Summary
The US Department of Labor increased the penalties for specified violations of the Employee Income Retirement Security Act of 1974. Most of the penalty increases involve reporting and disclosure failures related to benefit plans and will be effective for penalties assessed after August 1, 2016, if the violation occurred after November 1, 2015.
In Depth
Under the Federal Civil Monetary Penalties Inflation Adjustment Act Improvements Act of 2015 (2015 Inflation Adjustment Act), the US Department of Labor (DOL) increased the penalties for specified violations of the Employee Income Retirement Security Act of 1974 (ERISA), published in an interim final rule (IFR). Most of the penalty increases involve reporting and disclosure failures related to benefit plans. After the 45-day comment period on the IFR lapses, the DOL will publish final regulations.
Penalty Adjustments for Inflation
The IFR adjusts ERISA reporting and disclosure penalties for inflation. The IFR’s adjustments apply only to penalties assessed after August 1, 2016, if the violation occurred after November 2, 2015. If the violation occurred on or before November 2, 2015, the current penalty amounts apply.
Annual Penalty Adjustments for Inflation
The 2015 Inflation Adjustment Act directs the DOL to adjust penalties annually for inflation. Beginning in 2017, DOL will adjust penalty amounts no later than January 15 of each year. By January 15, 2017, DOL will adjust penalty amounts to reflect any increase in inflation that occurred between October 2015 and October 2016. Future annual inflation adjustments are not subject to regulatory notice and rulemaking requirements. The DOL will post any changes to penalty amounts on its website.
New Penalty Amounts as Adjusted For Inflation
A table of penalties, current and new, is included in the DOL Fact Sheet dated June 30, 2016, and is reproduced below. The table shows the current penalty amounts, and shows the inflation-adjusted penalty amounts that apply to penalties assessed after August 1, 2016 for violations occurring after November 2, 2015.
Next Steps
As a result of the upcoming increases in penalties for ERISA violations, plan sponsors should review their benefit plans for compliance with ERISA’s reporting and disclosure requirements. In some cases, DOL or IRS correction programs may be available to reduce these new penalties.
DOL Significantly Increases Some Penalties for ERISA Violations
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.