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The pattern of increasing prices reaches into all areas of business, including retirement plan administration – specifically benefit plan violations. While California and Texas plan sponsors do not set out to commit an ERISA violation, the reality is that it can happen. Since penalties can deter noncompliance, the Employee Benefits Security Administration (EBSA) annually reviews and increases maximum penalty amounts. On January 14th, the latest Department of Labor (DOL) updates were announced, providing insight into the maximum penalties plan sponsors could face. To help clients, prospects, and others, JLK Rosenberger has provided a summary of the key DOL penalty details below.
Adjusted Penalty Amounts for 2022
Filing and Reporting
- The failure to file Form 5500 penalty was increased from $2,259 to $2,400 per day. (Yes, this is a per-day penalty that should jar anyone in charge of an ERISA plan into compliance. Keep watching, as many of these are PER DAY penalties. The IRS’s $250 per day penalty ($150,000 max) is in addition to the DOL penalty.)
- The failure to provide the DOL with the requested documentation penalty was increased from $161 to $171 per day, not to exceed $1,713 per request.
- The failure to maintain records for any employee or furnish reports (e.g., pension benefit statements) to certain former employees penalty was increased from $31 to $33 per employee.
- Failure to provide employees with timely written notice of state-provided premium assistance opportunities penalty was increased from $120 to $127 per incident.
- Failure to disclose group health plan benefits to states for Medicaid- and CHIP-eligible participants penalty was increased from $120 to $127 per incident.
- Failure to provide participants with the Summary of Benefits and Coverage penalty was increased from $1,190 to $1,264 per incident.
- Failure to notify participants about certain blackout periods where they cannot change investments or make distributions penalty was increased from $143 to $152 per incident.
- Failure to comply with the Genetic Information Nondiscrimination Act penalty was increased from $120 to $127 per day.
- Failure of the fiduciary to make a proper distribution penalty was increased from $17,416 to $18,500 per incident.
- Failure of multi-employer plans in distress to adopt a funding improvement plan, meet benchmarks, or adopt a rehabilitation plan penalty was increased from $1,419 to $1,507.
ERISA Plan Violations
Once a plan is found to be in violation of regulations, the DOL can impose the associated penalty for each violation. The amounts listed above are maximum penalties, and reduced amounts can be assessed depending on circumstances.
If a plan is non-compliant, there are ways to potentially reduce penalties.
- Delinquent Filer Voluntary Compliance Program (DFVCP) – reduces monetary penalties for plan administrators for violations related to plan filings
- Voluntary Fiduciary Correction Program (VFCP) – encourages plans to self-correct fiduciary violations
In 2021 alone, the EBSA received 22,553 annual reports through DFVCP and 1,201 applications through the VFCP, which resulted in $34 million in restored plan payments.
Mistakes happen, Sometimes, there is an error on the Form 5500 filing, and the plan management discovers it before the DOL does. Or perhaps the plan failed to provide adequate communications to its participants. Sometimes plan management is unclear about their responsibilities. It’s always preferable to self-report and self-correct when possible.
We’re here to help
The increased penalties are a subtle reminder to California and Texas plan sponsors about the importance of maintaining compliance with established regulations. The annual retirement plan audit is an excellent opportunity to review operations and take corrective action should any issues arise. If you have questions about the information outlined above or need assistance with your annual 401k plan audit, JLK Rosenberger can help. For additional information, call us at 972-331-5917, or click here to contact us. We look forward to speaking with you soon.