40696 Federal Register / Vol. 62, No. 145 / Tuesday, July 29, 1997 / Rules and Regulations

DEPARTMENT OF LABOR

Pension and Welfare Benefits

Administration

29 CFR Part 2570

RIN 1210–0056

Final Rule Relating to Adjustment of

Civil Monetary Penalties

AGENCY: Pension and Welfare Benefits

Administration, Department of Labor.

ACTION: Final rule.

SUMMARY: This document contains a

final rule that adjusts the civil monetary

penalties under Title I of the Employee

Retirement Income Security Act of 1974,

as amended (ERISA), pursuant to the

requirements of the Federal Civil

Penalties Inflation Adjustment Act of

1990 (the 1990 Act), as amended by the

Debt Collection Improvement Act of

1996 (the Act). The Act amended the

1990 Act to require generally the

adjustment of civil monetary penalties

for inflation no later than 180 days after

enactment of the Act, and at least once

every four years thereafter, in

accordance with guidelines specified in

the 1990 Act, as amended.

DATES: This final rule is effective on July

29, 1997. This final rule applies only to

violations occurring after July 29, 1997.

FOR FURTHER INFORMATION CONTACT:

Rudy Nuissl, Office of Regulations and

Interpretations, Pension and Welfare

Benefits Administration, (202) 219–

7461. This is not a toll-free number.

SUPPLEMENTARY INFORMATION: Section

3720E of the Act (Pub. L. 104–134, 110

Stat. 1321–373) amended section 4 of

the 1990 Act (Pub. L. 101–410, 104 Stat.

890) to require, with certain exceptions,

that, by a regulation published in the

Federal Register, each civil monetary

penalty (CMP) be adjusted in

accordance with guidelines specified in

the amendment. The Act specifies that

any such increase in a CMP shall apply

only to violations which occur after the

date the increase takes effect. On April

18, 1997, the Department published a

notice of proposed rulemaking in the

Federal Register at 62 FR 19078 (the

‘‘proposal’’) containing proposed

regulations that would adjust the CMPs

under Title I of ERISA pursuant to the

1990 Act, as amended by the Act. No

comments were received from the

public in response to the proposal, and

the Department is by this notice

promulgating the regulations as set forth

in the proposal adjusting the CMPs

under sections 209(b)(1), 502(c)(1),

502(c)(2) and 502(c)(3) of ERISA (29

U.S.C. 1059(b)(1), 1132(c)(1), 1132(c)(2)

and 1132(c)(3)).

The term ‘‘civil monetary penalty’’ is

defined in the 1990 Act to mean any

penalty, fine or other sanction that—

(A)(i) is for a specific monetary

amount as provided by Federal law; or

(ii) has a maximum amount provided

for by Federal law; and

(B) is assessed or enforced by an

agency pursuant to Federal law; and

(C) is assessed or enforced pursuant to

an administrative proceeding or a civil

action in the Federal courts.

Only CMPs that are specified by

statute or regulation in dollar amounts

are adjusted under the 1990 Act, as

amended. CMPs that are specified as

percentages are not adjusted. The

statutory citations for each of the CMPs

under Title I of ERISA that are adjusted

by the final rule contained in this Notice

are set forth in columns (A) and (B) of

Table A. Column (C) briefly describes

the nature of the violations associated

with these citations. Column (D) of

Table A indicates the dollar amount of

each CMP to be adjusted, and Column

(E) sets forth the year that each penalty

was established by law or last adjusted.

Columns (F), (G), (H), (I), and (J) contain

the intermediate results of applying the

series of steps mandated by the 1990

Act, as amended. Reference should be

made to Column (K) of Table A to

determine the dollar amounts of the

adjusted penalties that are effected by

the final rule contained in this

document pursuant to the requirements

of the 1990 Act, as amended.
Federal Register / Vol. 62, No. 145 / Tuesday, July 29, 1997 / Rules and Regulations 40697

TABLE A.—INFLATION

ADJUSTMENT OF

CIVIL

MONETARY

PENALTIES

UNDER

TITLE I OF ERISA

(A)

U.S. Code citation

(B)

ERISA Title

I section

(C)

Nature of violation

(D)

Penalty

amount to be

adjusted

(E)

Year

penaltylast set

or adjusted

(F)

CLA

factor=456.7/

CPI below

(G)

Penalty after

raw

adjustment=col

D×456.7/col F

(H)

Unrounded

penalty

increase=col

G

¥col D

(I)

Rounded penalty increase

(J)

Uncapped

maximum

penalty=col

D+col I

(K)

Capped

penalty=min(col

J, 1.1×col D)

29 U.S.C. 1059(b) ........... 209(b) ......... Failure to furnish or

maintain records.

