What is the employer's penalty if they do not contribute to a simple IRA, matching the employee's contribution amount, up to 3%?

[ghornstein67]

What if they matched 1% or less of the employees contribution for 10 years, instead of 3% of the annual compensation.

[Opus 17]

We can't give legal advice.  You may want to speak to an attorney (maybe all the affected employees can share the cost).  

[dmertz]

Are you sure that it's really a SIMPLE IRA plan rather than just a Payroll Deduction IRA?

https://www.irs.gov/retirement-plans/plan-sponsor/payroll-deduction-ira

When establishing the account, did you complete Form 5304-SIMPLE or 5305-SIMPLE?

Does the Form 5498 from the IRA custodian indicate that it's a SIMPLE IRA?

Failure of the employer to follow the terms of the SIMPLE IRA plan document required to be provided to all eligible employees each year risks disqualification of the plan.  If the plan comes under audit and the IRS finds violations, the IRS can impose sanctions.

https://www.irs.gov/retirement-plans/epcrs-overview