Failing to File a Form 5500 Now a More Costly Mistake

Effective in 2020, penalties for failing to timely file a Form 5500 have increased substantially. As a reminder, retirement and health and welfare plans must file the form yearly with the Employee Benefits Security Administration (EBSA) at the end of the seventh month following the end of the plan year. The Form 5500 must include insurance, service provider, and financial information, among other requirements. The form provides information to a multitude of stakeholders: regulatory bodies assessing compliance, participants gauging the health and administration of their plan, and researchers analyzing larger employee benefit trends.

Both the IRS and DOL are able to assess fines for a failure to timely file the Form 5500. The IRS is now able to levy a fine of $250 per day, up to a maximum of $150,000 per plan year; this is a substantial increase from the $25 per day, $15,000 maximum in 2019. DOL penalties have slightly increased to account for inflation from $2,194 to $2,233 per day, although it’s important to note that there is no maximum amount on DOL penalties.

These are, of course, considerable penalties. If the filing deadline is missed, plans can take steps to mitigate the damage. The DOL offers the Delinquent Filer Voluntary Compliance Program, which reduces penalties for plans that correct noncompliance before being notified by the DOL of a failure to file. If a plan complies with the requirements of the program, DOL fines are reduced from $2,233 to $10 per day, and are generally capped at $1,500. Additionally, IRS penalties may automatically be waived under this program.