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DOL Bumps Up Civil Monetary Penalties

The Department of Labor (DOL) has adjusted the civil monetary penalties for inflation — though there’s likely to be some sticker shock from some of the increases.

The DOL on June 30 published an interim final rule that adjusts the penalties for various violations of Title 1 of ERISA. These include fiduciary, reporting and disclosure violations.

Why the Increases

The changes are being made in accordance with the 2015 Inflation Adjustment Act, which provides a formula on how to determine the proper adjustment for each penalty, starting from a baseline of each penalty’s last increase other than under a prior version of the Inflation Adjustment Act.

The law requires federal agencies to adjust their civil monetary penalties for inflation by July 1, 2016. After this initial “catch-up” adjustment, the agencies must adjust their civil monetary penalties annually for inflation. The new civil penalty amounts are applicable only to civil penalties assessed after August 1, 2016, whose associated violations occurred after Nov. 2, 2015, the date of enactment of the 2015 Inflation Adjustment Act.

Beginning in 2017, the DOL will adjust the new ERISA Title I penalty amounts annually for inflation no later than Jan. 15 of each year. For example, the DOL says that by Jan. 15, 2017 they will adjust penalty amounts to reflect any increase in inflation from October 2015 to October 2016. Those changes will be posted on the agency’s website.

Penalty Increases

The penalty adjustments that go into effect for penalties assessed after Aug. 1, 2016 include the following.

ERISA Section 209(b)
Violation:
Failure to furnish reports, such as pension benefit statements, to certain former participants and beneficiaries or maintain records
Penalty: increases from up to $11 per employee to up to $28 per employee

ERISA Section 502(c)(2)
Violations:


  • failure or refusal to file the Form 5500; and

  • failure of a multiemployer plan to certify endangered or critical status under ERISA Section 305(b)(3)(c) treated as failure to file annual report.
Penalty: Increases from up to $1,100 per day to up to $2,063 per day.

ERISA Section 502(c)(4)
Violations:
Failure to:

  • notify participants of certain benefit restrictions and/or limitations arising under Internal Revenue Code Section 436;

  • furnish certain multiemployer plan financial and actuarial reports upon request;

  • furnish estimates of withdrawal liability up request; and

  • furnish automatic contribution arrangement notices.
Penalty: Increases from up to $1,000 per day to $1,632 per day.

ERISA Section 502(c)(8)
Violations:
Failure by:

  • a plan sponsor of a multiemployer plan in endangered status to adopt a funding improvement plan;

  • a plan sponsor of a multiemployer plan in critical status to adopt a rehabilitation plan; and

  • a plan sponsor of an endangered plan (but not a seriously endangered plan) to meet its benchmark by the end of a funding improvement period.
Penalty: Increases from up to $1,100 per day to up to $1,296 per day.

A table of the current penalty amounts enforceable by the Employee Benefit Security Administration (EBSA) and the inflation-adjusted penalty that will go into effect for penalties assessed after August 1, 2016 is available here.

FAQs on the Inflation Adjustment Act are available here.