Failure to file Form 5500 is costly as the Department of Labor (DOL) and Internal Revenue Service (IRS) has jurisdiction over the form and can set forth separate penalties.
For penalties assessed after January 15, 2021, the DOL per day penalty for failure to properly Form 5500 has increased from $2,233 to $2,259, with no maximum. In addition to the DOL penalties, the IRS can also assess a penalty for late filers up to $250 a day, up to a maximum penalty of $150,000 per plan year.
That is why plan sponsors with late 550s should file through the DOL’s Delinquent Filer Voluntary Compliance Program (DFVCP).
The DOL penalties under DFVCP are reduced from $2,259 per day to $10 per day. Penalties for small plans (generally under 100 participants) are capped at $750 for a single late Form 5500 and $1,500 for multiple years per plan. Penalties for large plans (generally 100 employees and over) are capped at $2,000 for a single late Form 5500 and $4,000 for multiple years per plan.
