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2023 Penalty Adjustments To Benefits-Related Violations

2023 annual adjustments to civil monetary penalties were recently announced by the U.S. Department of Labor (DOL) regarding a wide range of benefits-related violations. By January 15 each year, annual adjustments on certain penalties are announced due to the legislation enacted in 2015.

The 2023 adjustments are effective for penalties assessed after January 15, 2023 with respect to violations occurring after November 2, 2015. Here are some highlights:

Form 5500. Employers must file this form annually for most Employee Retirement Income Security Act of 1974 (ERISA) plans to provide the IRS and DOL with information about the plan’s operation and compliance with government regulations. The maximum penalty for failing to file Form 5500 has increased from $2,400 per day to $2,586 per day that the filing is late.

Summary Of Benefits And Coverage (SBC). The maximum penalty for failing to provide an SBC has increased from $1,264 to $1,362 per failure.

Other Group Health Plan Penalties. Violations of the Genetic Information Nondiscrimination Act may result in penalties of $137 per participant per day, which is up from $127. Examples of violations include establishing eligibility rules based on genetic information, requesting genetic information for underwriting purposes, and failing to meet requirements related to disclosures regarding the availability of Medicaid or children’s health insurance program assistance.

401(k) plan disclosure, recordkeeping, and reporting. For plans with automatic contribution arrangements, penalties for failing to provide the required ERISA preemption notice to participants have increased from $1,899 per day to $2,046 per day. Penalties for failing to provide blackout notices (required in advance of certain periods during which participants can’t change their investments or take loans or distributions) or notices of diversification rights have increased from $152 per day to $164 per day. And the maximum penalty for failure to comply with ERISA recordkeeping and reporting requirements has increased from $33 to $36 per employee.

Multiple Employer Welfare Arrangement (MEWA) Filing. A MEWA is generally defined as a single plan that covers the employees of two or more unrelated employers. Penalties for failure to meet applicable filing requirements, which include annual Form M-1 filings and filings upon origination, have increased from $1,746 per day to $1,881 per day.

Adjustments also have been made to other benefit-related DOL penalties, such as for failure to provide certain information requested by the agency.

Although the affected penalties relate to a wide range of compliance issues, not all violations will trigger the highest permitted penalty. In some instances, the DOL has discretion to impose lower penalties, such as under programs designed to encourage Form 5500 filing. Contact us for further information.

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