The Departments of Labor (DOL) and Health and Human Services (HHS) have released their 2022 inflation-adjusted civil monetary penalties that may be assessed on employers for violations of a wide range of federal laws. The Inflation Adjustment Act requires the agencies to annually adjust certain civil money penalty levels for inflation. The increased amounts apply to civil penalties that are assessed by DOL after January 15, 2022 and by HHS after March 17, 2022 (for violations occurring after November 2, 2015).
Congress often adds penalties to laws to encourage greater compliance. According to the DOL, penalty increases are intended to deter violations, which will “provide a significant benefit not only for workers but also for responsible employers who will have a more level playing field when competing with employers who are not following the law.” Plan sponsors should become familiar with the new penalty amounts and review their benefit plan administration to ensure compliance with federal requirements.
This Update addresses adjustments of certain of the penalties applicable to group health plan sponsors, including:
Forms 5500. The penalty for failing to file a timely Form 5500 increases to $2,400 (from $2,259) for each day that the Form 5500 is late.
Multiple Employer Welfare Arrangements (MEWAs). The penalty for failing or refusing to meet applicable filing requirements, which include filing a Form M–1, increases to $1,746 per day (up from $1,644).
CHIP Notice. The penalty for failing to inform employees of the availability of Medicaid or Children’s Health Insurance Program (CHIP) assistance increases to $127 per participant per day (up from $120).
SBC Notice. The penalty for failing to provide the Summary of Benefits and Coverage (SBC) as required under the Affordable Care Act increases to $1,264 per failure (up from $1,190).
Documents requested by DOL. Failure to provide plan information to the DOL upon request, such as an SPD or other required plan document, subjects a plan sponsor to a penalty of $171 per day with maximum of $1,713 per request (up from $161 per day with maximum of $1,613 per request).
HIPAA Administrative Simplification. The indexed penalty amounts for each violation of a HIPAA administrative simplification provision are:
Lack of knowledge: Minimum penalty is $127 (up from $120), maximum penalty is $63,973 (up from $60,226), and calendar-year cap is $1,919,173 (up from $1,806,757).
Reasonable cause and not willful neglect: Minimum penalty is $1,280 (up from $1,205), maximum penalty is $63,973 (up from $60,226), and calendar-year cap is $1,919,173 (up from $1,806,757).
Willful neglect, corrected within 30 days: Minimum penalty is $12,794 (up from $12,045), maximum penalty is $63,973 (up from $60,226), and calendar-year cap is $1,919,173 (up from $1,806,757).
Willful neglect, not corrected within 30 days: Minimum penalty is $63,973 (up from $60,226), maximum penalty is $1,919,173 (up from $1,806,757), and calendar-year cap is $1,919,173 (up from $1,806,757).
Medicare Secondary Payer. The indexed penalty amounts for violations applicable to employer-sponsored health plans are:
Penalty for employer that offers incentives to Medicare-eligible individuals not to enroll in a plan that would otherwise be primary: $10,360 (up from $9,753).
Penalty for willful or repeated failure to provide requested information regarding group health plan coverage: $1,687 (up from $1,588).
Penalty for responsible reporting entities that fail to provide information identifying situations where group health plan is primary: $1,325 (up from $1,247).
Note that in some cases, plan sponsors can pay lower penalties by taking corrective steps. For example, if a plan sponsor fails to timely file Form 5500, the plan sponsor, under certain circumstances, can pay a significantly lower penalty amount by filing the late annual reports through the DOL’s Delinquent Filer Voluntary Compliance (DFVC) Program. Also, not all penalties increase annually. For example, the penalty for failing to furnish certain information requested by participants or beneficiaries was not increased. Therefore, the penalty for such violation remains unchanged at a maximum of $110 per day.
To avoid inadvertent noncompliance and associated financial penalties, plan sponsors are best advised to associate with a trusted adviser that monitors the changing landscape and provides expertise on how to manage it. Please contact your Conner Strong & Buckelew account representative toll-free at 1-877-861-3220 with any questions on health and group benefits related matters. For a complete list of Legislative Updates issued by Conner Strong & Buckelew, visit our online Resource Center.