ERISA Civil Penalties For Employers, Fiduciaries & Plan Administrators Rose August 1
Employer and other employee benefit plan sponsors, fiduciaries and administrators required by the Department of Labor Employee Benefit Security Administration (EBSA) to pay a civil monetary penalty for a post-November 2, 2015 violation of the employee benefit related obligations of the Employee Retirement Income Security Act (ERISA) should expect to pay more if EBSA assesses the penalty after August 1, 2016.
In 2015, Congress passed the Federal Civil Penalties Inflation Adjustment Act Improvements Act, which requires the Department of Labor (DOL) and other agencies adjust their penalties for inflation each year. In response to this mandate, the DOL has published two interim final rules to adjust its penalties for inflation effective August 1:
- Federal Civil Penalties Inflation Adjustment Act Catch-Up Adjustments, which is DOL-only rule covering the vast majority of penalties assessed by a number of the DOL’s agencies including the DOL’s Employee Benefits Security Administration, Mine Safety and Health Administration, Occupational Safety and Health Administration, Office of Workers’ Compensation Programs, and Wage and Hour Division; and
- Federal Civil Penalties Inflation Adjustment Act Catch-Up Adjustments: H-2B Temporary Non-agricultural Worker Program, which will be issued jointly with the Department of Homeland Security to adjust penalties associated with the H-2B temporary guest worker program
Both rules define rules that DOL plans to use to apply the 2015 Inflation Adjustment Act’s formula on how to determine the proper adjustment for each penalty effective August 1, 2016 to civil penalties that DOL can access against employers for violations.
The new method will adjust penalties for inflation, though the amount of the increase is capped at 150 percent of the existing penalty amount. The baseline is the last increase other than for inflation. The following chart shows the new civil penalty amounts assessable by EBSA after August 1, 2016 for post November 2, 2015 ERISA violations.
| ERISA Civil Monetary Penalties
Effective 8/16/2016 The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 requires federal agencies to increase the amounts of civil monetary penalties annually for inflation. The new penalties under the Employee Retirement Income Security Act of 1974 (ERISA) shown below took effect August 16, 2016 and apply to a penalty assessed after August 1, 2016 that relates to a violation that occurred after November 2, 2015. |
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| Offending Party | Action in Question | ERISA Section | Penalty
As of August 15, 2016 |
Penalty Effective August 16, 2016 |
| 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) |
The civil penalty increase provides yet another reason for employer and other plan sponsors,. fiduciaries and administrators to strive to prevent ERISA violations.
About The Author
Cynthia Marcotte Stamer is a noted Texas-based management lawyer and consultant, author, lecture and policy advocate, recognized for her nearly 30-years of cutting edge management work as among the “Top Rated Labor & Employment Lawyers in Texas” by LexisNexis® Martindale-Hubbell® and as among the “Best Lawyers In Dallas” for her work in the field of “Tax: Erisa & Employee Benefits” and “Health Care” by D Magazine.
Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, a Fellow in the American College of Employee Benefit Counsel, past Chair and current committee Co-Chair of the American Bar Association (ABA) RPTE Section Employee Benefits Group, Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee, former Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, a former ABA Joint Committee on Employee Benefits Council Representative and , Ms. Stamer helps management manage.
Ms. Stamer’s legal and management consulting work throughout her nearly 30-year career has focused on helping organizations and their management use the law and process to manage people, process, compliance, operations and risk. Highly valued for her rare ability to find pragmatic client-centric solutions by combining her detailed legal and operational knowledge and experience with her talent for creative problem-solving, Ms. Stamer helps public and private, domestic and international businesses, governments, and other organizations and their leaders manage their employees, vendors and suppliers, and other workforce members, customers and other’ performance, compliance, compensation and benefits, operations, risks and liabilities, as well as to prevent, stabilize and cleanup workforce and other legal and operational crises large and small that arise in the course of operations.
