What Is the Penalty for Late Filing of Form 5500?

Form 5500 is an annual reporting document for employee benefit plans, providing transparency regarding their financial health and operations. It satisfies annual reporting requirements mandated by the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code. This report is used by the Department of Labor (DOL), the Internal Revenue Service (IRS), and the Pension Benefit Guaranty Corporation (PBGC). Failing to meet filing deadlines can result in significant financial penalties.

Form 5500 Filing Obligations

Form 5500 is an annual report required for most employee benefit plans under ERISA. This report details the plan’s qualification status, financial condition, investments, and operations. Plan administrators, typically employers, are responsible for its timely submission.

Plans covering 100 or more participants at the start of a plan year must file the full Form 5500. Smaller plans, with fewer than 100 participants, may file simplified versions such as Form 5500-SF or Form 5500-EZ. Certain unfunded or fully-insured welfare plans with fewer than 100 participants are exempt from filing.

The standard filing deadline for Form 5500 is the last day of the seventh month following the end of the plan year. For calendar year plans, this due date is typically July 31. If additional time is needed, plan administrators can request a 2.5-month extension by filing Form 5558 with the IRS before the original deadline. This extension usually shifts the deadline to October 15 for calendar-year plans.

Understanding Late Filing Penalties

Failing to file Form 5500 on time can trigger substantial penalties from both the Department of Labor (DOL) and the Internal Revenue Service (IRS). These penalties accrue independently, meaning a single late filing can lead to financial consequences from both agencies. The daily accrual rates emphasize timely compliance.

The Department of Labor can assess significant penalties for late or non-filing of Form 5500. The maximum civil penalty can be as high as $2,670 per day. There is no statutory cap on this daily penalty, allowing the amount to accumulate rapidly.

The Internal Revenue Service imposes penalties for failure to file Form 5500 series returns. For Form 5500, the penalty is $250 per day, with a maximum penalty of $150,000 per plan year. This daily penalty amount increased significantly for returns required to be filed after December 31, 2019. For one-participant plans failing to file Form 5500-EZ, the penalty is also $250 per day, up to $150,000.

Submitting incomplete or incorrect filings can also lead to penalties. If an extension to file Form 5500 was granted but the extended deadline is missed, a penalty of $50 per day can be assessed. This penalty is applied retroactively to the original Form 5500 due date, not just from the extended deadline.

Programs for Penalty Relief

When a Form 5500 filing is delinquent, programs offer penalty relief. These programs provide opportunities to mitigate or reduce the financial impact of late submissions, assuming certain conditions are met. Understanding these mechanisms is crucial for plan administrators.

The Department of Labor offers the Delinquent Filer Voluntary Compliance Program (DFVCP) to encourage plan administrators to voluntarily submit overdue annual reports. This program allows for reduced civil penalties. Eligibility for the DFVCP is limited to plan administrators with Title I ERISA filing obligations who have not yet received written notification from the DOL regarding their failure to file. One-participant plans, which typically file Form 5500-EZ, are not eligible for the DFVCP.

Under the DFVCP, the basic penalty is $10 per day for delinquent filings. There are caps on these penalties: $750 for a single late report for small plans (fewer than 100 participants) and $2,000 for large plans (100 or more participants). For plans with multiple years of delinquent filings, the program includes a “per-plan” cap of $1,500 for small plans and $4,000 for large plans, regardless of how many overdue reports are submitted simultaneously.

To participate, plan administrators must electronically file the delinquent Form 5500 or Form 5500-SF via the EFAST2 system. The DOL’s online calculator helps determine the penalty amount. Penalties paid under the DFVCP cannot be covered by plan assets.

The Internal Revenue Service may abate penalties for late filings under specific circumstances, often based on “reasonable cause.” Reasonable cause is determined on a case-by-case basis. Examples include death or serious illness of the taxpayer or an immediate family member, an unavoidable absence, or the inability to obtain necessary records due to circumstances like a natural disaster.

For one-participant plans, the IRS offers a penalty relief program for late Form 5500-EZ filers. This involves a reduced fee of $500 per delinquent return, capped at $1,500 per plan for multiple years. Utilizing the DOL’s DFVCP can result in corresponding relief from IRS penalties.

Strategies to Ensure Timely Filing

Proactive measures are effective in preventing late Form 5500 filings and avoiding penalties. Establishing a clear organizational system for managing plan responsibilities is a foundational step. This includes setting reminders for all critical deadlines.

Maintaining accurate and comprehensive records throughout the year is important. Documenting plan participants, assets, contributions, distributions, and other transactions ensures that all necessary information is available for reporting. Engaging qualified professionals, such as third-party administrators (TPAs), accountants, or ERISA counsel, can provide expertise and support in navigating filing requirements. These professionals can help ensure accuracy and compliance.

Staying informed about any changes to the plan’s structure, participant count, or regulatory landscape is a meaningful strategy. Modifications to the plan or its demographics can impact filing requirements or the form series used. Utilizing available resources, such as the official websites and publications of the IRS and DOL, provides access to current guidance and support. These resources offer detailed instructions and answers to common questions, aiding in proper compliance.