$10 per employee. 1974 146.9 $31.09 $21.09 $20 $30 $11 per em- ployee.

29 U.S.C. 1132(c)(1)(A) .. 502(c)(1)(A) Failure to notify plan participants of group

health benefits underCOBRA.

Up to $100 a

day.

1986 327.9 139.28 39.28 40 140 Up to $110 a

day.

Failure to notify participants and beneficiaries

re: asset transfer.

Up to $100 a

day.

1990 389.1 117.37 17.37 20 120 Up to $110 a

day.

29 U.S.C. 1132(c)(1)(B) .. 502(c)(1)(B) Refusal to provide required info in timely

manner.

Up to $100 a

day.

1974 146.9 310.89 210.89 210 310 Up to $110 a

day.

29 U.S.C. 1132(c)(2) ...... 502(c)(2) .... Failure or refusal to file

an annual report.

Up to $100 a

day.

1987 340.1 1,342.84 342.84 300 1,300 Up to $1,100 a

day.

29 U.S.C. 1132(c)(3) ...... 502(c)(3) .... Failure to notify participants and beneficiaries

re: failure to meet minimum funding requirements.

Up to $100 a

day.

1989 371.7 122.87 22.87 20 120 Up to $110 a

day.

Failure to notify certain

persons re: transfer ofexcess pension assetsto health account.

Up to $100 a

day.

1990 389.1 117.37 17.37 20 120 Up to $110 a

day.
40698 Federal Register / Vol. 62, No. 145 / Tuesday, July 29, 1997 / Rules and Regulations

1Civil penalty set forth in ERISA section 502(c)(4)

for a failure to provide the information specified in

ERISA section 101(f), relating to Medicare and

Medicaid coverage data bank requirements, is not

being implemented or enforced. See H.R. Conf. Rep.

No. 103–733, 103rd Cong. 2nd Sess., at 22 (1994).

Specifically, the 1990 Act, as

amended, provides that the required

inflation adjustment shall be

determined by increasing the maximum

CMP amount or the range of maximum

and minimum CMP amounts, as

applicable, for each CMP by a cost-ofliving adjustment (CLA). The term

‘‘cost-of-living adjustment’’ is defined in

the Act as the percentage for each CMP

by which the Consumer Price Index

(CPI) for the month of June of the

calendar year preceding the adjustment

exceeds the CPI for the month of June

of the calendar year in which the

amount of such CMP was last set or

adjusted by law. The term ‘‘Consumer

Price Index’’ is defined in the 1990 Act,

as amended, to mean the Consumer

Price Index for All-Urban Consumers

published by the U.S. Department of

Labor.

Accordingly, to calculate the CLA it is

necessary to divide the CPI for June of

the calendar year preceding the

adjustment by the CPI for June of the

calendar year in which the CMP was

last set by law or adjusted for inflation.

(See Column (F) of Table A). In order to

calculate the raw inflation adjustment, it

is necessary to multiply the original

penalty amount by the relevant CLA.

(See Column (G) of Table A). The

subtraction of the original CMP amount

from this product yields the unrounded

penalty increase (See Column (H) of

Table A).

Section 5 of the 1990 Act, as

amended, sets out the manner in which

inflation adjustments must be rounded.

Specifically, any increase in the

maximum CMP or the range of

maximum and minimum CMPs, as

applicable, must be rounded to the

nearest:

(1) Multiple of $10.00 in the case of

penalties less than or equal to $100;

(2) Multiple of $100.00 in the case of

penalties greater than $100 but less than

or equal to $1000;

(3) Multiple of $1000 in the case of

penalties greater than $1000 but less

than or equal to $10,000;

(4) Multiple of $10,000 in the case of

penalties greater than $100,000 but less

than or equal to $200,000; or

(5) multiple of $25,000 in the case of

penalties greater than $200,000.

