July 5, 2016

DOL Increases Civil Penalties for Inflation

The Department of Labor (DOL) issued an interim final rule increasing civil penalties under all the laws it enforces, including the Employee Retirement Income Security Act (ERISA). The increases are pursuant to the Federal Civil Monetary Penalties Inflation Adjustment Act Improvements Act of 2015 (Inflation Act). The interim final rule changes apply to penalties assessed after August 1, 2016, with respect to violations that occurred after November 2, 2015.

The Inflation Act requires federal agencies to make an initial adjustment to their civil monetary penalties for inflation through October 15, 2015, and an annual adjustment thereafter. The DOL will adjust penalties for inflation by January 15 of each year; the January 15, 2017 inflation increase will cover inflation from October 15, 2015 to October 15, 2016.

Because of prior inflation adjustments to some penalties and differing rounding rules, the adjustment percentage varies by penalty. For ERISA pension penalties, the following penalties apply:

ERISA Penalty SectionERISA ViolationCurrent PenaltyNew Penalty
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) under §104 Up to $1,100 per day Up to $2,063 per day
ERISA §502(c)(4) Failure to notify participants of certain benefit restrictions under §101(j); failure to furnish automatic contribution arrangement notice under §514(e)(3) Up to $1,000 per day Up to $1,632 per day
ERISA §502(c)(6) Failure to furnish information (documents related to plan) requested by Secretary under §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 blackout notices under §101(i); failure to furnish notice of right to diversify under §101(m) Up to $100 per day Up to $131 per day
ERISA §502(c)(12) Failure of a 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 of amount prohibited under §206(e) because of liquidity shortfall Up to $10,000 per distribution Up to $15,909 per distribution
Penalties Related Exclusively to Health Plans
ERISA §715 Failure to provide Summary of Benefits and Coverage (SBC) Up to $1,000 per failure Up to $1,087 per failure
ERISA §502(c)(9)(A) Failure to inform employees of CHIP coverage opportunities Up to $100 per day Up to $110 per day
ERISA §502(c)(9)(B) Failure to timely provide to requesting State information relevant to coordinating group coverage with Medicaid or CHIP Up to $100 per day Up to $110 per day
ERISA §502(c)(10)(B)(i) Failure to comply with genetic information requirements $100 per day during non-compliance period $110 per day during non-compliance period
ERISA §502(c)(10)(C)(i) Minimum penalty for failure to meet genetic information requirements where violations are de minimis and not corrected prior to notice from Secretary $2,500 minimum $2,745 minimum
ERISA §502(c)(10)(C)(ii) Minimum penalty for failure to meet genetic information requirements where violations are not de minimis and not corrected prior to notice from Secretary $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

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