Rules & Regs Update: Failure to File and/or Comply Penalties Set to Increase

The Lead june 2016 - Lifetime Benefit Solutions

Failure to File or comply penalties set to increase

Rules & Regs Update:

Failure to File and/or Comply Penalties Set to Increase

The Department of Labor recently announced that penalties for failure to file Form 5500 and other notices will soon increase significantly, so remember the 5500 deadline – the last day of the seventh month after the end of the plan year.

The DOL-issued regulations increase the civil monetary penalties for a wide range of benefit-related violations. Why? Because penalties have not kept up with the rate of inflation, so Congress enacted legislation in 2015 requiring an initial “catch-up” adjustment to specified penalty amounts, followed by annual adjustments.

Major changes include:

  • Form 5500. The maximum penalty for failing to file Form 5500 (which must be filed by most ERISA plans) will increase from $1,100 to $2,063 every day that the Form 5500 is late.
  • Group Health Plans. The maximum penalty for failing to provide the summary of benefits and coverage (SBC) required under health care reform will increase from $1,000 to $1,087 per failure.
  • Violations of the Genetic Information Nondiscrimination Act (GINA), such as establishing eligibility rules based on genetic information or requesting genetic information for underwriting purposes, may result in penalties of $110 per participant per day, up from $100.
  • Maximum penalties relating to disclosures regarding the availability of Medicaid or CHiP assistance, including failure to disclose to a state, on request, relevant information about the employer’s plan, will also increase from $100 to $110 per day.
  • 401(k) Plans. For plans with automatic contribution arrangements, penalties for failure to provide the required ERISA §514(e) preemption notice to participants will increase from $1,000 to $1,632 per day. Penalties for failing to provide blackout notices (required in advance of certain periods during which participants may not change their investments or take loans or distributions) or notices of diversification rights will increase from $100 to $131 per day. And the maximum penalty for failure to comply with the ERISA §209(b) recordkeeping and reporting requirements will increase from $11 to $28 per employee.
  • Multiple Employer Welfare Arrangements (MEWAs). Penalties for failure to meet applicable filing requirements, which include annual Form M-1 filings and filings upon origination, will increase from $1,100 to $1,502.

Other increased penalties include those for failure to provide certain information requested by the DOL; failures not corrected within specified time periods; and defined benefit plan compliance failures. The increases apply to penalties assessed after August 1, 2016 with respect to violations occurring after November 2, 2015. Penalty assessments made before August 1, 2016 (including those relating to violations after November 2, 2015) and assessments at any time relating to violations on or before November 2, 2015 will reflect the lower pre-adjustment amounts.

Lifetime Benefit Solutions offers compliance services to support 5500 filing requirements.

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