United States: Retirement Plans Reporting Not Canceled During The Pandemic -- File To Avoid Increased Penalties

Employers should not relax their retirement plan reporting requirements even amidst the pandemic, as the penalties have gone significantly up for forms 5500, 5310-A and 8955-SSA.

Section 403 of the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act), Division O of the Further Consolidated Appropriations Act, 2020 (P.L. 116-94), increases penalties for failure to file certain retirement plan returns effective for returns, statements, and notifications required to be filed after Dec. 31, 2019.

The penalty for failure to file Form 5500 series and Form 5310-A required by IRC 6058 was increased to $250 per day, not to exceed $150,000. The penalty for failure to file a registration statement, Form 8955-SSA, required by IRC 6057(a), increased to $10 for each participant with respect to whom there is a failure to file multiplied by the number of days the failure occurred, not to exceed $50,000 with respect to any plan year. The penalty for failure to file a notification of change of plan status required by IRC 6057(b) increased to $10 for each day during which such failure occurs, not to exceed $10,000. 

Even without the coronavirus, the Employee Benefits Securities Administration saw an increase of penalties related to reporting compliance between 2018 and 2019. EBSA assessed about $6 million in civil penalties related to reporting compliance issues, according to the agency. That amount more than doubled in fiscal year 2019, when the agency assessed about $13.6 million in civil penalties.

Late filers should not count on a sympathetic IRS or DOL.  The government, correctly, takes the position that their role is to protect the retirement funds of the American public.  Our team has also seen an uptick in penalties for failure to file.  Easy targets are Form 5500s that are filed without the audit report.  If we do not have a good "reasonableness" argument on why the return was filed wrong, the employer may be on the hook for a mid to large 5-digit penalty.

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