The Penalty Is Bigger Than You Think
Most employers know Form 5500 has a deadline. Few know what ignoring it actually costs. The IRS penalty for a late filing is $250 per day, capped at $150,000 per return per year. That cap hits after 600 days of non-filing, according to Financial Clarity Group.
And that's just the IRS side. The DOL runs its own penalty track. According to Maynard Nexsen's Compliance Corner, the DOL civil penalty for failure to file timely or accurately can reach up to $2,529 per day, with no maximum cap.
Why do some sources cite $1,100 and others cite $2,529? Annual inflation adjustments required by the Inflation Adjustment Improvements Act of 2015. The number moves. Check current figures before assuming.
DWC 401k estimates combined exposure can exceed $2,500 per day. That's not a typo. It adds up fast.
| Penalty Source | Daily Rate | Maximum Cap |
|---|---|---|
| IRS | $250/day | $150,000 per return/year |
| DOL | Up to $2,529/day | No cap |
| Combined exposure | Up to $2,779/day | No cap |
How the Deadline Works
For calendar-year plans, July 31 is your original due date. That's the last day of the seventh month following the end of the plan year. Need more time? File IRS Form 5558 for an automatic 2.5-month extension, which pushes your deadline to October 15.
Here's where employers get confused. The extension delays the IRS filing deadline. Under DOL enforcement procedures, the base late-filer penalty clock starts from the original due date, not the extension date.
Miss July 31 and file in November? The DOL penalty meter has been running since August 1, not October 16. Don't assume the extension buys you clean runway on both fronts. It doesn't.
A Timeline If You're Approaching July 31
- Now through June 15: Confirm your plan year, plan type, and whether you're required to file. Most plans with 100 or more participants must file. Some smaller plans qualify for the Form 5500-SF.
- June 15 through July 1: Gather required data from your TPA, recordkeeper, or insurance carrier. Audited financials are required for large plans. Don't wait on this. Auditors book up.
- By July 15: If you can't file by July 31, submit Form 5558 before the deadline for your automatic extension to October 15. File it early, not the morning of July 31.
- By October 15 (if extended): File through the EFAST2 system. This is a hard deadline. No second extension.
- Already late? Go straight to the DFVCP.
The DFVCP: Your Best Option If You're Already Late
If you've already missed a deadline, the Delinquent Filer Voluntary Compliance Program is the most practical fix available. The DFVCP lets plan administrators voluntarily correct late filings and pay significantly reduced penalties. The key word is voluntary. You have to come to them before they come to you.
Before the SECURE Act, the IRS penalty was $25 per day capped at $15,000. The SECURE Act increased it tenfold, to $250 per day capped at $150,000. That shift took effect in 2020. A lot of plan sponsors still haven't internalized it.
Two relief routes exist on the IRS side: a Reasonable Cause Request, or the DFVCP for DOL penalties. Neither is automatic. Both require documentation, timely action, and a clean filing submitted as part of the process.
What This Means for You
If your plan year ended December 31, 2025, your July 31, 2026 deadline is weeks away. Check right now whether your TPA has everything they need. If there's a gap, file Form 5558 before July 31, not after.
Already missed a prior year deadline? Don't wait for a notice. Get into the DFVCP before the DOL finds you first.