As a plan sponsor, you’ve got a lot on your plate, and it’s easy to back-burner certain tasks—like your annual 401(k) audit. If you’re wondering (hypothetically or not), “What happens if I miss a 401k plan audit deadline?” … Here’s your answer.
But don’t put it off indefinitely… The consequences of missing that filing deadline can pack a hefty punch. So, if you have a large plan, here’s a friendly reminder to get your reports and documentation in order and submitted to your auditor on time!
First off, if you can, avoid missing the deadline.
With some planning and working with the right partner, your 401(k) plan audit can be a breeze. To keep it simple and penalty-free, keep your deadline on your radar and prepare accordingly.
We’ve put together handy checklists to help you get ready for your next 401(k) plan audit, whether it’s your first, or your seventeenth.
When’s that deadline again?
You’re expected to submit your third-party 401(k) audit report alongside your Form 5500, which is due on the last day of the seventh month after your plan year ends. (Say that ten times fast.)
If your plan is like most and operates on a standard calendar year, this means a July 31 deadline. But if your plan follows a different fiscal year-end, it’s wise to double-check your specific dates.
About those penalties for tardy audits…
Let’s just say, they’re not pocket change. Miss a 5500-series return deadline, and you’re looking at hefty fines.
The IRS doesn’t mess around, typically hitting plan sponsors with a $25 per day until you file, up to $15,000. According to their site, for returns required to be filed after December 31, 2019, that failure to file penalty is increased to $250 a day, up to a whopping $150,000…!
Meanwhile, the Department of Labor’s penalties vary depending on the size of the plan, can reach $2,529 a day, with no maximum limit.
Ouch.
If you’re late or close to missing the deadline, you have options.
You can snag a one-time 2.5-month extension by filing a Form 5558. If your fiscal year follows the calendar year, that pushes your deadline to October 15, giving you a bit more breathing room.
Another option? The Department of Labor (DOL) offers a Delinquent Filer Voluntary Compliance Program (DFVCP). It slices those late fees down to a fraction of what they’d be without it. Just keep in mind that this program is only available if you haven’t already received a written notice about your tardiness.
(The IRS also recommends not waiting to receive a notice for a late filing, as it typically takes them about a year to issue one… by which time you will have accumulated beaucoup fees and penalties.)
And here’s an extra cherry on top: IRS fees often get waived if you qualify for the DFVCP. So if you have delinquent filings, run, don’t walk, to DOL’s website to learn more.
The bottom line?
Missing that 401(k) audit deadline could mean serious financial woes for your plan. So, mark your calendar, get in touch with your friendly neighborhood auditing firm well before the due date, and give yourself some wiggle room. Early action, smart planning, and a dash of extra time—it’s the recipe for a stress-free audit season.
Don’t wait until it’s too late. Whether you’re late or anticipate falling behind, we can help. Contact Cassell Plan Audits today.
