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Things You Could Buy with Your Compliance Fines

If you’re an employer who offers benefits, you are likely aware of the various laws and required filings that you’re required to comply with each year. Although it’s a bit overwhelming to think about compliance and all of the aspects pertinent to a benefit plan, it’s not going to get less precarious as time goes on.

On August 1st, 2016, higher violation penalties from the Department of Labor, Internal Revenue Service, and Equal Employment Opportunity Commission casually strolled into the picture, in some cases doubling from the prior amount. So if your current approach to the topic is to plug your ears, hum a tune loudly, and then change the subject—there’s no time like the present to start paying attention.


HIPAA fines increase in severity as you move from “I didn’t know what I was doing” to “I knew I could have been more careful, but I wasn’t”.


Here are some things you could buy with the amount of money you would pay in a fine to the government for non-compliance--and remember, while this is all in good fun, consulting with a professional qualified to advise you in your actual situation is your best bet.

1. Late filling of ERISA Form 5500= A Pair of 2016 Ford Supercars

There are a few iterations of the Form 5500, such as the paper-only Form 5500-EZ and the Form 5500- SF, but for purposes of this illustration I am referring to Form 5500, which is due by the end of the 7th calendar month after the culmination of the plan year. If you fail to file in a timely manner and discover it before the Feds do, thankfully there’s a thing called the Delinquent Filer Voluntary Compliance Program that will get you back in compliance for a lesser fee.

Fines for non-compliance, which are pre-empted by letters from the IRS Employee Plans Compliance Unit (ahem, do NOT ignore), are imposed by both the IRS and DOL, but the fines from the DOL are considerably heftier of the two. One year after a late filing without response to the letters from the EPCU can now land you with a fine of $2063 per day, with no cap. That’s enough to buy TWO brand new 2016 Ford GT Supercars—which, by the way, are the automaker’s most expensive cars to date.

2. Offering Zero Options for Medical Coverage as an ALE= Two Weeks’ Vacation on a Private Island

ALE stands for “Applicable Large Employer”, which applies to an employer who has 50 or more full time equivalents. It’s likely that you are aware of your status at this point, and probably made the choice to “pay or play” a couple of years ago.

However, there are still employers out there who are exposed to the Employer Mandate of the ACA and don’t seem to realize it—or they do, and don’t understand how much non-compliance may cost them in actual fines. Without getting too technical, although I’m happy to explain the methodology to anyone curious, an Applicable Large Employer who offers nothing in the way of medical benefits to their employee faces at least $40,000 in fines per year of non-compliance as of 2016.

That’s enough money to fly to Belize and spend two weeks on a private island resort. Or, realistically, you could spend the $40K on a tax-deductible expense, but I’ll let the reader pontificate on that themselves.

3. Breach of HIPAA= A Bottle of 15-Year-Old Scotch, or Enough Time to Earn a College Degree

HIPAA violations are reported to the U.S. Department for Health and Human services, Office for Civil Rights. Once they’re reported, the penalty for the violation is based upon the severity of harm caused by said violation, as well as whether or not the violation was intentional.

The bottom end of the fine starts at a mere $100 for a first time breach by an unknowing person, which doesn’t seem like much-- but there’s your bottle of scotch, right out the window.

However, HIPAA fines increase in severity as you move from “I didn’t know what I was doing” to “I knew I could have been more careful, but I wasn’t”. This could include sending Personal Health Information via unsecured e-mail, leaving medical underwriting applications within reach of employee access, and a slew of other seemingly benign practices. Willful neglect violations run from $10,000-$50,000, depending on the violator’s quickness to rectify the situation.

Deliberate disclosure of health information that violates HIPAA carries a fine of $50,000 and up to a year in prison, while deliberate disclosure through deception is a fine of $100,000, with jail time up to 5 years. FIVE YEARS. That’s enough time (and money) to earn a college degree.

Of course, there are a slew of other compliance regulations that employers should be aware of and carefully consider-- the new update to FSLA, ACA-related tax filings, the abundance of ERISA implications, just to name a few.

As an employer, PLEASE don’t just take my word for it: make sure you’re consulting with a qualified tax consultant, labor law specialist, and/or your broker and administrators to ensure you’re staying in compliance. Meanwhile, let's all go back to daydreaming of that private island, shall we?

Originally published by Danielle Mason on LinkedIn on August 8th, 2016

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