A failure to furnish documents in a timely manner when requested by a 401(k) participant could cost the parties involved.
Reuters reported that “after ruling a 401(k) plan administrator violated ERISA when it failed to furnish a custodial agreement and other documents requested by a plan participant, a trial court has imposed penalties totaling $15,959.”
The court also concluded that the plan administrator failed to engage an independent qualified public accountant (IQPA) to conduct an audit of the plan in connection with several years’ Form 5500s, according to the news service.
“The maximum permissible penalty for failing to furnish documents requested by a participant or beneficiary is $110 per day, but courts have discretion to impose lower penalties,” it added.
Factors the courts look at include whether the delay was due to bad faith, its length, the number of requests and documents involved, and whether the delay negatively impacted the participant.
“In this instance, there were two separate failures. For the first failure—a 300-day delay in furnishing any plan documents—the court imposed a penalty of $50 per day, concluding that the plan administrator’s actions were intentional but not in bad faith, and attributing the delay partially to a “faultless” communication breakdown caused by an undelivered phone message.”
The second failure involved a 959-day delay in furnishing a copy of a custodial agreement between the plan sponsor and a trust company. The court imposed a nominal penalty of $1 per day, Reuters noted.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
