The U.S. Department of Labor (DOL) recently announced the 2021 annual adjustments to civil monetary penalties for a wide range of benefits-related violations. Legislation enacted in 2015 requires annual adjustments to certain penalty amounts by January 15 of each year. The 2021 adjustments are effective for penalties assessed after January 15, 2021, with respect to violations occurring after November 2, 2015. Here are some highlights:
Form 5500. Employers must file this form annually for most ERISA plans to provide the IRS and DOL with information about the plan’s operation and compliance with government regulations. The maximum penalty for failing to file Form 5500 has increased from $2,233 per day to $2,259 per day that the filing is late.
Summary of Benefits and Coverage (SBC). The maximum penalty for failing to provide an SBC has increased from $1,176 to $1,190 per failure.
Other group health plan penalties. Violations of the Genetic Information Nondiscrimination Act (GINA) may result in penalties of $120 per participant per day, which is up from $119. Examples of violations include establishing eligibility rules based on genetic information, requesting genetic information for underwriting purposes and failing to meet requirements related to disclosures regarding the availability of Medicaid or children’s health insurance program (CHIP) assistance.
401(k) plan disclosure, recordkeeping and reporting. For plans with automatic contribution arrangements, penalties for failure to provide the required ERISA preemption notice to participants have increased from $1,767 per day to $1,788 per day. Penalties for failing to provide blackout notices (required in advance of certain periods during which participants can’t change their investments or take loans or distributions) or notices of diversification rights have increased from $141 per day to $143 per day. And the maximum penalty for failure to comply with ERISA recordkeeping and reporting requirements remains $31 per employee.
Multiple Employer Welfare Arrangement (MEWA) filing. A MEWA is generally defined as a single plan that covers the employees of two or more unrelated employers. Penalties for failure to meet applicable filing requirements, which include annual Form M-1 filings and filings upon origination, have increased from $1,625 per day to $1,644 per day.
Adjustments have also been made to other benefits-related DOL penalties, such as for failure to provide certain information requested by the agency.
Although the affected penalties relate to a wide range of compliance issues, not all violations will trigger the highest permitted penalty. In some instances, the DOL has discretion to impose lower penalties, such as under programs designed to encourage Form 5500 filing.
Also, though relief granted in connection with the COVID-19 public health emergency allows more time to provide certain disclosures, including blackout notices, penalties could potentially be triggered if the terms of that relief aren’t met. Contact us for further information.