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DOL Announces Annual Adjustments to Many Employee Benefit Plan Penalties

The DOL has issued the first annual adjustment of civil monetary penalties for a wide range of benefit-related violations.

The DOL has issued the first annual adjustment of civil monetary penalties for a wide range of benefit-related violations. As background, Congress enacted legislation in 2015 requiring an initial “catch-up” adjustment to specified penalty amounts, followed by annual adjustments. Regulations issued in 2016 (see our Checkpoint article) established the catch-up amounts and called for future adjustments by January 15 of each year, starting in 2017. The adjustments just announced are effective for penalties assessed after January 13, 2017, with respect to violations occurring after November 2, 2015. Here are highlights of the changes:\r\n\r\nForm 5500. The maximum penalty for failing to file Form 5500 (which must be filed by most ERISA plans) increases from $2,063 to $2,097 per day that the Form 5500 is late.\r\nGroup Health Plans. The maximum penalty for failing to provide the summary of benefits and coverage (SBC) required under health care reform increases from $1,087 to $1,105 per failure. Violations of the Genetic Information Nondiscrimination Act (GINA), such as establishing eligibility rules based on genetic information or requesting genetic information for underwriting purposes, and failures relating to disclosures regarding availability of Medicaid or children’s health insurance program (CHIP) assistance may result in penalties of $112 per participant per day, up from $110.\r\n401(k) Plans. For plans with automatic contribution arrangements, penalties for failure to provide the required ERISA § 514(e) preemption notice to participants increase from $1,632 to $1,659 per day. Penalties for failing to provide blackout notices (required in advance of certain periods during which participants may not change their investments or take loans or distributions) or notices of diversification rights increase from $131 to $133 per day. And the maximum penalty for failure to comply with the ERISA § 209(b) recordkeeping and reporting requirements remains at $28 per employee.\r\nMultiple Employer Welfare Arrangements (MEWAs). Penalties for failure to meet applicable filing requirements, which include annual Form M-1 filings and filings upon origination, increase from $1,502 to $1,527.\r\nOther penalties increased by the regulations include those for failure to provide certain information requested by the DOL and defined benefit plan compliance failures.

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