Increases in ERISA Penalties Take Effect August 1, 2016
July 26, 2016
Types : Alerts
Under the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, federal agencies are required to increase the amounts of civil monetary penalties annually to adjust for inflation. The first round of increases is set to take effect on August 1, 2016. The new penalties under the Employee Retirement Income Security Act of 1974 (ERISA) are shown below. Subsequent increases will be announced by January 15, 2017 and each January 15th thereafter.
The new ERISA penalty amounts apply where the penalty is assessed after August 1, 2016 and relates to a violation that occurred after November 2, 2015.
| Offending Party | Action in Question | ERISA Section | Current Penalty | New Penalty |
| Employer | Failure to maintain records or furnish information sufficient to determine benefits | 209(b) | $11 per employee | $28 per employee |
| Plan administrator | Failure/refusal to file annual report (Form 5500) with DOL | 502(c)(2) | $1,100 per day | $2,063 per day |
| Administrator of multiemployer plan | Failure to certify endangered or critical (funding) status | 502(c)(2) | $1,100 per day | $2,063 per day |
| Single-employer defined benefit plan | Failure to provide notice of funding-based limit on certain forms of distribution | 101(j) and 502(c)(4) | $1,000 per day | $1,632 per day |
| Administrator of multiemployer plan | Failure to provide financial and actuarial reports on written request | 101(k) and 502(c)(4) | $1,000 per day | $1,632 per day |
| Sponsor/Administrator of multiemployer plan | Failure to provide timely estimate of withdrawal liability upon request | 101(l) and 502(c)(4) | $1,000 per day | $1,632 per day |
| Administrator of 401(k) plan with automatic contribution arrangement | Failure to provide notice to participants of their rights and obligations under the arrangement before the start of the plan year | 514(e)(3) and 502(c)(4) | $1,000 per day | $1,632 per day |
| Multiple employer welfare arrangement (MEWA) | Failure/refusal to meet applicable reporting and disclosure requirements | 502(c)(5) | $1,100 per day | $1,502 per day |
| Plan administrator | Failure to provide benefit plan information (including SPD) to DOL | 502(c)(6) | $110 per day; capped at $1,100 per request | $147 per day; capped at $1,472 per request |
| Administrator of defined contribution plan with participant-directed investments | Failure/refusal to provide participants and beneficiaries with “blackout” notice or notice of right to divest employer securities | 502(c)(7) | $100 per day per required recipient | $131 per day per required recipient |
| Underfunded multiemployer pension plan | Failure to timely adopt a funding improvement or rehabilitation plan or to meet benchmarks by the end of the improvement period | 502(c)(8) | $1,100 per day | $1,296 per day |
| Employer | Failure to disclose group health plan benefits to states re Medicaid/CHIP eligible individuals | 502(c)(9) | $100 per employee per day | $110 per employee per day |
| Employer | Failure to provide employees with written notice of opportunities for state-provided premium assistance for health coverage | 502(c)(9) | $100 per employee per day | $110 per employee per day |
Group health plan or plan’s health insurance issuer | Failure to follow genetic information protocols | 502(c)(10) | $100 per participant per day | $110 per participant per day |
| Group health plan or plan’s health insurance issuer | Failure to follow genetic information protocols, where de minimis failure is not corrected before plan receives notice of violation from DOL | 502(c)(10) | Minimum penalty is $2,500 | Minimum penalty is $2,745 |
| Group health plan or plan’s health insurance issuer | Failure to follow genetic information protocols, where violation is more than de minimis | 502(c)(10) | Minimum penalty is $15,000 | Minimum penalty is $16,473 |
| Group health plan or plan’s health insurance issuer | Failure to follow genetic information protocols due to reasonable cause, not willful neglect | 502(c)(10) | Maximum penalty is $500,000 | Maximum penalty is $549,095 |
| Plan fiduciary | Making improper distribution | 502(m) | $10,000 per improper distribution | $15,909 per improper distribution |
| Group health plan | Willful failure to provide summary of benefits coverage to participant or beneficiary | 715 and new Labor Reg. §2575.2(m) | $1,000 per failure | $1,087 per failure |
Sponsor of Cooperative and Small Employer Charity (CSEC) plan | Failure to establish or update a funding restoration plan | 502(c)(12) | $100 per day | $100 per day (no change) |
For more information, please contact a member of the Employee Benefits Group to discuss any questions you may have.