DOL Civil Penalty under ERISA Section 502(c)(4)
Rev. 02/05/09; E-mail Alert 2009-2

The Department of Labor issued a final regulation authorizing the Secretary of Labor to access civil penalties, not to exceed $1,000 per day for each violation by any person, against plan administrators who fail to disclose certain documents to participants and beneficiaries as required by the Employee Retirement Income Security Act (ERISA), as amended by the Pension Protection Act (PPA).  The effective date is March 3, 2009.

The following administrative procedures for assessing and contesting these penalties were also established in this final regulation:

1. In determining the penalty to be assessed, the DOL will be “taking into consideration the degree or willfulness of the failure or refusal.”

2.  The DOL process for determining the penalty provides for a 30-day period during which a plan administrator may file a written statement or request a hearing to present mitigating circumstances for noncompliance.  The DOL proecdure further states that if the plan administrator fails to file a statement or request for hearing within 30 days; they will waive the right to appear and contest the notice, and it will be an admission of the facts alleged in the notice. Such notice then becomes a final order of the Secretary 45 days from the date of service of the notice.

If a statement is filed, following a review of the statement, the DOL will notify the plan administrator of its decision to either waive the penalty, in whole or in part, and/or to assess a penalty.

3. The exact delivery rules and mailing timeframes for the DOL notice are defined in the final regulations.

4. Filing rules for the administrator’s statement of reasonable cause are also defined.
 
5.  The liability of the parties for penalties provides that, if more than one person is responsible as administrator for the failure to provide the required item(s), all such persons shall be jointly and severally liable for such failure. Further, any person against whom a penalty is assessed shall be personally liable for the payment of such penalty, and the penalty may not be a liability of the plan. The term "administrator'' shall include plan sponsor (within the meaning of section 3(16)(B) of the Act).

6. Hearings will be before an Administrative Law Judge (ALJ) with respect to assessment by the Department of a civil penalty under ERISA section 502(c)(4), and for appealing an ALJ decision to the Secretary or her delegate. The procedures are the same procedures that would apply in the case of a civil penalty assessment under section 502(c)(7) of ERISA.

 

 

The plan administrator will be liable for civil penalties assessed under section 502(c)(4) of ERISA for failure or refusal to furnish the following notices:

AUTOMATIC CONTRIBUTION ARRANGEMENT NOTICE, Section 514(e)(3)
Type of Information:  A participant’s rights and obligations under the arrangement.
To Whom: Each participant to whom the arrangement applies.
When: Initially, prior to a participant becoming eligible for the plan, then at a reasonable time (30 days) prior to the start of every plan year.

Prior to assessing a penalty, the Department will provide the plan administrator with written notice of the intent to assess a penalty.  This notice will include the amount of the penalty, the number of individuals on which the penalty is based, the period to which the penalty applies, and the reason(s) for the penalty.

The plan administrator will have thirty days to file a written statement of reasonable cause explaining why the penalty should be reduced, or not be assessed and/or to request a hearing.  The Department may determine to waive all or a part of the penalty if the plan administrator can show compliance, or if there were mitigating circumstances for noncompliance.  Failure to file a timely statement of reasonable cause shall be deemed a waiver of the right to appear and contest the facts alleged.

NOTICE OF FUNDING BASED LIMITATION, Section 101(j)  
Type of Information:  The Plan Administrator of a single-employer or multiple employer defined benefit plan must provide a notice of specified funding-based limits on benefit accruals and benefit distributions.
To Whom: Participants and beneficiaries
When: Generally, within 30 days after a plan becomes subject to a specified funding-based limitation, as well as at any other time specified by the Secretary of Treasury.

MULTIEMPLOYER PENSION PLAN INFORMATION MADE AVAILABLE ON REQUEST, Section 101(k)
Type of Information: Copies of periodic actuarial reports, quarterly, semi-annual, or annual financial reports, and amortization extension applications.
To Whom: Participants, beneficiaries receiving benefits, each labor organization that represents participants under the plan, and each employer that has an obligation to contribute to the plan.
When: Within 30 days of written request.  Requester not entitled to receive more than one copy of any report or application during any 12-month period.

MULTIEMPLOYER PLAN NOTICE OF POTENTIAL WITHDRAWAL LIABILITY, Section 101(l)
Type of Information: Estimated amount of employer’s withdrawal liability and how such estimated liability was determined.
To Whom: Any employer who has an obligation to contribute to the plan.
When: Generally, within 180 days of a written request.

Bill Grossman, ERPA, QPA