ERISA Plan Sponsors Are Advised of Increased Penalties
By Mark Johnson, Ph.D., J.D.


Employers who sponsor pension and benefit plans governed by the Employee Retirement Income Security Act (ERISA) will soon be subject to an increase in penalty fees for certain reporting violations.


The Department of Labor (DOL) in late June issued an interim final rule that identifies inflation-adjusted penalties for a range of reporting and filing violations. This article focuses on penalties enforced by the Employee Benefits Security Administration (EBSA), an agency within the Department of Labor that administers the fiduciary, reporting and disclosure provisions of Title I of the Employee Retirement Income Security Act of 1974 (ERISA).


ERISA Violations Subject to Penalty


Listed below are a few of the reporting failures identified that will trigger increased penalty provisions, as included in the interim rules.


• Failure to furnish reports, including pension benefit statements, to certain former participants and beneficiaries. The current penalty of $11 per employee will increase to $28 per employee.

• Failure or refusal to file Form 5500 annual report. The current penalty of up to $1,100 per day will increase to a maximum of $2,063 per day.

• Failure to notify participants under ERISA §101(j) of certain benefit restrictions and/or limitations arising under Internal Revenue Code § 436. The current penalty of up to $1,000 per day will increase to a maximum of $1,632 per day.


Monetary Penalties for Multiemployer Plans Several


of the increased penalty levels will apply specifically to multiemployer plans, with several examples indicated below.


• Failure of a multiemployer plan to certify endangered or critical status. The current penalty of up to $1,100 per day will increase to a maximum of $2,063 per day.

• Failure to furnish certain multiemployer plan financial and actuarial reports upon request. The current penalty of up to $1,000 per day will increase to a maximum of $1,632 per day.

• 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. The current penalty of up to $1,100 per day will increase to a maximum of $1,296 per day.


As we have written about in the past, there are approximately 1,400 active multiemployer benefit pension plans in the country. Collectively bargained and maintained by more than one employer in a related industry and a labor union, these multiemployer plans cover about 10 million participants. Employees in these plans traditionally work in industries such as building and construction; film, television and theater; retail food; garment manufacturing; mining; trucking; and maritime.


Background on the DOL Increases in Civil Monetary Penalties


The increased monetary penalties take effect in August. The new penalty schedule will apply to violations that occurred after November 2 of last year and were assessed after the beginning of August of this year.


Additional future increases are expected. The DOL will increase monetary penalties by mid-January on an annual basis, beginning in 2017. Future increases will not require advance notice or further rulemaking.


The DOL actions are in response to 2015 amendments to the Federal Civil Monetary Penalties Inflation Adjustment Act, which required federal agencies to issue an interim rule by July of this year.


The Employee Benefits Security Administration, which oversees ERISA, is only one of several Department of Labor divisions affected by this interim ruling. Other DOL agencies include:


• Employment and Training Administration

• Mine Safety and Health Administration

• Occupational Safety and Health Administration

• Wage and Hour Division

• Workers Compensation Programs Office


Full details about the changes in civil monetary penalties are available at the website for the DOL and the EBSA.


July 2016



ABOUT THE AUTHOR: Mark Johnson, J.D., Ph.D. Mark Johnson, Ph.D., J.D., is a highly experienced ERISA expert. As a former ERISA Plan Managing Director and plan fiduciary for a Fortune 500 company, Dr. Johnson has practical knowledge of plan documents as well as an in-depth understanding of ERISA obligations. He works as an expert consultant and witness on 401(k), ESOP and pension fiduciary liability; retiree medical benefit coverage; third party administrator disputes; individual benefit claims; pension benefits in bankruptcy; long term disability benefits; and cash conversion balances.


ERISA Benefits Consulting, Inc. by Mark Johnson provides benefit consulting and advisory services and does not engage in the practice of law.


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