May 13, 2021

Volume XI, Number 133


May 13, 2021

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Penalties Increased for Employee Benefit Plan Violations

Recently-enacted legislation has increased many penalty amounts for certain employee benefit plan violations. The new penalties – some of which are more than double previous amounts – were adjusted to catch up with inflation and provide a more effective deterrent. The amount of adjustment varies, depending on the length of time since the last adjustment. For some penalties, this has been more than 20 years, and for others, more than 30 years. Annual adjustments for inflation will be made in the future. Here are some highlights:

Form 5500 Reports

  • The maximum penalty for failure to file increased from $1,000 to $2,063 per day late.

Benefit Plan, 401(k) Plans

  • The penalty for failure to provide blackout notices or notices of diversification rights increased from $100 to $131 per day per recipient.

  • The penalty for failure to provide automatic contribution notices increased from $1,000 to $1,632 per day per recipient.

  • The penalty for failure to maintain records or furnish benefit statements to certain former participants and beneficiaries increased from $11 to $28 per employee.

Pension Plans

  • The penalty for failure to provide notice of restriction on certain forms of distribution for some underfunded plans increased from $1,000 to $1,632 per day per recipient.

  • The penalty for failure of a fiduciary to make a proper distribution from a defined benefit plan (during a period in which the plan has a liquidity shortfall) increased from $10,000 to $15,909.

Health Plans

  • The penalty for failure to inform employees of CHIP coverage opportunities or timely provide a state with information regarding related coverage coordination increased from $100 to $110 per day per employee, participant or beneficiary.

  • The penalty for failure to meet the Genetic Information Nondiscrimination Act (GINA) requirements increased from $100 to $110 per day per participant and beneficiary.

  • The penalty for failure to provide a summary of benefits and coverage or a notice of changes in coverage increased from $1,000 to $1,087 per failure.

The adjustments apply to penalties assessed by the Department of Labor after August 1, 2016 for violations that occurred after November 2, 2015. More information on the penalty adjustments, including adjustments for MSHA, OSHA, WHD, and OWCP violations, may be found on the 2016 Inflation Penalty Chart, available at

© 2021 Varnum LLPNational Law Review, Volume VI, Number 237



About this Author

Thomas H. Bergh, Varnum Law Firm, Grand Rapids, Estate Planning Attorney, IRS Litigation Lawyer

Tom has over 30 years of experience in helping clients efficiently and effectively define theirestate planning goals and to arrange their affairs accordingly. His expertise includes facilitating the direction of a client-centered and directed strategy and then drafting clear and understandable legal documents to implement it, thereby protecting client wealth, closely-held businesses, and families from taxes, post-mortem chaos and expense, and unnecessary complexity. He has expertise and experience in dealing with the IRS in administrative hearings and litigation,...

Jeffrey DeVree, employment benefits and tax attorney, Varnum

Jeff is a partner and leads the Employee Benefits Team. He has 30 years of experience working with employers, executives and third-party administrators on a wide range of employee benefit, executive compensation and individual retirement matters, including plan design, plan administration, benefit plan disputes and tax planning for retirement.

He also helps solve complex tax issues in business and investment transactions, especially those involving pass-through entities and oil and gas activities.

William R. Hineline, Varnum, Employee Benefit Lawyer, Corporate Agreements Attorney

Bill provides general business counsel to clients primarily in the area of employee benefits, including benefit administration matters, selection of plan types, and representation before the IRS, DOL, and Pension Benefit Guaranty Corporation (PBGC). He has a strong focus on the health care industry as well as family-owned and other closely-held businesses.Bill also provides counsel for business clients on various corporate and business matters, employment agreements, and contract issues. For those same clients, he has served as counsel on family ownership dynamics and succession planning...

John Arendshorst, Varnum Law Firm, Grand Rapids, Employee Benefits Attorney

John is a member of the firm’s Employee Benefits Team. He counsels employee benefit plan sponsors with respect to compliance with ERISA and IRS requirements for 401(k) plans, ESOPs and other defined contribution plans, defined benefit plans, and deferred compensation arrangements. John also advises clients on employee benefits issues in the context of corporate transactions, including qualified plan compliance issues, change-in-control agreements, continuation of health coverage, and golden parachute payments under Section 280G. John is experienced in negotiating and...

Kristy L. De Vos, Employee Benefits Paralegal, Varnum,

Kristy focuses her Employee Benefits practice on retirement plans. In addition to drafting plans, she submits plans to IRS for opinion and determination letters, and submits plans to IRS under the Voluntary Compliance Program and to the U.S. Department of Labor under the Voluntary Fiduciary Correction Program.

Her experience also includes drafting plan amendments, consent resolutions, Summary Plan Descriptions, Summaries of Material Modifications, 204(h) Notices, and plan administrative forms. Kristy answers client questions about plan administration and assists...