Once the penalty increase has been

rounded in accordance with the

procedures set forth in the 1990 Act, as

amended (see Column (I) of Table A),

the rounded increase must be added to

the original penalty amount to

determine the uncapped maximum

penalty. (See Column (J) of Table A).

The first adjustment of a CMP pursuant

to the amendment effected by the Act,

however, may not exceed 10% of the

penalty being adjusted. The final

adjusted penalty amounts listed in

Column (K) of Table A reflect the

application of this statutory cap.

Applying the CLA rules described

above, the following CMPs under Title

I of ERISA are being adjusted.1 (See

Columns (A), (B), and (C) of Table A):

(1) the per capita CMP of $10.00 set

by ERISA section 209(b) (29 U.S.C.

1059(b)) for a failure to furnish the

employee benefit plan information or to

maintain the plan records specified in

ERISA section 209(a);

(2) the CMP of up to $100.00 a day (as

determined in the discretion of a court)

set by section 502(c)(1)(A) (29 U.S.C.

1132(c)(1)(A)) for a failure or refusal by

a plan administrator to meet the

requirements of ERISA section 101(e)(1)

(29 U.S.C. 1021(e)(1)) (concerning notice

with regard to a transfer or excess

pension assets) or ERISA section 606(4)

(29 U.S.C. 1166(4)) (concerning notice

with regard to the occurrence of

qualifying events), or to comply with a

request for information which such

administrator is required by Title I of

ERISA to furnish to a participant or

beneficiary;

(3) the CMP of up to $100.00 a day (as

determined the discretion of a court) set

by ERISA section 502(c)(1)(B) (29 U.S.C.

1132(c)(1)(B)) for a failure or refusal to

comply with a request for information

which a plan administrator is required

by Title I of ERISA to furnish a

participant or beneficiary;

(4) the CMP of up to $1,000.00 a day

set by ERISA section 502(c)(2) (29

U.S.C. 1132(c)(2)) for the failure on the

part of a plan administrator to file the

annual report required to be filed under

ERISA section 101(b)(4) (29 U.S.C.

1021(b)(4));

(5) the CMP of up to $100.00 a day (as

determined in the discretion of a court)

set by ERISA section 502(c)(3) (29

U.S.C. 1132(c)(3)) for the failure on the

part of an employer to meet the

requirements of ERISA section 101(d)

(29 U.S.C. 1021(d)); (concerning

provision of notice to participants and

beneficiaries for failure to meet the

minimum funding requirements) or

ERISA section 101(3)(2) (29 U.S.C.

1021(e)(2)) (concerning provision of

notice regarding transfers of excess

pension assets).

The final rule contained in this

document amends Part 2570

(‘‘Procedural Regulations Under the

Employee Retirement Income Security

Act’’) of Title 29 of the Code of Federal

Regulations (CFR) by adding a new

‘‘Subpart E—Adjustment of Civil

Penalties Under ERISA Title I.’’ New

Subpart E contains five new regulations

effecting the adjustment for inflation of

the civil monetary penalties discussed

above.

Executive Order 12866

The Department has determined that

this regulatory action is not a

‘‘significant rule’’ within the meaning of

Executive Order 12866 concerning

federal regulations, because it is not

likely to result in: (1) An annual effect

on the economy of $100 million or

more, or an adverse and material effect

on a sector of the economy,

productivity, competition, jobs, the

environment, public health or safety, or

State, local or tribal governments or

communities; (2) the creation of a

serious inconsistency or interference

with an action taken or planned by

another agency; (3) a material alteration

in the budgetary impacts of entitlement,

grants, user fees, or loan programs or the

rights and obligations of recipients

thereof; or (4) the raising of novel legal

or policy issues arising out of legal

mandates, the President’s priorities, or

the principles set forth in Executive

Order 12866.

