DOL Increases Penalties for Not Timely Filing Form 5500
The US Department of Labor (DOL) is the responsible federal agency for overseeing compliance with ERISA, the Employee Retirement Income Security Act of 1974. Penalties for a variety of ERISA violations are contained within the law and are indexed annually for inflation.
The new inflated penalty amounts generally apply to reporting and disclosure failures if the penalty is assessed after January 15, 2021, and if the violation occurred after November 2, 2015.
The most common penalty we see assessed are against employers sponsoring qualified retirement plans with two or more participants, and even more often against employers sponsoring insured health and welfare plans with 100 or more participants and self-funded health and welfare plans of any size for failures to timely file Form 5500. The new penalty amount for such a failure is (gulp) up to $2,259 for each day the form is late.
All ERISA-covered plans outlined above must file the 5500 within seven months after the last day of the plan year, unless the deadline is extended for an additional 2-1/2 months by the employer filing a Form 5558 before the original due date. For calendar year plans, the 5500 is due by July 31st of the year following the end of the plan year, unless extended to October 15th by properly filing the 5558.
An employer can self-correct the failure to timely file a 5500 if it does so before the IRS or DOL notify the plan sponsor of an audit of the affected plan at a much-reduced penalty amount under the Delinquent Filer Voluntary Compliance Program (DFVCP). For our clients, we can assist with preparing the delinquent 5500s and the DFVCP filings with the DOL.
We strongly urge all sponsoring employers to review their processes to first determine which of their employee benefit plans are required to file the 5500, and then to ensure all Form 5500s are timely filed.