EBSA increases penalties for ERISA violations

Any employer that sponsors a pension plan or a qualified retirement plan, such as a 401(k), is undoubtedly familiar with the Employee Retirement Income Security Act (ERISA). The law also applies to employer-sponsored health maintenance organization plans, Flexible Spending Accounts, and life and disability insurance.

Established in 1974, ERISA holds plan fiduciaries responsible for their actions related to the maintenance of applicable benefits plans. The Employee Benefits Security Administration (EBSA), an agency of the U.S. Department of Labor (DOL), is required by law to annually adjust ERISA penalties for inflation.

This year, effective for penalties assessed after January 14, 2022, the EBSA has increased for inflation the per diem and maximum penalty amounts for a variety of ERISA-mandated requirements. Here are some potential violations and their adjusted penalties:

Failure to furnish information to, or maintain records for, any employee. The penalty has been increased from $31 to $33 per employee for each failure. Employers might be able to avoid this penalty if they can demonstrate reasonable cause.

Failure or refusal to file a plan’s annual report with the DOL. The penalty has been increased from $2,259 to $2,400 per day, starting on the date of the plan administrator’s failure or refusal to file.

Failure by multiple employer welfare arrangements that provide health care benefits to timely file an annual report with the DOL. The penalty has been increased from $1,644 to $1,746.

Failure to provide plan information, such as a summary plan description, to the DOL in a timely manner. The penalty has been increased from $161 per day (not to exceed $1,613 per request) to $171 per day (not to exceed $1,713 per request).

Failure or refusal to provide notice to participants and beneficiaries of: 1) the provision of blackout period notice, or 2) the provision of notice of the right to divest employer securities. The penalty has been increased from $143 to $152 per day.

Failure by an underfunded multiemployer pension plan to timely adopt a funding improvement plan or rehabilitation plan, or to meet the applicable benchmarks by the end of the plan’s funding improvement period. The penalty has been increased from $1,419 to $1,507 per day.

Failure to provide employees with written notice of potential opportunities for state-provided premium assistance. The penalty has been increased from $120 to $127 per day.

Failure to provide disclosure of group health plan benefits to states for Medicaid- and CHIP-eligible individuals. The penalty has been adjusted to $127 per employee per day.

Failure to properly make a distribution. The penalty of $17,416 has been increased to $18,500 per improper distribution.

Willful failure by a group health plan to provide information to a participant or beneficiary. The penalty has been increased from $1,190 to $1,264 for each failure.

ERISA also imposes various penalties for the misuse of genetic information. Contact your benefits advisor for specifics about these.

The revised ERISA penalty amounts, which are generally payable to the DOL, will remain in effect until the effective date of the next adjustment for inflation. Our firm can help you manage the costs and financial risks of your benefits plans.

Patrick Hoffert, CPA, Partner © 2022