Increases in Penalty Amounts for Plan Violations

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The President signed into law the 2015 Civil Penalties Inflation Adjustment Act on November 2, 2015. According to this new law, agencies must adjust the level of civil monetary penalties with an initial catch-up adjustment and then must start adjusting civil monetary penalties for inflation each year.  

On June 30, 2016 the DOL issued an interim rule adjusting civil monetary penalties in accordance with the Inflation Adjustment Act.  The adjustments issued on June 30 are catch-up adjustments applying to penalties assessed after August 1, 2016 for violations that occurred after November 2, 2015. Starting in 2017, civil penalties will be annually adjusted for inflation by January 15 each year. The new amounts will be for penalties occurring from October to October.   For example, by January 15, 2017, the Department will adjust penalty amounts to reflect increases in inflation from October 2015 to October 2016.

The following pension penalties have been updated.  Most importantly, note that the penalty for failing to file Form 5500 has increased from $1,100 per day to $2,063 per day.

ERISA Penalty Statute Description of ERISA Violations Current Penalty Amount New Penalty Amount after August 1, 2016
ERISA §209(b) Failure to furnish reports (e.g., benefit statements) to certain former participants and beneficiaries; failure to 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); and Failure of a multiemployer plan to certify endangered or critical status under ERISA §305(b)(3)(C) 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 IRC §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(l); 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)(6)          Failure to furnish information requested by Secretary of Labor under ERISA §104(a)(6) Up to $110 per day Up to $147 per day
ERISA §502(c)(7)          Failure to furnish a blackout notice under section 101(i) of ERISA or notice of the right to divest employer securities under section 101(m) or ERISA Up to $100 per day Up to $131 per day
ERISA §502(m) Distribution prohibited by §206(e) of ERISA Up to $10,000 per distribution Up to $15,909 per distribution
author

Caryn Patterson attended the University of Kentucky and graduated in December, 2012 with a Bachelor’s degree in Finance. She joined RMS in January, 2013 as a Plan Specialist.   She has earned her Qualified 401(k) Administrator designation from the American Society of Pension Professionals & Actuaries, and was promoted to Senior Plan Specialist I in 2016. Most of her time is devoted to defined contribution plan administration and compliance testing. Caryn resides in Louisville and enjoys reading, hiking and traveling.

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