Increase in Employer Penalties for Late Filings
Although many of the SECURE Act provisions are welcomed by Plan Sponsors, such as providing more contribution flexibility and tax credits for starting a plan or adding automatic enrollment provisions to an existing plan, the Act also substantially increases penalties for failure to file Forms 5500 and 8955-SSA on a timely basis.
Both the IRS and the DOL can access penalties for failing to file. The increased penalties will be applied to filings due after December 31, 2019 which mean the new penalties apply to the 2019 Plan Year Forms with filing due dates in 2020!
- The IRS penalty for a late Form 5500 filing is $250 per day, with a maximum of $150,000 per plan (per plan year missed). Previously the penalty was $25 per day, up to a maximum of $15,000.
- The IRS penalty for a late Form 8955-SSA filing is $10 per participant per day with a maximum of $50,000. Previously the penalty was $1 per participant per day with a maximum of $5,000.
- The DOL can assess a penalty of $2,330 per day with no maximum for a late Form 5500 filing. The dollar amount is adjusted for inflation but was not changed by the Act.
If these forms are filed past the deadline, use the Department of Labor’s Delinquent Filer Voluntary Compliance Program (DFVCP) as soon as possible. The IRS will generally waive their late filing penalties for Form 5500 series filers who satisfy the DFVCP requirements. Also, by using the DFVCP, the DOL penalties are reduced and capped. There is a separate User Fee to file under the DFVCP.
Causes for late filings include delay in the preparation of the independent audit report which must be attached to the Form 5500, lack of accurate or timely data provided by the employer to the preparer of the Forms, or failure to monitor participants that must be reported on Form 8955-SSA.
TRA’s third party administration services also serve to minimize the chance of an employer misses a filing deadline. TRA’s 3(16) Delegated Fiduciary Services specifically include preparing, signing and timely filing of the Form 5500 and Form 8955-SSA on behalf of the Plan Sponsor. Working with TRA as the Third Party Administrator and/or the 3(16) Delegated Fiduciary Service provider allows the employer to rest easy in the knowledge that these critical filings are handled, and costly penalties are avoided.
Contact your TRA Regional Sales Consultant with questions on the SECURE Act.