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:
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
||$110 per participant or beneficiary per day during noncompliance period
|Failure to provide the SBC||Up to $1,000 per failure||Up to $1,087 per failure|
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 firstname.lastname@example.org.
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