Employer Penalties For ERISA Compliance Errors See Big Increase

Attention employers: The stakes in your ERISA compliance effort just got higher. The U.S. Department of Labor recently announced that the penalties employers face for failing to comply with the Employee Retirement Income Security Act are being adjusted upward, effective August 1, 2016. In some cases, the penalties are more than doubling.

Smart employers will want to take a look at each of these potential violations and ensure they have procedures in place to check for and ensure compliance.

The new penalty rates, quietly announced on July 1stin the Federal Register, are as follows:

  • Failure to furnish statement of benefits to former retirement plan participants and beneficiaries or failure to maintain records for a retirement plan IAW Section 209(b) of ERISA:  Increasing from $11 per employee to $28 per employee
  • Failure or refusal to file an annual Form 5500, IAW Section 502(c)(2): Increasing from $1,100 per day to $2,063 per day
  • Failure of a multi-employer defined benefit (DB) plan to certify endangered or critical status IAW Section 502(c)(2) of ERISA: Increasing from $1,100 per day to $2,063 per day
  • Failure to notify single employer defined benefit plan participants of certain benefit restrictions and/or limitations under Code Section 436, IAW Section 502(c)(4): Increasing from $1,000 per day to $1,632 per day
  • Failure to furnish certain multi-employer defined benefit plan financial and actuarial reports upon request by participant, beneficiary or employee representative, IAW Section 502(c)(4): Increasing from $1,000 per day to $1,632 per day
  • Failure by a plan sponsor or plan administrator of a multi-employer defined benefit plan to furnish estimate of withdrawal liability upon request to participating employer, IAW Section 502(c)(4): Increasing from $1,000 per day to $1,632 per day
  • Failure to furnish of automatic contribution arrangement notice to defined contribution plan participants IAW Section 502(c)(4): Increasing from $1,000 per day to $1,632 per day
  • Failure of Multiple Employer Welfare Arrangement (MEWA) to file required report (M-1) IAW Section 502(c)(5): Increasing from $1,100 per day to $1,502 per day
  • Failure to furnish employee benefit plan documents to Department of Labor upon request (including plan and trust documents, summary plan description, summary of material modifications collective bargaining agreement), IAW Section 502(c)(6): Increased from $110 per day to $147 per day, but with a cap of $1,472 per request
  • Failure to furnish blackout notice or notice of right to divest employer securities to participants and beneficiaries in defined contribution plans, in accordance with Section 502(c)(7): Increasing from $100 per day per required recipient to $131  $131 per day per required recipient
  • Failure of multi-employer defined benefit plan sponsor to adopt a funding improvement plan for plan in endangered status (or failure to adopt a rehabilitation plan for plan in critical status), also applies to failure to meet benchmark by end of funding improvement period for endangered plans (that are not seriously endangered plans), as per Section 502(c)(8) of ERISA: Increased from $1,100 per day to $1,296 per day
  • Failure to inform employees of Medicaid/CHIP coverage opportunities, IAW Section 502(c)(9)(A): Penalty increasing from $100 per day to $110 per day, per employee
  • Failure of group health plan administrator to prove state with timely coverage coordination disclosure form for Medicaid or CHIP-eligible individuals, IAW Section 502(c)(9)(B): Increased from $100 per day to $110 per day, per beneficiary or participant
  • Genetic Information Disclosure Act (GINA) violation by a health plan sponsor (Section 502(c)(10)): Fine for violations increased from $100 to $110 per day per beneficiary, if not corrected before notice of violation is received, subject to a minimum of $2,745 per day per participant or beneficiary for de minimis violations, or $16,473 for violations that are not de minimis
  • Failure to provide Summary of Benefits Coverage to participant or beneficiary of a group health insurance plan, IAW Section 715: Fine increased from $1,000 to $1,087 per beneficiary or participant
  • Prohibited payment from a defined benefit plan when the plan has a liquidity shortfall under Section 502(m): Penalty increased from $10,000 per prohibited payment to $15,909

 

These penalties will be adjusted for inflation each year beginning in 2017.

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