The U.S. Labor Department has refused requests for exceptions to its rule requiring all businesses with a pension plan and/or a 401(k) to file certain forms electronically, according to a pension consultant, who warns that plan sponsors may choose to terminate their existing plans.

The DOL started a plan to go paperless Jan. 1, meaning companies that fail to meet the filing requirements, including having an email address, could face a $15,000 penalty, according to Brett Goldstein, president of The Pension Department, based in Plainview, N.Y.

The law is designed to save the government money by reducing manual operations, Goldstein said in a statement.

He suggests that 20% to 28% of small businesses do not use email and may be forced to pay a $15,000 penalty.

Brett Goldstein

“Small business owners who don’t have email, high speed Internet connections, and older business owners are going to have a hard time trying comply with the DOL’s mandate that everyone use the Internet to electronically file their forms,” Goldstein said. “The new e-filing requirement will be burdensome to small business owners who will have to spend time away from their business to e-file. As small business owners don’t want to spend time administering their 401(k), this may be disincentive for small businesses to establish news 401(k) plans and, at worst, may lead to 401(k) plan terminations.”

The DOL said the ID and password given to employers so that they can electronic file the Form 5500, must be protected and not shared, so tax preparers cannot file on behalf of their clients, according to Goldstein.

“It’s one thing to allow companies to electronically file, but to mandate that everyone must file electronically without any exceptions is unconstitutional,” Goldstein said, suggesting that the DOL needs to make exceptions for people without Internet access or allow actuarial firms to electronically file on behalf of their clients.