DOL Bumps Up Civil Monetary Penalties

The Labor Department has adjusted the civil monetary penalties for inflation – though there’s likely to be some sticker shock from some of the increases.

For example, the penalty for failure or refusal to file a Form 5500 will (after Aug. 1, 2016) be up to $2,063/day, from up to $1,100/day at present. The failure to furnish reports (e.g. pension benefit statements) to certain former participants and beneficiaries will rise from up to $11/employee at present to up to $28/employee after Aug. 1, 2016.

Additionally, the failure to furnish a blackout notice goes from up to $100 per day to up to $131 per day, and the failure to furnish automatic contribution arrangement notice under ERISA 514(e)(3) rises from up to $1,000/day to up to $1,632/day.

Why the Increases

The changes are being made in accordance with the 2015 Inflation Adjustment Act, which provides a formula on how to determine the proper adjustment for each penalty, starting from a baseline of each penalty’s last increase other than under a prior version of the Inflation Adjustment Act.

The law requires federal agencies to adjust their civil monetary penalties for inflation by July 1, 2016. After this initial “catch-up” adjustment, the agencies must adjust their civil monetary penalties annually for inflation. The new civil penalty amounts are applicable only to civil penalties assessed after Aug. 1, 2016, whose associated violations occurred after Nov. 2, 2015, the date of enactment of the 2015 Inflation Adjustment Act.

Beginning in 2017 the Labor Department will adjust the new ERISA Title I penalty amounts annually for inflation no later than January 15 of each year. By way of example, the Labor Department says that by Jan. 15, 2017 they will adjust penalty amounts to reflect any increase in inflation from October 2015 to October 2016. Those changes will be posted on the agency’s website.

A table of the current penalty amounts enforceable by the Employee Benefit Security Administration (EBSA) and the inflation-adjusted penalty that will go into effect for penalties assessed after Aug. 1, 2016 is here.

FAQs on the Inflation Adjustment Act are here.

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