Monday, January 12, 2009

DOL Final Regulation - Civil Penalties Under ERISA Section 502(c)(4)

[Federal Register Correction: In rule document Z8-31188 beginning on page 17 in the issue of Friday, January 2, 2009 make the following correction: On page 17, in the second column, in the DATES heading, March 3, 2008 should read March 3, 2009.]

The DOL announced a final regulation implementing civil penalty rules under the Pension Protection Act:

Washington —The U.S. Department of Labor today announced a final regulation implementing the department's authority to assess civil penalties against plan administrators who fail to disclose certain documents to participants, beneficiaries and others as required by the Employee Retirement Income Security Act, as amended by the Pension Protection Act (PPA).

The PPA established new disclosure provisions relating to: funding-based limits on benefit accruals and certain forms of benefit distributions; plan actuarial and financial reports; withdrawal liability of contributing employers; and participants' rights and obligations under automatic contribution arrangements. The PPA gave the department authority to assess civil monetary penalties of up to $1,000 per day per violation against plan administrators for violations of the new disclosure requirements. The final regulation sets forth the administrative procedures for assessing and contesting such penalties and does not address the substantive provisions of the new disclosure requirements.

This final regulation is to be published in the January 2, 2009 Federal Register.

The regulations describe how the DOL will assess and compute the notice penalty. They also discuss the process to dispute an assessment and request an administrative hearing.

The final regulations do not have any reference to providing the notice before a participant becomes eligible and whether the notice requirements are for all automatic contribution arrangements or only for those covered under 29 CFR § 2550.404c-5.

Final Regulations Adopted on ERISA Civil Penalties for PPA Disclosure Violations provides additional anaylsis:

Under the final regulations, DOL is authorized to assess civil penalties not to exceed $1,000 per day for violations of each of the following:

  • Notice of funding-based limits.– Effective for plan years beginning on or after January 1, 2008.
  • Notice requirements for automatic contribution arrangements. – Effective August 17, 2006.
  • Furnishing of plan documents. – Effective for plan years beginning on or after January 1, 2008.
  • Notice of potential withdrawal liability. – Effective for plan years beginning on or after January 1, 2008.

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