Ensuring that your employee benefits plans comply with the Employee Retirement Income Security Act of 1974 (“ERISA”) just became more important. That is because the cost of noncompliance just increased (and in some instances, the increases are significant). On June 30, 2016, the U.S. Department of Labor (the “DOL”) issued an interim final rule increasing the penalties for certain violations of ERISA. The interim final rule is effective for penalties assessed after August 1, 2016 if the corresponding violation occurred after November 2, 2015.
The interim final rule and the corresponding increases in penalties occurred as the result of a 2015 amendment to the Federal Civil Monetary Penalties Inflation Adjustment Act of 1990 (the “2015 Amendment”). The 2015 Amendment required federal agencies to issue an interim final rule by July 1, 2016, adjusting their civil monetary penalties for inflation through October 2015. These adjustments are intended to ensure that ERISA penalties maintain their desired deterrent effects. Beginning in 2017, the DOL will make annual adjustments to ERISA penalties by January 15 of each year, accounting for inflation through October of the preceding year.
In connection with the issuance of its interim final rule, the DOL also published frequently asked questions and a fact sheet addressing the changes. The fact sheet included the following chart, which depicts the current penalty amounts enforceable by EBSA (the Employee Benefits Security Administration) and the new inflation-adjusted penalties that will go into effect for penalties assessed after August 1, 2016. As illustrated by the chart below, many of these new penalty amounts are substantial increases from the prior penalties, thus making it even more important for plan sponsors to review their benefit plans to ensure compliance.
| 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) |
| Up to $1,100 per day | Up to $2,063 per day |
| ERISA § 502(c)(4) |
| 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 blackout notice under section ERISA § 101(i) or notice of the right to divest employer securities under ERISA § 101(m) | 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)(11). | 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 § 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 |
In this blog, Nutter's Executive Compensation and Employee Benefits attorneys will provide updates on key developments and offer practical tips and best practices relating to executive compensation, employee benefits, and corporate governance matters.
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