b) plans do not need to file Form 5330 or pay the excise tax on the lost earnings, as Form 5330 only applies to plans as defined under the Internal Revenue Code’s prohibited transaction rules set out in Section 4975, and the Section 4975 definition of a “plan” does not include 403(b) plans.

However, in addition to your VFCP filing, if you are a large ERISA 403(b) plan that is subject to audit (more than 100 employees), note that you will also need to report the late remittance on your 2023 Form 5500 filing, so you should notify your plan auditors of the late remittance. It is also important to note that, while unlikely, the Department of Labor has the authority to assess a civil penalty in the case of prohibited transactions, and 403(b) plans could be subject to a 5% civil penalty for late remittances under ERISA 502(i).

NOTE: This feature is to provide general information only, does not constitute legal advice and cannot be used or substituted for legal or tax advice.

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