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
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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)
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Up to $156 per day, not to exceed $1,566 per request
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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)
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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)
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Up to $117 per day per affected employee
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Up to $119 per day per affected employee
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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)
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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
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$117 per day during non-compliance period
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$119 per day during non-compliance period
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Minimum penalty for de minimis failures to meet genetic information requirements not corrected prior to notice from the Secretary of Labor
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$2,919 minimum
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$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
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$17,515 minimum
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$17,824 minimum
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Cap on penalty for unintentional failures to meet genetic information requirements
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$583,830 maximum
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$594,129 maximum
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Failure of Cooperative and Small Employer Charity Act plan sponsor to establish or update a funding restoration plan
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Up to $107 per day
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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
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Amount distributed but no more than $16,915 per distribution
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Amount distributed but no more than $17,213 per distribution
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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
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Up to $1,156 per failure
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Up to $1,176 per failure
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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.
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