SECURE Act/Inflation Adjustments Act Leads to Significant Increase in Benefit Plan Penalties

The SECURE (Setting Every Community Up for Retirement Enhancement) Act of 2019 provided many incentives for Americans to save for retirement, including greater flexibility in contributions, tax credits for new plans, automatic enrollment capability, and more.  However, these important benefits also come with a potential price to pay: a substantial increase in penalties for failure to file several forms in a timely manner.

Effective for filings due after December 31, 2019, the following penalties for late filings can be imposed by the IRS:

Internal Revenue Code Penalties

Form or Notice Penalty for Late Filings after 12/31/2019 Pre-SECURE Act Penalties
Failing to timely file Form 5500 Up to $250 per day, not to exceed $150,000 per plan year $25 a day, not to exceed $15,000 per plan year
Failing to timely file Form 5310-A Up to $250 per day, not to exceed $150,000 per plan year $25 a day, not $15,000 per plan year
Failing to file Form 8955-SSA Up to a daily penalty of $10 per participant, not to exceed $50,000 A daily penalty of $1 per participant, not to exceed $5,000
Failing to file Form 5330 The lesser of $435 or 100% of the amount of tax due The lesser of $330 or 100% of the amount due
Failing to file Form 990-T The lesser of $435 or 100% of the amount of tax due The lesser of $330 or 100% of the amount due
Failing to provide income tax withholding notices Up to $100 for each failure, not to exceed $50,000 for the calendar year $10 for each failure, not to exceed $5,000

 

Penalties for a late filing of Form 5500 may apply not only under the Internal Revenue Code, but also under ERISA (Employee Retirement Income Security Act 1974).  IRS penalty relief may be available for late filings of Form 5500 under the Department of Labor’s Delinquent Filer Voluntary Compliance Program.

DOL Inflation Adjusted Penalties

Under the Federal Civil Penalties Inflation Adjustment Act of 2015, the Department of Labor (“DOL”) is required to make annual inflation adjustments to ERISA violation penalties by January 15 of each year.  The increased penalties apply to violations where a penalty is assessed after January 15, 2020 for violations occurring after November 2, 2015.

DOL Penalties

ERISA Violation 2019 Penalty 2020 Penalty
Failure to furnish reports (e.g., pension benefit statements) to certain former participants and beneficiaries or maintain records

 

$30 per affected participant and beneficiary

 

$31 per affected participant and beneficiary

 

Failure or refusal to properly file an annual report (Form 5500) required by Section 104

 

Failure of a multi-employer plan to certify endangered or critical status under Section 305(b)(3)(C) treated as a failure to file an annual report

 

Up to $2,194 per day

 

Up to $2,233 per day

 

Failure to notify participants under Section 10(j) of certain benefit restrictions or limitations arising under Section 436 of the Internal Revenue Code

 

Failure to furnish certain multi-employer plan financial and actuarial reports on request under Section 101(k) of the ERISA

 

Failure to furnish an estimate of withdrawal liability on request under Section 101(l)

 

Failure to furnish an automatic contribution arrangement notice under Section 514(e)(3)

 

Up to $1,736 per day per affected participant

 

Up to $1,767 per day per affected participant

 

Failure of a multiple employer welfare arrangement to file a report required by regulations issued under Section 101(g)

 

Up to $1,597 per day

 

Up to $1,625 per day

 

Failure to furnish information requested by the Secretary of Labor under Section 104(a)(6)

 

Up to $156 per day, not to exceed $1,566 per request

 

Up to $159 per day, not to exceed $1,594 per request

 

Failure of a defined contribution plan to furnish a blackout notice under Section 101(i) or a notice of the right to divest employer securities under Section 101(m)

 

Up to $139 per day per affected participant Up to $141 per day per affected participant

 

Failure by a plan sponsor of a multi-employer plan in endangered status to adopt a funding improvement plan or a multi-employer plan in critical status to adopt a rehabilitation plan. This penalty also applies to a plan sponsor of an endangered status plan (other than a seriously endangered plan) that fails to meet its benchmark by the end of the funding improvement period

 

Up to $1,378 per day Up to $1,402 per day

 

Failure by an employer to inform employees of Children’s Health Insurance Program coverage opportunities under Section 701(f)(3)(B)(i)(l)

 

Up to $117 per day per affected employee

 

Up to $119 per day per affected employee

 

Failure by a plan administrator to timely provide to any state the information required to be disclosed regarding coverage coordination under Section 701(f)(3)(B)(ii)

 

Up to $117 per day per affected participant and beneficiary

 

Up to $119 per day per affected participant and beneficiary

 

Failure by any plan sponsor of a group health plan, or any health insurance issuer offering health insurance coverage in connection with the plan, to meet the requirements of Sections 702(a)(1)(F), (b)(3), (c) or (d), 701 or 702(b)(1) with respect to genetic information

 

$117 per day during non-compliance period

 

$119 per day during non-compliance period

 

Minimum penalty for de minimis failures to meet genetic information requirements not corrected prior to notice from the Secretary of Labor

 

$2,919 minimum

 

$2,970 minimum

 

Minimum penalty for failures to meet genetic information requirements which are not corrected prior to notice from the Secretary of Labor and are more than de minimis

 

$17,515 minimum

 

$17,824 minimum

 

Cap on penalty for unintentional failures to meet genetic information requirements

 

$583,830 maximum

 

$594,129 maximum

 

Failure of Cooperative and Small Employer Charity Act plan sponsor to establish or update a funding restoration plan

 

Up to $107 per day

 

Up to $109 per day

 

Defined benefit distribution prohibited by Section 206(e) due to an impermissible forfeiture following withdrawal of a participant’s contributions

 

Amount distributed but no more than $16,915 per distribution

 

Amount distributed but no more than $17,213 per distribution

 

Failure by a group health plan to provide a summary of benefits and coverage under Section 2715(f) of the Public Health Services Act, as incorporated into Section 715 of the ERISA and Title 29, Section 2590.715-2715(e) of the Code of Federal Regulations

 

Up to $1,156 per failure

 

Up to $1,176 per failure

 

At Hall Benefits Law, we work extensively with employers to adhere to applicable reporting requirements and avoid costly penalties that can result in substantial harm to your business. Please call 678-439-6236 to discuss your concerns with an experienced attorney.

The following two tabs change content below.

Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.

Latest posts by Hall Benefits Law, LLC (see all)

%d bloggers like this: