Black out notice and other disclosures

We have a client that moved from one recordkeeper to another.  They were provided with several notices by the new rk and the funds have already been transferred.  Yesterday, we found out the client did not distribute any of the notices.  What are the penalities for something like this and does it require reporting to DOL/IRS?  Thank you.,

There is a question on the 5500 asking if there was a blackout period, and if the notice was provided, so you are going to have to report it one way or another.

6 hours ago, mjf06241972 said:

We have a client that moved from one recordkeeper to another.  They were provided with several notices by the new rk and the funds have already been transferred.  Yesterday, we found out the client did not distribute any of the notices.  What are the penalities for something like this and does it require reporting to DOL/IRS?  Thank you.,

Quote

Failure to provide the notice at the proper times could result in civil penalties assessed by the DOL of up to $139 per day (2019), per participant or beneficiary. DOL regulations state that this penalty is a personal liability of the employer and not a liability of the plan. The penalty is calculated from the date that the employer failed to provide the notice, up to and including the final day of the blackout period.

Reported on Form 5500. Is there some compelling reason it wasn't distributed? Also, consider sending the notices ASAP with an a explanation for the delay. It may not relieve the Emloyer of the penalties but it would look better should you have to argue with the DOL.

9 hours ago, mjf06241972 said:

We have a client that moved from one recordkeeper to another.  They were provided with several notices by the new rk and the funds have already been transferred.  Yesterday, we found out the client did not distribute any of the notices.  What are the penalities for something like this and does it require reporting to DOL/IRS?  Thank you.,

mjf06241972, you do not say when the blackout started and ended. The past 3 months have been a period of unusual market volatility. Your greatest exposure is to participants who may claim that they would have handled their investments differently, and avoided losses,  had they known that there was going to be a blackout. Obviously, that is very fact-dependent and hindsight is 20-20, as they say. In similar situations I have typically counselled employers to analyze the time period involved and the participant losses that occurred to try to quantify the exposure. Some participants may complain. Luckily, the markets have recovered significantly (at least for the moment) from the late March low.

For a penalty assessed after January 15, 2020, the civil penalty is inflation-adjusted to $141.

https://www.govinfo.gov/content/pkg/FR-2020-01-15/pdf/2020-00486.pdf

If a blackout notice failure affected 100 individuals for 40 days, that penalty is $564,000.

14 hours ago, Peter Gulia said:

For a penalty assessed after January 15, 2020, the civil penalty is inflation-adjusted to $141.

https://www.govinfo.gov/content/pkg/FR-2020-01-15/pdf/2020-00486.pdf

If a blackout notice failure affected 100 individuals for 40 days, that penalty is $564,000.

But imposition of penalty is discretionary with DOL and also can be reduced by DOL. Best way to set yourself up in case of DOL investigation is to do an internal investigation first and take corrective action.