Benefit News

DOL Increases Penalties for Employee Benefit Plan Violations

July 12, 2016

On June 30, 2016, the Department of Labor (DOL) published an interim final rule that increases the penalties for a wide range of benefit-related violations under the jurisdiction of the DOL. This includes penalties associated with the following violations:

  • Failing to file an annual Form 5500 (as applicable);
  • Health plan violations of the Genetic Information Nondiscrimination Act (GINA):
  • Failing to provide the annual notice regarding premium assistance under the Children's Health Insurance Program (CHIP);
  • Failing to provide the Summary of Benefits and Coverage (SBC), as required by the Affordable Care Act (ACA); and
  • For 401(k) plans, failing to provide blackout notices, noticies of diversification rights, or, in the case of plans with an automatic contribution arrangement, the preemption notice to participants.

Penalties will also increase for failure to provide certain information requested by the DOL, failures not corrected within specified time periods, and defined benefit plan compliance failures.

These increases were mandated as a result of the passage of the 2015 Bipartisan Budget Act (Act), which includes provisions to strengthen the civil monetary penalties under various federal laws in order to maintain their deterrent effect. The Act requires the DOL to adjust the civil monetary penalties that it administers for inflation, including those under the Employee Retirement Income Security Act (ERISA). This adjustment must include an initial ''catch-up'' increase to the penalty amounts, effective August 1, 2016; and subsequent annual adjustments for inflation, beginning in January 2017. (Under the Act, the DOL is required to publish annual updates reflecting the annual increases. These updates must be published in the Federal Register by January 15 of each year.)

The increased amounts for health and welfare plan violations are reflected in the table below and apply to civil penalties assessed after August 1, 2016, for violations that occurred after November 2, 2015.

Requirement Current Penalty Amount New Penalty Amount
Failure to file an annual report (Form 5500) with the DOL (unless a filing exemption applies) Up to $1,100 per day Up to $2,063 per day
Failure of a multiple employer welfare arrangement (MEWA) to file an annual report (Form M-1) with the DOL Up to $1,100 per day Up to $1,502 per day
Failure to furnish plan-related information requested by the DOL (Under ERISA, administrators of employee benefit plans must furnish to the DOL, upon request, any documents relating to the employee benefit plan, including but not limited to, the latest summary plan description (SPD) (including any summaries of plan changes not contained in the SPD), and the bargaining agreement, trust agreement, contract or other instrument under which the plan is established or operated) Up to $110 per day, but not to exceed $1,100 per request Up to $147 per day, but not to exceed $1,472 per request
Failing to provide the annual notice regarding CHIP coverage opportunities (Applies to employers with group health plans that cover residents of states that provide a premium assistance subsidy under CHIPRA) Up to $100 per day for each failure (each employee is a separate violation) Up to $110 per day for each failure (each employee is a separate violation)
Failure to timely disclose information to a state regarding group health plan coverage of an individual who is covered under a Medicaid or CHIP plan Up to $100 per day (each participant/beneficiary is a separate violation) Up to $110 per day (each participant/beneficiary is a separate violation)
Failure by any health plan sponsor (or any health insurance issuer offering health insurance coverage in connection with the plan), to comply with the requirements of GINA $100 per participant or beneficiary per day during noncompliance period
  • Minimum penalty of $2,500 per participant or beneficiary for de minimis failures not corrected prior to notice from the DOL
  • Minimum penalty of $15,000 per participant or beneficiary for failures which are not corrected prior to notice from the DOL and are not de minimis
  • $500,000 cap on unintentional failures
$110 per participant or beneficiary per day during noncompliance period
  • Minimum penalty of $2,745 per participant or beneficiary for de minimis failures not corrected prior to notice from the DOL
  • Minimum penalty of $16,473 per participant or beneficiary for failures which are not corrected prior to notice from the DOL and are not de minimis
  • $549,095 cap on unintentional failures
Failure to provide the SBC Up to $1,000 per failure Up to $1,087 per failure
The excise tax for group health plan violations, including violations of the ACA's market reforms, is not impacted by these adjustments. This excise tax is generally $100 per day, per individual, per violation, subject to certain minimum and maximum amounts.

Action Steps

Employers should become familiar with the new penalty amounts and review their benefit plans to ensure compliance with ERISA's requirements. For example, employers should make sure they are complying with ERISA's reporting and disclosure rules, including the Form 5500, annual CHIP notice and SBC requirements.

The interim final rule is available at https://www.gpo.gov/fdsys/pkg/FR-2016-07-01/pdf/2016-15378.pdf;

A Fact Sheet prepared by the Employee Benefits Security Administration (EBSA) is available at https://www.dol.gov/ebsa/pdf/fs-interim-final-rule-adjusting-erisa-civil-monetary-penalties-for-inflation.pdf; and

Frequently Asked Questions regarding the increased penalties can be found at https://www.dol.gov/sites/default/files/2016-inflation-faq.pdf.

For additional information, please contact your Burnham Benefits Consultant or Burnham Benefits at 949-833-2983 or inquiries@burnhambenefits.com.


Burnham Benefits does not engage in the practice of law and this publication should not be construed as the providing of legal advice or a legal opinion of any kind. The consulting advice we provide is intended solely to assist in assessing its compliance with the Patient Protection and Affordable Care Act and other applicable federal and state law requirements, and is based on Burnham Benefit’s interpretation of federal guidance in effect as of the date of this publication. To the best of our knowledge, the information provided herein, and assumptions relied on, are reasonable and accurate as of the date of this publication. Furthermore, to ensure compliance with IRS Circular 230, any tax advice contained in this publication is not intended to be used, and cannot be used, for purposes of (i) avoiding penalties imposed under the United States Internal Revenue Code or (ii) promoting, marketing or recommending to another person any tax-related matter.

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