Ms. Stamer works with businesses and their management, employee benefit plans, governments and other organizations deal with all aspects of human resources and workforce, internal controls and regulatory compliance, change management and other performance and operations management and compliance. She supports her clients both on a real time, “on demand” basis and with longer term basis to deal with daily performance management and operations, emerging crises, strategic planning, process improvement and change management, investigations, defending litigation, audits, investigations or other enforcement challenges, government affairs and public policy.
Well known for her extensive work with health care, insurance and other highly regulated entities on corporate compliance, internal controls and risk management, her clients range from highly regulated entities like employers, contractors and their employee benefit plans, their sponsors, management, administrators, insurers, fiduciaries and advisors, technology and data service providers, health care, managed care and insurance, financial services, government contractors and government entities, as well as retail, manufacturing, construction, consulting and a host of other domestic and international businesses of all types and sizes. Common engagements include internal and external workforce hiring, management, training, performance management, compliance and administration, discipline and termination, and other aspects of workforce management including employment and outsourced services contracting and enforcement, sentencing guidelines and other compliance plan, policy and program development, administration, and defense, performance management, wage and hour and other compensation and benefits, reengineering and other change management, internal controls, compliance and risk management, communications and training, worker classification, tax and payroll, investigations, crisis preparedness and response, government relations, safety, government contracting and audits, litigation and other enforcement, and other concerns.
Ms. Stamer uses her deep and highly specialized health, insurance, labor and employment and other knowledge and experience to help employers and other employee benefit plan sponsors; health, pension and other employee benefit plans, their fiduciaries, administrators and service providers, insurers, and others design legally compliant, effective compensation, health and other welfare benefit and insurance, severance, pension and deferred compensation, private exchanges, cafeteria plan and other employee benefit, fringe benefit, salary and hourly compensation, bonus and other incentive compensation and related programs, products and arrangements. She is particularly recognized for her leading edge work, thought leadership and knowledgeable advice and representation on the design, documentation, administration, regulation and defense of a diverse range of self-insured and insured health and welfare benefit plans including private exchange and other health benefit choices, health care reimbursement and other “defined contribution” limited benefit, 24-hour and other occupational and non-occupational injury and accident, expat and medical tourism, onsite medical, wellness and other medical plans and insurance benefit programs as well as a diverse range of other qualified and nonqualified retirement and deferred compensation, severance and other employee benefits and compensation, insurance and savings plans, programs, products, services and activities. As a key element of this work, Ms. Stamer works closely with employer and other plan sponsors, insurance and financial services companies, plan fiduciaries, administrators, and vendors and others to design, administer and defend effective legally defensible employee benefits and compensation practices, programs, products and technology. She also continuously helps employers, insurers, administrative and other service providers, their officers, directors and others to manage fiduciary and other risks of sponsorship or involvement with these and other benefit and compensation arrangements and to defend and mitigate liability and other risks from benefit and liability claims including fiduciary, benefit and other claims, audits, and litigation brought by the Labor Department, IRS, HHS, participants and beneficiaries, service providers, and others. She also assists debtors, creditors, bankruptcy trustees and others assess, manage and resolve labor and employment, employee benefits and insurance, payroll and other compensation related concerns arising from reductions in force or other terminations, mergers, acquisitions, bankruptcies and other business transactions including extensive experience with multiple, high-profile large scale bankruptcies resulting in ERISA, tax, corporate and securities and other litigation or enforcement actions.
