The Department of Labor (DOL) has recently updated the civil monetary penalties for various benefit-related violations to account for inflation. According to federal regulations, the DOL must adjust these penalties for inflation by Jan. 15 each year.
The new penalty amounts for 2025 will apply to any civil penalties assessed after Jan. 15, 2025, by the Employee Benefits Security Administration (EBSA), an enforcement arm of the DOL. Although the DOL has the authority to reduce or waive penalties in cases of good faith correction efforts, it is crucial for plan sponsors to be aware of the potential consequences of non-compliance.
The increased penalties of note include the following:
Form 5500: Failure to timely file annual report Form 5500 subjects a plan sponsor to a penalty of $2,739 per day, starting on the date of the failure.
Lockton comment: The EBSA offers an amnesty program called the Delinquent Filer Voluntary Compliance Program (opens a new window) for late filers that voluntarily submit tardy Forms 5500. Penalty amounts under the program are significantly reduced to as little as $10 per day, but the filing under the amnesty program must be initiated by the late filer, not by federal enforcement.
Form M-1: Failure to file annual report Form M-1 on a timely basis subjects a plan sponsor to a penalty of $1,992 per day (Form M-1 filing requirement applies exclusively to multiple employer welfare arrangements).
Lockton comment: There is no formal amnesty program for late M-1 filers, but the EBSA has historically been slow to penalize voluntary late filers.
Summary of Benefits and Coverage: Failure to timely provide a compliant Summary of Benefits and Coverage (SBC) per the Affordable Care Act (ACA) requirements subjects a plan sponsor to a penalty of $1,443 per failure.
Lockton comment: This penalty is rarely enforced to its maximum extent. Nevertheless, it’s a reminder to make sure your SBCs are complete and made available as required.
Documents requested by the DOL: Failure to provide plan information to the DOL upon request, such as a summary plan description or other required plan document, subjects a plan sponsor to a penalty of $195 per day, with a maximum penalty of $1,956 per occurrence.
CHIP notice: Failure to provide each employee with notice related to state-provided premium assistance (commonly referred to as a Medicaid/CHIP notice or CHIPRA notice) subjects a plan sponsor to a penalty of
$145 per day, per employee. A related requirement provides that employers must, upon request, provide disclosure of group health plan benefits to states for Medicaid- and CHIP-eligible individuals. The penalty for failure to provide that disclosure also increased to $145 per day, per employee.
Lockton comment: We’ve seen little penalty enforcement in this context. Typically, an EBSA auditor will simply work with the plan sponsor to implement sound administrative processes to provide the required notices, unless there is a well-worn pattern of ongoing noncompliance.
For a more comprehensive list of health and welfare plan penalties for 2025, click here (opens a new window).
Not legal advice: Nothing in this alert should be construed as legal advice. Lockton may not be considered your legal counsel, and communications with Lockton's Compliance Consulting group are not privileged under the attorney-client privilege.
For more alerts, insights and additional information, click here (opens a new window) to visit Lockton's ERISA Compliance Consulting page.
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