If a review indicates serious and willful misconduct by the employer, the reserves should be increased by what amount?

• A. Increase by 10%
• B. Increase by 25%
• C. Increase by 50%
• D. Decrease reserves

Answer: (C)

When a review finds serious and willful misconduct by the employer, the plan must adjust its financial protection to reflect the higher risk of future liabilities. Increasing the reserves by a substantial margin ensures there are enough funds to cover potential additional claim costs and demonstrates the plan’s commitment to solvency and responsible oversight. A fifty percent uplift is the level prescribed for this severe finding, signaling a strong response to misconduct. Smaller increases would understate the risk, and decreasing reserves would undermine the plan’s ability to meet future obligations in light of discovered misconduct.