Increased late filing fees for DOL and IRS employee benefit plan


For 2020, legislation enacted in December 2019 significantly increases the penalties imposed by the Internal Revenue Code (the Code) for the late filing of certain notices and reports on employee benefit plans. Additionally, a final rule issued by the Department of Labor (DOL) makes inflation adjustments to a wide range of penalties. This article compiles the penalty amounts applicable from 2020.

In depth


Penalties of the Tax Code sharply increased

To increase government revenue, the 2019 Setting Every Community Up for Retirement Enhancement (SECURE Act) tenfold penalties for non-compliance:

  1. Timely file a plan’s annual report on IRS Form 5500;

  2. Timely file a notice of plan merger, asset transfer, or spin-off on IRS Form 5310-A;

  3. Timely file the declaration of registration of deferred vested benefits under a pension scheme on IRS form 8955-SSA;

  4. Timely filing notification of certain changes in a plan’s registration information on IRS 5500 form; and

  5. Provide timely withholding notice required to pension plan members on IRS Form W-4P.

Late filing of Form 5500 may result in penalties under ERISA and the Code. For Form 5500, penalty relief may be available as part of the DOL’s Delinquent Reporting Voluntary Compliance Program, and this relief may result in IRS penalty relief.

The increased penalties under the SECURE Act generally apply to returns, declarations and notices required after December 31, 2019. The table below compares the penalty amounts before and after the SECURE Act.

INTERNAL REVENUE CODE PENALTIES

Penalties section of the code

Description of the breaches of the code liable to penalties

2019 penalty amount

2020 penalty amount

Code §6652 (e)

Failure to file a timely annual report (Form 5500) under code §6058.

$ 25 per day, up to $ 15,000

$ 250 per day, up to $ 150,000

Code §6652 (e)

Failure to timely file a Notice of Merger, Split or Transfer of Plan Assets (Form 5310-A) under Code §6058.

$ 25 per day, up to $ 15,000

$ 250 per day, up to $ 150,000

Code §6652 (d) (1)

Failure to timely file the registration statement for deferred vested benefits (form 8955-SSA) under Code § 6057 (a).

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

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

Code §6652 (d) (2)

Failure to file timely notification of certain changes (Form 5500) in a plan’s information (name, plan administrator, plan termination, plan merger or split) under Code § 6057 (b).

$ 1 per day, up to $ 1,000

$ 10 per day, up to $ 10,000

Code §6652 (h)

Failure to timely provide required withholding notice (Form W-4P) under Code § 3405 (e) (10) (B).

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

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

Penalties adjusted for inflation announced by the Ministry of Labor

The Federal Civil Sanctions Inflation Adjustment Act 2015 directs the DOL to make annual inflation adjustments for sanctions due to specified violations of ERISA. The increased penalties generally apply for failure to report and disclose if the penalty is imposed after January 15, 2020 and the violation occurred after November 2, 2015. The table below compares the amounts of penalties imposed for violations after January 23, 2019 through January 15. , 2020 (the column titled 2019 Penalty Amount), to the penalty amounts imposed after January 15, 2020 (the column titled 2020 Penalty Amount).

DOL PENALTIES

ERISA Penalty Status

Description of sanctionable ERISA violations

2019 penalty amount

2020 penalty amount

ERISA §209 (b)

Failure to provide reports (for example, pension benefit statements) to certain former members and beneficiaries or keep records.

$ 30 per affected participant and beneficiary

$ 31 per affected participant and beneficiary

ERISA §502 (c) (2)

Failure or refusal to correctly file the annual report (form 5500) required by ERISA §104; and

Failure of a multi-employer plan to certify endangered or critical status under ERISA §305 (b) (3) (C) treated as failure to file an annual report.

Up to $ 2,194 per day

Up to $ 2,233 per day

ERISA §502 (c) (4)

Failure to notify participants under ERISA §10 (j) of certain restrictions and / or limitations of benefits arising from Internal Revenue Code §436;

Failure to provide certain multi-employer plan financial and actuarial reports upon request under ERISA §101 (k);

Failure to provide an estimate of liability for withdrawal upon request under ERISA §101 (l); and

Failure to provide notice of automatic contribution arrangement under ERISA §514 (e) (3).

Up to $ 1,736 per day per affected participant

Up to $ 1,767 per day per affected participant

ERISA §502 (c) (5)

Failure of a multiple employer social protection scheme to file the report required by regulations issued under ERISA §101 (g).

Up to $ 1,597 per day

Up to $ 1,625 per day

ERISA §502 (c) (6)

Failure to provide information requested by Minister of Labor under ERISA §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

ERISA §502 (c) (7)

Failure of a defined contribution plan to provide a prohibition notice under ERISA §101 (i) or a notice of the right to cede employer securities under ERISA §101 (m) .

Up to $ 139 per day per affected participant

Up to $ 141 per day per affected participant

ERISA §502 (c) (8)

Failure of a promoter of a multi-employer plan in danger to adopt a funding improvement plan or of a multi-employer plan in a critical situation to adopt a rehabilitation plan. The penalty also applies to a plan sponsor whose status is at risk (other than a critically endangered plan) that does not meet its benchmark at the end of the funding enhancement period.

Up to $ 1,378 per day

Up to $ 1,402 per day

ERISA §502 (c) (9) (A)

Failure of an employer to inform employees of the possibilities of Children’s Health Insurance Program (CHIP) coverage under ERISA §701 (f) (3) (B) (i) (l).

Up to $ 117 per day per affected employee

Up to $ 119 per day per affected employee

ERISA §502 (c) (9) (B)

Failure of a plan administrator to timely provide any state with the information required to be disclosed regarding the coordination of coverage under ERISA §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

ERISA §502 (c) (10) (B) (i)

Failure of a plan sponsor of a group health plan, or any health insurance issuer providing health insurance coverage under the plan, to meet the requirements of ERISA §§702 (a ) (1) (F), (b) (3), (chord); or §701; or §702 (b) (1) with respect to genetic information.

$ 117 per day during the non-compliance period

$ 119 per day during the non-compliance period

ERISA §502 (c) (10) (C) (i)

Minimum penalty for de minimis non-compliance with genetic information requirements not corrected before the opinion of the Minister of Labor.

$ 2,919 minimum

$ 2,970 minimum

ERISA §502 (c) (10) (C) (ii)

Minimum penalty for non-compliance with genetic information requirements that are not corrected before the opinion of the Minister of Labor and are greater than de minimis.

$ 17,515 minimum

$ 17,824 minimum

ERISA §502 (c) (10) (D) (iii) (ll)

Cap on penalties for unintentional non-compliance with genetic information requirements.

$ 583,830 maximum

$ 594,129 maximum

ERISA §502 (c) (12)

Failure of the Cooperative and Small Employer Charity Act (CSEC) plan sponsor to establish or update a plan to restore funding.

Up to $ 107 per day

Up to $ 109 per day

ERISA §502 (m)

Distribution of defined benefits prohibited by ERISA §206 (e) due to inadmissible confiscation following withdrawal of contributions from a participant.

Amount distributed but not more than $ 16,915 per distribution

Amount distributed but not more than $ 17,213 per distribution

ERISA §715

Failure of a group health plan to provide a summary of benefit coverage under the Public Health Services Act §2715 (f), as incorporated in ERISA §715 and 29 CFR 2590.715-2715 (e ).

Up to $ 1,156 per failure

Up to $ 1,176 per failure

© 2021 McDermott Will & EmeryRevue nationale de droit, volume X, number 30


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