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DOL Increases Penalties for Violations of ERISA

The Department of Labor (DOL) has issued an interim final rule that significantly increases the civil penalties under several programs it administers, including the Employee Retirement Income Security Act of 1974, as amended (ERISA). The interim final rule also requests comments. The new penalty amounts are effective August 1, 2016, and will apply to any penalties assessed after the effective date. The text of the rule is at this link.

Action Need Now: Plan Sponsors should familiarize themselves with the new penalties and submit comments, if desired.

Background: The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (FCPIAAA), requires agencies to adjust civil monetary penalties for inflation and to publish the adjustments in the Federal Register. The initial "catch-up" adjustment was required to be published via an interim final rule by July 1, 2016 and become effective by August 1, 2016. Subsequent annual adjustments will be promulgated by January 15 of each year after 2016. The adjustments are based on changes in the Consumer Price Index, and rounded to the nearest dollar.

Penalties Under Interim Final Rule: The maximum civil penalties that DOL may assess under ERISA are adjusted as shown in the following chart:

ERISA Penalty Statute Description of ERISA Violations Subject to Penalty Current Penalty Amount New Penalty Amount
ERISA 209(b) Failure to furnish reports (e.g., pension benefit statements) to certain former participants and beneficiaries or maintain records. Up to $11 per employee Up to $28 per employee
ERISA 502(c)(2)
  • Failure or refusal to file annual report (Form 5500) required by ERISA 104; and
  • Failure of a multiemployer plan to certify endangered or critical status under ERISA 305(b)(3)(C) treated as failure to file annual report.
Up to $1,100 per day Up to $2,063 per day
ERISA 502(c)(4)
  • Failure to notify participants under ERISA 101(j) of certain benefit restrictions and/or limitations arising under Internal Revenue Code 436;
  • Failure to furnish certain multiemployer plan financial and actuarial reports upon request under ERISA 101 (k);
  • Failure to furnish estimate of withdrawal liability upon request under ERISA 101(1); and
  • Failure to furnish automatic contribution arrangement notice under ERISA 514(e)(3).
Up to $1,000 per day Up to $1,632 per day
ERISA 502(c)(5) Failure of a multiple employer welfare arrangement to file report required by regulations issued under ERISA 101(g). Up to $1,100 per day Up to $1,502 per day
ERISA 502(c)(6) Failure to furnish information requested by Secretary of Labor under ERISA 104(a)(6). Up to $110 per day not to exceed $1,100 per request Up to $147 per day not to exceed $1,472 per request
ERISA 502(c)(7) Failure to furnish a required blackout notice under 101 (i) of ERISA or notice of the right to divest employer securities under 101(m) of ERISA. Up to $100 per day Up to $131 per day
ERISA 502(c)(8) Failure by a plan sponsor of a multiemployer plan in endangered status to adopt a funding improvement plan or a multiemployer plan in critical status to adopt a rehabilitation plan. Penalty also applies to a plan sponsor of an endangered status plan (other than a seriously endangered plan) that fails to meet its benchmark by the end of the funding improvement period. Up to $1,100 per day Up to $1,296 per day
ERISA 502(c)(9)(A) Failure by an employer to inform employees of CHIP coverage opportunities under ERISA 701 (f)(3)(B)(i)(I) - each employee a separate violation. Up to $100 per day Up to $110 per day
ERISA 502(c)(9)(B) Failure by a plan administrator to timely provide to any State the information required to be disclosed under ERISA 701(f)(3)(B)(ii), regarding coverage coordination - each participant/beneficiary a separate violation. Up to $100 per day Up to $110 per day
ERISA 502(c)(10)(B)(i) Failure by any plan sponsor of a group health plan, or any health insurance issuer offering health insurance coverage in connection with the plan, to meet the requirements of ERISA 702(a)(1)(F), (b)(3),(c) or (d); or 701; or 702(b)(1) with respect to genetic information. $100 per day during non-compliance period $110 per day during non-compliance period
ERISA 502(c)(10)(C)(i) Minimum penalty for de minimis failures to meet genetic information requirements not corrected prior to notice from Secretary of Labor. $2,500 minimum $2,745 minimum
ERISA 502(c)(10)(C)(ii) Minimum penalty for failures to meet genetic information requirements which are not corrected prior to notice from Secretary of Labor and are not de minimis. $15,000 minimum $16,473 minimum
ERISA 502(c)(10)(D)(iii)(II) Cap on unintentional failures to meet genetic information requirements. $500,000 maximum $549,095 maximum
ERISA 502(c)(12) Failure of CSEC plan sponsor to establish or update a funding restoration plan. Up to $100 per day Up to $100 per day
ERISA 502(m) Distribution prohibited by ERISA 206(e). Up to $10,000 per distribution Up to $15,909 per distribution
ERISA 715 Failure to provide Summary of Benefits Coverage under Public Health Services Act section 2715(f), as incorporated into ERISA section 715 and 29 CFR 2590.715-2715(e). Up to $1,000 per failure Up to $1,087 per failure

Cheiron Observation: Although the interim regulation requests comments, it is doubtful that it will be changed because the basis for determining the penalty increases is mandated by statute.

Cheiron pension consultants can assist plan sponsors in assessing the impact of this interim final rule and meeting their ERISA reporting and notice requirements to avoid penalties.

Cheiron is an actuarial consulting firm that provides actuarial and consulting advice. However, we are neither attorneys nor accountants. Accordingly, we do not provide legal services or tax advice.

 
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