For 2020, legislation enacted in December 2019 dramatically increased penalties imposed by the Internal Revenue Code for late filing of certain employee benefit plan notices and reports. In addition, a final rule published by the Department of Labour (DOL) made inflation adjustments to a wide range of penalties. This article compiles the penalty amounts that apply from 2020.

Sharply increased Internal Revenue Code penalties

To raise government revenue, the Setting Every Community Up for Retirement Enhancement (SECURE) Act 2019 increased tenfold the penalties for failure to:

  • timely file a plan's annual return on Internal Revenue Service (IRS) Form 5500;
  • timely file notice of a plan merger, transfer of assets or spin-off on IRS Form 5310-A;
  • timely file the registration statement for deferred vested benefits under a retirement plan on IRS Form 8955-SSA;
  • timely file notification of certain changes in a plan's registration information on IRS Form 5500; and
  • timely provide a required withholding notice to retirement plan participants on IRS Form W-4P.

A late filing of Form 5500 may result in penalties under both the Employee Retirement Income Security Act 1974 (ERISA) and the Internal Revenue Code. For Form 5500, penalty relief may be available under the DOL's Delinquent Filer Voluntary Compliance Programme, and that relief may result in IRS penalty relief.

The SECURE Act's increased penalties are generally effective for returns, statements and notices required after 31 December 2019. The table below compares penalty amounts before and after the SECURE Act.

Internal Revenue Code penalties

Code penalty section

Description of code violations subject to penalty

2019 penalty amount

2020 penalty amount

Section 6652(e)

Failure to timely file an annual report (Form 5500) under Section 6058

$25 per day, up to $15,000

$250 per day, up to $150,000

Section 6652(e)

Failure to timely file a notice of plan merger, spin-off or asset transfer (Form 5310-A) under Section 6058

$25 per day, up to $15,000

$250 per day, up to $150,000

Section 6652(d)(1)

Failure to timely file the registration statement for deferred vested benefits (Form 8955-SSA) under Section 6057(a)

$1 per participant per day, up to $5,000

$10 per participant per day, up to $50,000

Section 6652(d)(2)

Failure to timely file notification of certain changes (Form 5500) in a plan's information (name, plan administrator, plan termination, plan merger or spin-off) under Section 6057(b)

$1 per day, up to $1,000

$10 per day, up to $10,000

Section 6652(h)

Failure to timely provide a required withholding notice (Form W-4P) under Section 3405(e)(10)(B)

$10 per failure, up to $5,000 per year

$100 per failure, up to $50,000 per year

Inflation-adjusted penalties announced by DOL

The Federal Civil Penalties Inflation Adjustment Act 2015 directs the DOL to make annual inflation adjustments for penalties due to specified ERISA violations. The increased penalties generally apply to reporting and disclosure failures if:

  • the penalty is assessed after 15 January 2020; and
  • the violation occurred after 2 November 2015.

The table below compares penalty amounts assessed for violations between 23 January 2019 and 15 January 2020 (the column labelled 2019 penalty amount) with penalty amounts assessed after 15 January 2020 (the column labelled 2020 penalty amount).

DOL penalties

ERISA penalty statute

Description of ERISA violations subject to penalty

2019 penalty amount

2020 penalty amount

Section 209(b)
  • Failure to furnish reports (eg, pension benefit statements) to certain former participants and beneficiaries or maintain records

$30 per affected participant and beneficiary

$31 per affected participant and beneficiary

Section 502(c)(2)
  • Failure or refusal to properly file an annual report (Form 5500) required by Section 104
  • Failure of a multi-employer plan to certify endangered or critical status under Section 305(b)(3)(C) treated as a failure to file an annual report

Up to $2,194 per day

Up to $2,233 per day

Section 502(c)(4)
  • Failure to notify participants under Section 10(j) of certain benefit restrictions or limitations arising under Section 436 of the Internal Revenue Code
  • Failure to furnish certain multi-employer plan financial and actuarial reports on request under Section 101(k) of the ERISA
  • Failure to furnish an estimate of withdrawal liability on request under Section 101(l)
  • Failure to furnish an automatic contribution arrangement notice under Section 514(e)(3)

Up to $1,736 per day per affected participant

Up to $1,767 per day per affected participant

Section 502(c)(5)
  • Failure of a multiple employer welfare arrangement to file a report required by regulations issued under Section 101(g)

Up to $1,597 per day

Up to $1,625 per day

Section 502(c)(6)
  • Failure to furnish information requested by the secretary of labour under Section 104(a)(6)

Up to $156 per day, not to exceed $1,566 per request

Up to $159 per day, not to exceed $1,594 per request

Section 502(c)(7)
  • Failure of a defined contribution plan to furnish a blackout notice under Section 101(i) or a notice of the right to divest employer securities under Section 101(m)

Up to $139 per day per affected participant

Up to $141 per day per affected participant

Section 502(c)(8)
  • Failure by a plan sponsor of a multi-employer plan in endangered status to adopt a funding improvement plan or a multi-employer plan in critical status to adopt a rehabilitation plan. This penalty also applies to a plan sponsor of an endangered status plan (other than a seriously endangered plan) that fails to meet its benchmark by the end of the funding improvement period

Up to $1,378 per day

Up to $1,402 per day

Section 502(c)(9)(A)
  • Failure by an employer to inform employees of Children's Health Insurance Programme coverage opportunities under Section 701(f)(3)(B)(i)(l)

Up to $117 per day per affected employee

Up to $119 per day per affected employee

Section 502(c)(9)(B)
  • Failure by a plan administrator to timely provide to any state the information required to be disclosed regarding coverage coordination under Section 701(f)(3)(B)(ii)

Up to $117 per day per affected participant and beneficiary

Up to $119 per day per affected participant and beneficiary

Section 502(c)(10)(B)(i)
  • Failure by any plan sponsor of a group health plan, or any health insurance issuer offering health insurance coverage in connection with the plan, to meet the requirements of Sections 702(a)(1)(F), (b)(3), (c) or (d), 701 or 702(b)(1) with respect to genetic information

$117 per day during non-compliance period

$119 per day during non-compliance period

Section 502(c)(10)(C)(i)
  • Minimum penalty for de minimis failures to meet genetic information requirements not corrected prior to notice from the secretary of labour

$2,919 minimum

$2,970 minimum

Section 502(c)(10)(C)(ii)
  • Minimum penalty for failures to meet genetic information requirements which are not corrected prior to notice from the secretary of labour and are more than de minimis

$17,515 minimum

$17,824 minimum

Section 502(c)(10)(D)(iii)(ll)
  • Cap on penalty for unintentional failures to meet genetic information requirements

$583,830 maximum

$594,129 maximum

Section 502(c)(12)
  • Failure of Cooperative and Small Employer Charity Act plan sponsor to establish or update a funding restoration plan

Up to $107 per day

Up to $109 per day

Section 502(m)
  • Defined benefit distribution prohibited by Section 206(e) due to an impermissible forfeiture following withdrawal of a participant's contributions

Amount distributed but no more than $16,915 per distribution

Amount distributed but no more than $17,213 per distribution

Section 715
  • Failure by a group health plan to provide a summary of benefits and coverage under Section 2715(f) of the Public Health Services Act, as incorporated into Section 715 of the ERISA and Title 29, Section 2590.715-2715(e) of the Code of Federal Regulations

Up to $1,156 per failure

Up to $1,176 per failure

Rick Stepanovic, associate, assisted in the preparation of this article.