Failure to Provide ERISA-Required Plan Document to Participant Costs Plan Sponsor $41,000

ERISA plan failures often result in corrective actions and monetary penalties. ERISA penalties apply to all types of benefit plans, so while the case at hand is a medical benefits plan, monetary fines for failure to provide plan documents could and do apply to retirement plans, disability plans, executive compensation, and other employer-provided benefit plans.

Kinsinger v. Smartcore, LLC

In the case at hand, a health plan participant received preauthorization for a hysterectomy. This procedure was medically necessary. After the operation, however, the medical bills for the surgery were not paid by her health insurance. It turned out that those responsible had not paid for the health benefit program. While funds were being withheld from employee paychecks for health benefits, those funds were not being used to actually pay for the benefits.

This wrongdoing in this case continued when the plan participant, after discovering her claims would not be paid, requested a copy of the plan documents. She wanted to be able to review the documents to determine how to appeal and what rights she had under the plan. The plan sponsor failed to provide plan documents. In order to remedy the situation, the plan participant chose to sue her employer in order to cover her medical costs. During discovery, the requested plan documents were finally provided, several years late.

Finally, the day before the case was to go to trial, the medical costs of the hysterectomy were paid. The court added interest for the payment delay. In addition, the court added a penalty of $55 per day, or $41,000 total, for failure to produce the requested plan document within 30 days, as required by ERISA. Penalties of up to $110 per day are permitted under ERISA as a deterrent to businesses and to encourage timely compliance with regulations. The court did not grant the full penalty allowed, instead the judge exercised their discretion in setting the penalty amount.

ERISA Penalties

While penalties for failure to provide documents are permitted, and common, they are not always assessed at trial. The judge is given discretion to determine whether a penalty is appropriate in a given situation and how much the court should charge. Leveraging a penalty is often a sign that the judge does not have confidence in the fiduciaries for other reasons besides their failure to produce.

The experienced team at Hall Benefits Law works with clients put in place processes and procedures that comply with regulations and avoid costly litigation and penalties. We want our clients to keep their money while offering the best benefit options for their employees. Learn more by calling 678-439-6236, or visit the Hall Benefits Law website.

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Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.

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