Fees, litigation and even criminal indictments are all possibilities for plan fiduciaries when the Department of Labor uncovers ERISA violations. Since civil penalty amounts are adjusted for inflation, the stakes are going up. Read on for examples of violations and penalties.
Failures and Penalties
In accordance with the Federal Civil Penalties Inflation Adjustment Improvements Act of 2015 (“Inflation Adjustment Act”), the Department of Labor (DOL), must annually modify civil penalty fees for ERISA violations based on inflation. In 2024, for example, penalties and fees for ERISA violations include:
- ERISA § 209(b)
Penalty, per participant, for the failure to furnish or maintain records: $37
- ERISA § 502(c)(2)
Failure to file the Form 5500: $2,670
- ERISA § 502(m)
Per distribution penalty for a fiduciary’s improper distribution: $20,579
- ERISA § 715
Penalty for an entity’s failure to provide a Summary of Benefits Coverage: $1,406
Groom Law Group provides this chart to help plan fiduciaries further understand the penalties and fee increases associated with violations of the various aspects of ERISA. Experts also point out that via its Employee Benefits Administration (EBSA), the DOL maintains a robust civil investigation program: in just the one year period between October 2021 and September 2022, for example, EBSA “recovered more than $1.4 billion for plans, participants, and beneficiaries, with $931 million being recovered through enforcement actions.” Plan sponsors are cautioned that under the high standards of ERISA, even seemingly simple oversights are known to open the doors for investigation. For example, compliance failures related to the ERISA Fidelity Bonds required by the Department of Labor for everyone involved in handling funds or property of the retirement plan (in any way) routinely draw attention.
What Do ERISA Fidelity Bonds Protect?
ERISA fidelity bonds serve an important purpose: they protect the retirement plan against acts of fraud or dishonesty, and are specifically required by Section 412 of the Employee Retirement Income Security Act of 1974. As a leading national provider, listed with the Department of the Treasury, Colonial Surety helps plan sponsors ensure compliance. Uniquely, Colonial includes retroactive ERISA fidelity bond coverage for years when the plan was not adequately covered. Additionally, plan sponsors can opt for comprehensive, multi-year coverage packages, ensuring the ERISA bond remains Department of Labor compliant for the life of its term.
Although ERISA bonds are required by the DOL, they do not protect plan sponsors in the event of allegations of ERISA breaches. However, by opting for a convenient and affordable package from Colonial Surety, sponsors can protect themselves and their businesses. Armed with Fiduciary Liability coverage from Colonial Surety, for a few dollars a day, you’ll have defense costs and penalty limits up to $1,000,000 if faced with alleged or actual breaches of duty in connection with the employee retirement plan. Cyber liability coverage is included at no extra cost, providing additional protection–for the plan and your company–against regulatory actions related to data and privacy, as well as expert response services.
At Colonial, adding Fiduciary & Cyber Liability Insurance to your ERISA fidelity bond is quick – login to your dashboard, click “upgrade” next to your bond, and get a quote. Our packages are available for 1, 2, and 3-year terms, providing flexibility and locked-in rates:
Colonial Surety was founded in 1930 and continues giving customers the assurance that they, their businesses, and their clients are safeguarded with the right surety and insurance products at all times. We are a direct and digital insurer offering products through an online platform supported with exemplary customer service. We give customers a simple, direct, and instant service that takes the pain out of buying insurance and bonds. Colonial Surety is licensed in every state in the U.S., rated “A” Excellent by A.M. Best, and listed by the U.S. Treasury as an approved surety.