The Department of Labor (DOL), along with several other federal agencies, recently released adjusted penalty amounts for various violations. The amounts had not been adjusted since 2003, so there was some catching up to do, as required by legislation passed late last year.
These new penalty amounts apply to penalties assessed after August 1, 2016 for violations that occurred after November 2, 2015 (which was when the legislation was passed). Therefore, while the penalty amounts aren’t effective yet, they will be very soon and they will apply to violations that may have already occurred. Additionally, per the legislation, these amounts will be subject to annual adjustment going forward, so they will keep going up.
The DOL released a Fact Sheet with all the updated penalty amounts under ERISA. A few of the highlights are:
General Penalties
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For a failure to file a 5500, the penalty will be $2,063 per day (up from $1,100).
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If you don’t provide documents and information requested by the DOL, the penalty will be $147 per day (up from $110), up to a maximum penalty of $1,472 per request (up from $1,100).
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A failure to provide reports to certain former participants or failure to maintain records to determine their benefits is now $28 per employee (up from $10).
Pension and Retirement
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A failure to provide a blackout notice will be subject to a $131 per day penalty (up from $100).
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A failure to provide participants a notice of benefit restrictions under an underfunded pension plan under 436 of the tax code will cost $1,632 per day (up from $1,000).
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A payment in violation of those restrictions will be $15,909 per distribution (up from $10,000).
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A failure of a multiemployer plan to provide plan documents and other information or to provide an estimate of withdrawal liability will be $1,632 per day (up from $1,000).
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A failure to provide notice of an automatic contribution arrangement required under Section 514(e)(3) of ERISA will also be $1,632 per day (also up from $1,000).
Health and Welfare
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Employers who fail to give employees their required CHIP notices will be subject to a $110 per day penalty ($100, currently).
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Failing to give State Medicaid & CHIP agencies information on an employee’s health coverage will also cost $110 per day (again, up from $100).
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Health plan violations of the Genetic Information Nondiscrimination Act will also go up to $110 per day from $100. Additionally, the following minimums and maximums for GINA violations also go up:
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minimum penalty for de minimis failures not corrected prior to receiving a notice from DOL: $2,745 (formerly $2,500)
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minimum penalty for GINA failures that are not de minimis and are not corrected prior to receiving a notice from the DOL: $16,473 (up from $15,000)
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cap on unintentional GINA failures: $549,095 (up from $500,000)
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Failure to provide the Affordable Care Act’s Summary of Benefits and Coverage is now $1,087 per failure (up from $1000).
The above penalty amounts are usually maximums (the penalties are “up to” those amounts), which means the DOL has the discretion to assess a smaller penalty. Employers and plans should be mindful of these and the other penalty increases described in the fact sheet. These increased penalties give the DOL additional incentive to pursue violations and assess penalties. They also give the DOL greater negotiating leverage in any investigation. For these reasons, it pays to be aware of the various compliance obligations (and any associated timing requirements) and make sure your plans’ operations are consistent with those obligations.
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