Rising Penalties for Non-Compliant Employee Benefit Plans

The use of employee benefit plans is so widespread that it may be easy to become complacent about developing and maintaining them. However, plan administrators and employers who understand the rising penalties for non-compliant employee benefit plans may be able to avoid being an EBSA statistic. The Employee Benefit Security Administration (EBSA) is tasked with finding and addressing ERISA violations. In 2017, the EBSA collected 1.1 billion in “recoveries” for benefit plans due to plan sponsor ERISA violations, a 41 percent increase from 2016.

Why are penalties for non-compliant employee benefit plans on the rise?

The Federal Civil Penalties Inflation Adjustment Act of 1990 (the “Inflation Adjustment Act”) created a way to increase penalties in accordance with ongoing economic inflation. However, penalty increases were uncommon and failed to keep up with inflation.

In an effort to raise penalties to more effective levels, Congress passed the Federal Civil Monetary Penalties Inflation Adjustment Improvements Act. Federal agencies were allowed to increase penalties assessed after August 1, 2016 up to 150% over the November 2, 2015 penalties. For example, the 2019 penalties for the following violations reflect the increase from 2018:

  • Failure to file an annual report (Form 5500). The penalty has risen from $2,140 to $2,194 per day for each failure.
  • Failure to provide blackout notices. The penalty has risen from $136 to $139 per day for each failure.
  • MEWA’s failure to file required report (M-1). This penalty has risen from $1,558 to $1,597 per day for each failure.
  • Employer’s failure to tell employees about Medicaid/CHIP coverage. Some penalties are based on the number of employees affected. The penalty assessed against a company has increased from $114 to $117 per day per employee.
  • Failure to furnish reports (e.g., pension benefit statements) to certain former participants and beneficiaries or to maintain records. This penalty has risen from $29 to $30 per employee.
  • Failing to comply with the Genetic Information Nondisclosure Act (GINA). Some violations of GINA rose from $17,084 to $17,515 per day per participant with the cap rising from $569,468 to $583,830.

These are just a few of the penalties that have risen. However, the increases are substantial and could be devastating to companies with non-compliant employee benefit plans.

Non-compliance can be costly.

Avoid the rising penalties. At Hall Benefits Law, we work with our clients to draft, implement, and maintain employee benefit plans that satisfy applicable legal compliance requirements and avoid significant penalties and fines.  

At Hall Benefits Law, we work extensively with employee benefit plans, both before and after plans are established. Please call 678-439-6236 to discuss your concerns with an experienced attorney. Our website contains more information about our firm, a Contact Form, and free resources for your review. From our home office in Georgia, we assist clients throughout the United States, from Connecticut to California.


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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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