While you and your employees are busy dealing with high inflation and managing your daily living expenses, it is also affecting potential costs of running and managing your retirement plan. As a sponsor of a qualified retirement plan, you are likely very familiar with the Employee Retirement Income Security Act (ERISA). Established in 1974, ERISA holds plan fiduciaries responsible for their actions related to the maintenance of applicable benefits plans. The Employee Benefits Security Administration (EBSA), an agency of the U.S. Department of Labor (DOL), is required by law to annually adjust ERISA penalties for inflation.
Earlier this year, effective for penalties assessed after Jan. 14, 2022, the EBSA increased for inflation the per diem and maximum penalty amounts for a variety of ERISA-mandated requirements. Here are some potential violations related to retirement plans and their adjusted penalties.
Failure to file Form 5500. The penalty has been increased from $2,259 to $2,400 per day, starting on the date of the plan administrator’s failure or refusal to file.
Failure to provide plan information, such as a summary plan description, to the DOL in a timely manner. The penalty has been increased from $161 per day (not to exceed $1,613 per request) to $171 per day (not to exceed $1,713 per request).
401(k) Plan Disclosure, Recordkeeping, and Reporting. For plans with automatic contribution arrangements, penalties for failure to provide the required ERISA preemption notice to participants increased from $1,788 to $1,899 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 increased from $143 to $152 per day. The maximum penalty for failure to comply with the ERISA recordkeeping and reporting requirements increases from $31 to $33 per employee.
Failure to properly make a distribution. The penalty of $17,416 has been increased to $18,500 per improper distribution.
The revised ERISA penalty amounts, which are generally payable to the DOL, will remain in effect until the effective date of the next adjustment for inflation – likely in early 2023.
A Reminder About EBSA’s Compliance Assistance Programs
EBSA’s Voluntary Fiduciary Correction Program (VFCP) and Delinquent Filer Voluntary Compliance Program (DFVCP) encourage the correction of violations of ERISA by providing significant incentives for fiduciaries and others to self-correct. The VFCP allows plan officials who have identified specified violations of ERISA to take corrective action to remedy the breaches and voluntarily report the violations to EBSA, without becoming the subject of an enforcement action.
In 2021, EBSA received 1,201 applications for the VFCP, reporting restored payments to plans totaling $34 million. The DFVCP encourages plan administrators to bring their plans into compliance with ERISA's filing requirements. EBSA received 22,553 annual reports through this program in 2021.
For more information on EBSA’s VFCP and DFVCP programs, including fact sheets, FAQs and tools to help you manage plan corrections, go to: https://tinyurl.com/sdmrpvv7.
Employee Benefits Security Administration. https://www.dol.gov/agencies/ebsa
U.S. Department of Labor. https://www.dol.gov/