Petition pushes Congress to cap late 401(k) filing penalties for small businesses

Retirement expert Brett Goldstein has launched The 5500 Project to press Congress to lower six-figure penalties tied to late Form 5500 filings for retirement plans. The effort targets a proposed bill that would simplify filing deadlines but leave the current penalty structure intact.

Why it matters: - Small business owners face late retirement plan filing penalties that can reach six and seven figures, adding pressure to businesses already dealing with wages, rent and benefits costs. - The 5500 Project says deadline relief alone will not solve the affordability problem if the penalty structure stays in place. - The petition argues that filing modernization should come with real penalty relief for employers that sponsor retirement plans.

What happened: - Brett Goldstein, president of The Pension Department, Inc. in Melville, New York, launched The 5500 Project. - The 5500 Project is a petition effort on Change.org asking Congress to amend the Form 5500 Filing Simplification Act. - Senators Jim Banks, R-Ind., and Cory Booker, D-N.J., proposed legislation to create a single later filing date for Form 5500 retirement plan annual reports. - The proposal would let calendar-year plans file closer to October and would formally allow electronic signatures.

The details: - The current rule requires most retirement plans to file about seven months after year-end and then request an extension. - The proposed act would replace that process with a single later deadline. - Goldstein said an employer can face a $71,500 penalty for being 10 months late on a 401(k) form. - Goldstein also said the IRS cap can reach $150,000 for a single late filing. - Goldstein said the Department of Labor can add a $2,739 per day penalty on top of IRS penalties. - The petition asks lawmakers to add a one-time $750 amnesty cap for a first-time small business penalty. - The petition also wants to end disqualification from the Delinquent Filer Voluntary Compliance Program after a government notice is received. - The petition calls for a mandatory 90-day warning period before the $250 per day penalties can compound.

Between the lines: - The proposed bill appears focused on administrative simplification, not penalty reform. - Goldstein is framing the issue as a real-time financial risk, not a compliance technicality. - The effort is aimed at shifting Congress from modernizing the filing process to limiting the damage from late-filed paperwork.

What's next: - The 5500 Project is urging small business owners and supporters to sign and share the Change.org petition. - The campaign wants Congress to revise the bill before filing simplification moves forward without penalty relief. - If lawmakers act, the proposal could lower the risk of large late-filing penalties for small employers.