Benefits Limitation Participant Notice

[Andy the Actuary]

FYI

Thought the $1,000/day maximum penalty for failure to provide the benefits limitation notice to participants and beneficiaries was stiff? Think again.

That's what all the literature I've read said -- $1,000 per violation without defining violation. However, the December 07 proposed regulation defines a violation as "(2) For purposes of calculating the amount to be assessed under this section, a failure or refusal to furnish the item with respect to any person entitled to receive such item, shall be treated as a separate violation under section 101(j), (k), or (l), or section 514(e)(3) of the Act, as applicable."

So, if your Plan has 60 partiicipants, that's $60,000 per day. If this Plan Sponsor commits to contributing additional amounts for 2007 to bring funding up to 80%, you won't know of a failure unless he advises you. Thus, by time you get out to September 15, 2008, your looking at a maximum penalty of over $8 million.

Now, we are talking maximums and wouldn't expect such a draconian penalty. However, let's say a physician's group is being investigated for Medicare fraud . . .