Group Health Plan Sponsors Should Stay Up to Date with Requirements to Avoid Unnecessary Penalties
Trey Tompkins No Comments

Benefit Compliance Penalties Updated for 2024

The Department of Labor (DOL) announced annual inflation increases to several employee benefit compliance penalties last week. The full schedule of the annual inflation related increases is available online. The new maximums are effective for compliance penalties assessed after January 15, 2024. The date the benefit related violation occurred does not impact the applicable penalty limit.

Forms 5500 Penalties

ERISA covered Group Health Plans with more than 100 participants must file a Form 5500 for each Plan Year. The filings are due within seven months following the end of each Plan Year. The maximum daily penalties for failing to timely file Form 5500 increased from $2,586 to $2,670. There is no cap on the total potential penalty. Large benefit plans that fail to file for several years face potential compliance penalties of millions of dollars. Late filers drastically reduce these potential penalties by taking advantage of the government’s Delinquent Filer Voluntary Compliance Program.

Under the Affordable Care Act (ACA), group health plans must provide plan participants with a Summary of Benefits and Coverage (SBC). SBCs must be provided each Plan Year and must meet specific appearance, language and content requirements. The maximum compliance penalties for failing to provide SBCs to participants increased from $1,362 to $1,406 per failure. Each plan participant who is not provided a SBC in a timely manner is considered to be a unique failure for the purposes of the penalties.

Although SBCs are typically provided by a benefit plan’s insurer or third party administrator, it is typically the employer’s responsibility to distribute the provided forms to its employees.

Admin America’s Benefit Compliance Experts Can Help!

Admin America encourages employers and their professional benefit advisors to direct any questions they have about employee benefit related compliance penalties to our experts via e-mail at sales@adminamerica.com or by calling (678) 578-4644. They can also request a call from us. More information about Admin America’s services is also available online.

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COVID-19 PPE is now FSA, HRA and HSA

On March 26, 2021 the IRS released guidance which allows Health Flexible Spending Arrangements (FSAs) and Health Reimbursement Arrangements (HRAs) to reimburse plan participants for amounts paid to purchase face masks and other personal protective equipment used to prevent COVID-19.  The guidance also allows owners of Health Savings Account (HSAs) to receive tax free disbursements from their account to cover the same expenses.

These new policies can be found in IRS Announcement 2021-7.  The IRS clarifies that the eligible expenses include “amounts paid for personal protective equipment, such as masks, hand sanitizer and sanitizing wipes, for the primary purpose of preventing the spread of the Coronavirus Disease….”  The announcement further clarifies that the new rule applies to expenses incurred as early as January 1, 2020.

If a Health FSA or HRA was written to exclude these items, the announcement allows the Plan Sponsor to adopt a retroactive amendment to make such expenses eligible so long as the amendment is written no later than December 31, 2022. 

Health FSA documents prepared by Admin America will not require an amendment to take advantage of this revised rule.  Our plans are already written to allow all expenses that are considered to be for medical care under Section 213(d) of the Internal Revenue Code (which now includes COVID related PPE as a result of this announcement).

Likewise, HRA documents that previously provided expense eligibility for all Section 213(d) medical care expenses will not need to be amended to take advantage of this new rule.  Plan Sponsors of other HRAs that would like to take advantage of this new rule by allowing Participants to be reimbursed for PPE expenses may contact an Admin America HRA administrator via e-mail at hra@adminamerica.com to request this change.

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Federal Income Tax Return Deadline Postponement Also Extends 2020 HSA Contribution Opportunities

In March, the IRS announced that Federal income tax returns and any tax payments in connection with those forms, with an original due date of April 15, 2021, are now due May 17, 2021.  The filing and payment extension for federal income tax returns automatically postpones to May 17, 2021, the deadline for making 2020 contributions to Health Savings Accounts (HSAs).  The extension is available to contributions made by individuals or employers.  If employer HSA contributions are made for a prior year, the employer must notify the HSA trustee or custodian and inform the employee of that designation.

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