Failing to comply with the Employee Retirement Income Security Act (ERISA) can lead to significant penalties. Employers and plan administrators must follow ERISA’s rules to avoid costly consequences. Understanding these penalties can help you stay in compliance and protect employee benefits.
Civil penalties for ERISA violations
The Department of Labor (DOL) enforces ERISA and can impose financial penalties for non-compliance. If a plan administrator fails to provide required documents, the DOL can fine them up to $110 per day per violation. Failure to file Form 5500, which reports financial details of a plan, can result in penalties of over $2,500 per day. Employers may also face lawsuits from employees seeking unpaid benefits or breaches of fiduciary duty.
Criminal penalties for ERISA violations
Severe ERISA violations can result in criminal charges. If an employer or plan administrator intentionally provides false information or embezzles plan funds, they can face fines and imprisonment. Criminal penalties may include up to 10 years in prison and fines reaching $100,000 for individuals or $500,000 for corporations. The severity of the penalty depends on the extent of the violation and whether fraud or misconduct was involved.
Delaware-specific ERISA enforcement
While ERISA is a federal law, Delaware courts handle cases involving benefits disputes and fiduciary breaches. Delaware follows federal guidelines but allows employees to file claims in state courts for denied benefits. Employers operating in Delaware must also comply with state laws on health insurance and retirement plans, which sometimes add additional requirements beyond ERISA.
How to avoid ERISA penalties
To prevent ERISA violations, employers should keep accurate records, provide employees with required notices, and file documents on time. Regular audits and legal reviews can help catch errors before they lead to fines or lawsuits. Employers should also educate plan administrators on their fiduciary responsibilities to avoid potential breaches.
