Get Ready For It…The Department of Labor To Hike Up Penalties
by David Pixley
Failing to comply with ERISA can cost you. Under the DOL’s interim final rule, beginning on August 1, 2016 those same failures could cost you more, much more. It has been many years, decades in some instances, since these penalties were last adjusted for inflation. Beginning in 2017, the DOL is expected to make annual adjustments to keep pace with inflation.
Currently, if a plan administrator fails to furnish information or maintain necessary records, the civil penalty is $11 for each affected employee. For example, failing to provide benefit statements to 1,000 individuals could cost you $11,000. After August 1, 2016 that same violation would cost you $28,000, or up to $28 per employee. Today, failing to file Form 5500 could result in a penalty of up to $1,100 per day. For example, missing this deadline by just 30-days could cost you $33,000. After August 1, 2016 that same failure will cost you up to $61,890, or $2,063 per day. Also, remember that even if your Form 5500 is timely filed, a rejected annual report must be satisfactorily revised within 45-days of the notice of rejection or it may be treated as a failure to file an annual report.
On August 1, 2016, the penalty for failing to furnish automatic contribution arrangement notices will jump from $1,000 per day to $1,632 per day. Failing to furnish information requested by the DOL will be bumped up to $147 per day, not to exceed $1,472 per request. See https://www.federalregister.gov/articles/2016/07/01/2016-15378/department-of-labor-federal-civil-penalties-inflation-adjustment-act-catch-up-adjustments for detailed information on all the increased penalties.
Although it is never wise to rely on a waiver of any penalty, it may be possible to obtain relief from some of these penalties. The process and deadlines for seeking relief from penalties under ERISA varies based on the type of failure. Further, some civil penalties, such as failing to file an annual report, may trigger personal liability on the part of the responsible individual.
For these reasons, it is paramount for the responsible plan fiduciary (normally the plan administrator) to implement policies and procedures to ensure compliance with the recordkeeping, filing and furnishing requirements under ERISA to avoid costly failures that will soon be much more costly.