DOL Increases Civil Penalties of Benefits-Related Violations

Legal Alert

June 24, 2016

On July 1, 2016, the Department of Labor (“DOL”) issued regulations that increased the civil monetary penalties of many employee benefit-related violations. These regulations were issued pursuant to the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, passed by Congress in November of 2015 (the “Act”).

Congress passed the Act to provide for increases in civil monetary penalties across all government agencies. Agencies were directed to impose an initial “catch-up” increase by July 1, 2016, and then to index the penalties for inflation thereafter. In addition to the below increases, the DOL also increased penalties subject to its Wage and Hour Division, Occupational Health and Safety Administration, and Office of Workers’ Compensation Programs (among others). Other federal agencies have likewise increased penalties pursuant to the Act.

Increased Penalties

Among the penalties that were increased are the following:

Failure to file an annual report (Form 5500) was increased from a maximum of $1,100 per day to a maximum of $2,063 per day;
Failure of a group health plan sponsor to provide a summary of benefits and coverage to participants, as required by the Affordable Care Act, was increased from $1,000 per failure to $1,087 per failure;
Failure to provide notice to participants of a 401(k) plan with an automatic contribution arrangement was increased from a maximum of $1,000 per day to a maximum of $1,632 per day; and
Failure of a multiple employer welfare arrangement (“MEWA”) to file required reports was increased from a maximum of $1,100 per day to a maximum of $1,502 per day.

As was the case prior to these increases, many of the above dollar amounts are upper limits on penalties; actual penalties imposed by the DOL may be lower.

Effective Date

The new dollar amounts are applicable to penalties assessed after August 1, 2016, for violations that occurred after November 2, 2015. Beginning in January of 2017, the DOL will adjust the penalties on an annual basis for inflation.

If you have any questions regarding these issues, please contact your Executive Compensation and Employee Benefits counsel at Smith, Gambrell & Russell, LLP.

This client alert is intended to inform clients and other interested parties about legal matters of current interest and is not intended as legal advice.