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SECURE Act Increases Late Filing Penalties
“What are the new higher penalties under the SECURE Act for companies that fail to timely file 401(k) plan reports and notices?”
ERISA consultants at the Retirement Learning Center (RLC) Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare. We bring Case of the Week to you to highlight the most relevant topics affecting your business.
A recent call with a financial advisor from Massachusetts is representative of a common inquiry related to penalties for late plan filings.
Highlights of the Discussion
The Further Consolidated Appropriations Act, 2020 included provisions from the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) that materially increased penalties for plan sponsors that fail to file certain reports and notices in a timely manner. The following penalties apply to filings and notices required to be provided after December 31, 2019.
| Form or Notice | Penalty Assessed for Late Filings after 12/31/2019 | Pre-SECURE Act Penalties |
| Failing to timely file Form 5500[1] | 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 lessor 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 lessor 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 |
Conclusion
Beginning in 2020, plan sponsors face much stiffer IRS penalties for not complying with plan reporting requirements as a result of law changes.
[1] The SECURE Act did not change the DOL’s penalty of up to $2,194 per day for a late Form 5500 filing.