Cost of Benefit Plan Violations Increases in 2022

Like most things in the new year, the cost of ERISA penalties for employee benefit plan violations is going up. The Employee Benefits Security Administration (EBSA) adjusted the penalty amounts for violations after January 14, 2022. The adjustments occur annually and are indexed for inflation, so while the adjustment itself isn’t a new development, the increased penalty amounts are something Atlanta plan sponsors need to be aware of. Now, it is important to note these amounts represent the maximum fine that can be levied, but the Department of Labor (DOL) reserves the right to make adjustments based on specific circumstances. In any case, the best policy is to maintain compliance with relevant regulations. To help clients, prospects, and others, Wilson Lewis has provided a summary of the key information below.

Why the Annual Adjustment?

Penalties weren’t always adjusted annually for inflation. It’s a newer development signed into law in 2015. The Inflation Adjustment Act (Inflation Act) mandated federal agencies to adjust civil penalties and update the Federal Register by January 15 every year. The changes are partially based on the Consumer Price Index (CPI-U) in October, which means that 2022 penalty amounts are increased by a multiplier of 1.06222, or the October 2021 CPI-U.

Adjusted Penalty Amounts for 2022

The following is an excerpt of adjusted penalties for specific plan violations. For the full list or with questions specific to a plan, contact us.

Filing and Reporting

• The failure to file Form 5500 penalty was increased from $2,259 to $2,400 per day.
• The failure to file an Annual Report penalty was increased $2,259 to $2,400 per day
• The failure to provide the DOL with the requested documentation penalty was increased from $161 to $171 per day, not to exceed $1,713 per request.

Recordkeeping

• The failure to maintain records for any employee (or furnish information to any employee) penalty was increased from $31 to $33 per employee.

Participant Communications

• Failure to provide employees with timely written notice of state-provided premium assistance opportunities penalty was increased from $120 to $127 per day.
• Failure to disclose group health plan benefits to states for Medicaid- and CHIP-eligible participants penalty was increased from $120 to $127 per day.
• Failure to provide participants with the Summary of Benefits and Coverage penalty was increased from $1,190 to $1,264 per incident.
• Failure to notify participants about certain blackout periods where they cannot change investments or make distributions penalty was increased from $143 to $152 per day.

Plan Eligibility

• Failure to comply with the Genetic Information Nondiscrimination Act penalty was increased from $120 to $127 per day.

Financial

• Failure to properly make a distribution penalty was increased from $17,416 to $18,500 per incident.
• Failure of multi-employer plans in distress to adopt a funding improvement plan, meet benchmarks, or adopt a rehabilitation plan penalty was increased from $1,419 to $1,507.

Contact Us

Atlanta plan sponsors need to regularly review plan operations to ensure compliance with plan documents and regulations. Issues generally tend to surface during the annual retirement plan audit, but it is ideal to catch them before that time. If you have questions about the information outlined above or need assistance with your annual 401k plan audit, Wilson Lewis can help. For additional information call us at 770-476-1004 or click here to contact us. We look forward to speaking with you soon.