As we enter 2025, the Department of Labor (“DOL”) has announced increases to the penalties for violations under the Employee Retirement Income Security Act (“ERISA”). These annual adjustments, tied to inflation, serve as a stark reminder for employers and plan administrators to prioritize compliance with ERISA requirements.
Overview of the Penalty Increases
Effective for penalties assessed after January 15, 2025, the DOL’s updated penalty amounts reflect significant increases. Below are the most critical updates:
- Failure to File Form 5500:
- New Penalty: $2,739 per day for late or missing filings.
- Importance: Form 5500 is a key document for reporting plan details and ensuring transparency. Late submissions can quickly lead to substantial fines.
- Failure to Furnish Plan-Related Information to the DOL:
- New Penalty: $195 per day, with a maximum of $1,956 per request.
- Importance: Responding promptly to DOL requests for plan information is crucial to maintaining compliance.
- Failure to Provide the Summary of Benefits and Coverage (“SBC”):
- New Penalty: $1,443 per failure.
- Importance: The SBC helps employees understand their health plan options. Employers must ensure accurate and timely distribution.
- Failure to Submit M-1 Filings:
- New Penalty: $1,992 per day for late or missing filings.
- Importance: M-1 filings are required for multiple employer welfare arrangements (“MEWAs”) to ensure proper oversight and regulatory compliance. Missing or delayed submissions can result in substantial penalties and increased scrutiny from the DOL.
- Failure to Distribute CHIP Notices:
- New Penalty: $145 per day per affected individual.
- Importance: Employers offering group health plans must provide the Children’s Health Insurance Program (“CHIP”) notice to inform employees about premium assistance programs. Failing to distribute these notices can lead to significant fines and hinder employees’ access to critical benefits information.
- Failure to Provide 401(k) Auto-Enrollment Notices:
- New Penalty: $2,167 per day for each failure.
- Importance: Employers providing employees with a 401(k) must provide employees with specific notices, including the auto-enrollment notice, within a set period of time.
Why Compliance Matters
Noncompliance with ERISA requirements not only exposes employers to financial risk but also impacts employee trust and satisfaction. The DOL’s penalty adjustments are a clear incentive for organizations to:
- Conduct Regular Compliance Audits: Ensure all filings, disclosures, and notices are accurate and submitted on time.
- Review Internal Processes: Establish clear procedures for responding to DOL inquiries and distributing required documents.
- Educate Plan Administrators: Provide training on the latest ERISA requirements and compliance best practices.
Proactive Steps to Avoid Penalties
To mitigate the risk of penalties, employers and plan administrators should take the following steps:
- Set Deadlines and Reminders: Utilize compliance software or internal calendars to track key dates for filings and disclosures.
- Engage Expert Advisors: Work with benefits consultants, legal counsel, or insurance brokers to navigate complex compliance requirements.
- Leverage Voluntary Correction Programs: If a compliance issue is identified, consider using the DOL’s correction programs to address it before penalties are assessed.
Conclusion
The increased penalties for ERISA violations in 2025 highlight the importance of staying ahead of compliance requirements. By taking a proactive approach, employers can not only avoid costly fines but also foster greater trust with employees and maintain the integrity of their benefits programs.