Ms. Stamer also is deeply involved in helping to influence the Affordable Care Act and other health care, pension, social security, workforce, insurance and other policies critical to the workforce, benefits, and compensation practices and other key aspects of a broad range of businesses and their operations. She both helps her clients respond to and resolve emerging regulations and laws, government investigations and enforcement actions and helps them shape the rules through dealings with Congress and other legislatures, regulators and government officials domestically and internationally. A former lead consultant to the Government of Bolivia on its Social Security reform law and most recognized for her leadership on U.S. health and pension, wage and hour, tax, education and immigration policy reform, Ms. Stamer works with U.S. and foreign businesses, governments, trade associations, and others on workforce, social security and severance, health care, immigration, privacy and data security, tax, ethics and other laws and regulations. Founder and Executive Director of the Coalition for Responsible Healthcare Policy and its PROJECT COPE: the Coalition on Patient Empowerment and a Fellow in the American Bar Foundation and State Bar of Texas, Ms. Stamer annually leads the Joint Committee on Employee Benefits (JCEB) HHS Office of Civil Rights agency meeting and other JCEB agency meetings. She also works as a policy advisor and advocate to many business, professional and civic organizations.
Author of the thousands of publications and workshops these and other employment, employee benefits, health care, insurance, workforce and other management matters, Ms. Stamer also is a highly sought out speaker and industry thought leader known for empowering audiences and readers. Ms. Stamer’s insights on employee benefits, insurance, health care and workforce matters in Atlantic Information Services, The Bureau of National Affairs (BNA), InsuranceThoughtLeaders.com, Benefits Magazine, Employee Benefit News, Texas CEO Magazine, HealthLeaders, Modern Healthcare, Business Insurance, Employee Benefits News, World At Work, Benefits Magazine, the Wall Street Journal, the Dallas Morning News, the Dallas Business Journal, the Houston Business Journal, and many other publications. She also has served as an Editorial Advisory Board Member for human resources, employee benefit and other management focused publications of BNA, HR.com, Employee Benefit News, InsuranceThoughtLeadership.com and many other prominent publications. Ms. Stamer also regularly serves on the faculty and planning committees for symposia of LexisNexis, the American Bar Association, ALIABA, the Society of Employee Benefits Administrators, the American Law Institute, ISSA, HIMMs, and many other prominent educational and training organizations and conducts training and speaks on these and other management, compliance and public policy concerns.
Ms. Stamer also is active in the leadership of a broad range of other professional and civic organizations. For instance, Ms. Stamer serves on the Advisory Boards of InsuranceThoughtLeadership.com, HR.com, Employee Benefit News, and as an editorial advisor and contributing author of many other publications. Her leadership involvements with the American Bar Association (ABA) include year’s serving many years as a Joint Committee on Employee Benefits Council representative; ABA RPTE Section current Practice Management Vice Chair and Substantive Groups & Committees Committee Member, RPTE Employee Benefits & Other Compensation Committee Past Group Chair and Diversity Award Recipient, current Defined Contribution Plans Committee Co-Chair, and past Welfare Benefit Plans Committee Chair Co-Chair; Past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group and a current member of its Healthcare Coordinating Council; current Vice Chair of the ABA TIPS Employee Benefit Committee; International Section Life Sciences Committee Policy Vice Chair; and a speaker, contributing author, comment chair and contributor to numerous Labor, Tax, RPTE, Health Law, TIPS, International and other Section publications, programs and task forces. Other selected service involvements of note include Vice President of the North Texas Healthcare Compliance Professionals Association; past EO Coordinator and a Vice-Chair of the Gulf Coast TEGE Council TE Division; founding Board Member and President of the Alliance for Healthcare Excellence, as a Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; the Board President of the early childhood development intervention agency, The Richardson Development Center for Children; Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee; a former Southwest Benefits Association Board of Directors member, Continuing Education Chair and Treasurer; former Texas Association of Business BACPAC Committee Member, Executive Committee member, Regional Chair and Dallas Chapter Chair; former Society of Human Resources Region 4 Chair and Consultants Forum Board Member and Dallas HR Public Policy Committee Chair; former National Board Member and Dallas Chapter President of Web Network of Benefit Professionals; former Dallas Business League President and others. For additional information about Ms. Stamer, seeCynthiaStamer.com or contact Ms. Stamer via email here or via telephone to (469) 767-8872.
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