From the Hotline: Penalties for Missing Filing deadlines for Form 5500

Question: What are the penalties for missing the filing deadlines for Form 5500?

Answer: The answer depends upon whether you found that you did not file it yourself, or if the DOL has ordered you to file it.

If the error was found by the DOL, the Plan Administrator is subject to DOL penalties of up to $1,100/day for each ERISA Plan Form 5500 which is late, incomplete, or not prepared and filed at all by the deadline. (29 U.S.C. § 1132(c)(2); 29 C.F.R. § 2560.502c-2).

IRS can impose fines for failure to comply with ERISA’s filing requirements as follows:

  • $25 per day up to a maximum of $15,000 for failing to file Form 5500 or Form 5500-SF;
  • $1 per day up to a maximum of $1,000 for failing to note changes in plan status, such as changes in plan administration or plan termination; and
  • $1,000 for failing to file Schedule SB (I.R.C. §§ 6652(d)(2), 6652(e), 6692)

A willful violation may result in a criminal penalty of $100,000 or imprisonment for 10 years, or both. Knowing misrepresentation or concealment of facts required to be disclosed by the Plan Administrator are punishable by a fine up to $10,000 or imprisonment for up to 5 years. A DOL penalty cannot be treated as a Plan administrative expense.

Fortunately, the DOL does have a Delinquent Filer Voluntary Compliance Program that offers a reduced penalty, but this program cannot be used once the DOL finds the employer’s error through an audit or investigation.

If the client found the error and is voluntarily correcting it under the DFVCP, the penalties are as follows:

Per day penalty: The basic penalty under the program is $10 per day for delinquent filings.

“Per filing” cap: The maximum penalty for a single late annual report has been reduced from $2,000 to $750 for a small plan (generally a plan with fewer than 100 participants at the beginning of the plan year) and from $5,000 to $2,000 for a large plan.

“Per plan” cap: The DFVCP also includes a “per plan” cap. This cap is designed to encourage reporting compliance by plan administrators who have failed to file an annual report for a plan for multiple years. The “per plan” cap limits the penalty to $1,500 for a small plan and $4,000 for a large plan regardless of the number of late annual reports filed for the plan at the same time. There is no “per administrator” or “per sponsor” cap. If the same person is the administrator or sponsor of several plans required to file annual reports under Title I of ERISA, the maximum applicable penalty amounts would apply for each plan.