Regulatory Flexibility Act

When a Federal agency promulgates a

final rule under 5 U.S.C. 553 after being

required to publish a proposed rule, the

Regulatory Flexibility Act (RFA), 5

U.S.C. 601 et seq., requires the agency

to perform a final regulatory flexibility

analysis unless the head of the agency

certifies that the rule will not, if

promulgated, have a significant

economic impact on a substantial

number of small entities. Small entities

include small businesses, organizations,

and governmental jurisdictions. In

conjunction with the publication of the

notice of proposed rulemaking on April

18, 1997 (62 FR 19078), the undersigned

certified that the rule, if promulgated as

proposed, would not have a significant

effect on a substantial number of small

entities.

Because the final rule is identical to

the proposed rule and because no

comments were received from the

public in response to the April 18, 1997,

notice of proposed rulemaking, there is

no basis for modification of the

determination that the rule will not

have a significant impact on a

substantial number of small entities.

Accordingly, the Department is not

required to conduct a final regulatory

flexibility analysis.
Federal Register / Vol. 62, No. 145 / Tuesday, July 29, 1997 / Rules and Regulations 40699

Paperwork Reduction Act

This final rule contains no

information collection requirements

which are subject to review and

approval by the Office of Management

and Budget (OMB) under the Paperwork

Reduction Act of 1995 (44 U.S.C. 3500

et seq.).

Unfunded Mandates Reform Act

For purposes of Title II of the

Unfunded Mandates Reform Act of

1995, 5 U.S.C. 1531–1538, as well as

Executive Order 12875, this final rule

does not contain any federal mandate

that may result in increased

expenditures in either Federal, State,

local, and tribal governments in the

aggregate, or impose an annual burden

exceeding $100 million on the private

sector.

Congressional Review

The Department has determined that

this final rule is not a ‘‘major rule’’ as

that term is defined in 5 U.S.C. 804,

because it is not likely to result in (1)

An annual effect on the economy of

$100 million or more; (2) a major

increase in costs or prices for

consumers, individual industries,

federal, State or local government

agencies, or geographic regions; or (3)

significant adverse effects on

competition, employment, investment,

productivity, innovation, or on the

ability of United States-based

enterprises to compete with foreignbased enterprises in domestic and

export markets.

Statutory Authority

This final regulation is adopted

pursuant to authority contained in

section 4 of the Federal Civil Penalties

Adjustment Act of 1990, Pub. L. 101–

410, 104 Stat. 890, 28 U.S.C. 2461 note,

as amended by the Debt Collection

Improvement Act of 1996, Pub. L. 104–

134, Title III, section 31001(s)(1), 110

Stat. 1321–373, and contained in

sections 209(b), 502(c)(1) and 505 of

ERISA, 29 U.S.C. 1059(b), 1132(c)(1)

and 1135.

List of Subjects in 29 CFR Part 2570

Administrative practice and

procedure, Employee benefit plans,

Employee Retirement Income Security

Act, Penalties, Pensions.

Final Rule

In view of the foregoing, Part 2570 of

Chapter XXV of Title 29 of the Code of

Federal Regulations is amended as set

forth below:

PART 2570—PROCEDURAL

REGULATIONS UNDER THE

EMPLOYEE RETIREMENT INCOME

SECURITY ACT

1. The authority citation for Part 2570

is revised to read as follows:

Authority: 5 U.S.C. 8477(c)(3); 29 U.S.C.

1108, 1135; Reorganization Plan No. 4 of

1978; 5 U.S.C. 8477(c)(3); Secretary of Labor

Order No. 1–87.

Subpart A is also issued under 29 U.S.C.

1132(c)(1).

Subpart E is also issued under sec. 4, Pub.

L. 101–410, 104 Stat. 890 (28 U.S.C. 2461

note), as amended by sec. 31001(s)(1), Pub.

L. 104–134, 110 Stat. 1321–373.

2. Part 2570 is amended by adding a

new Subpart E to read as follows:

Subpart E—Adjustment of Civil Penalties

Under ERISA Title I

Sec.

2570.100 In general.

2570.209b–1 Adjusted civil penalty under

section 209(b).

2570.502c–1 Adjusted civil penalty under

section 502(c)(1).

2570.502c–2 Adjusted civil penalty under

section 502(c)(2).

2570.502c–3 Adjusted civil penalty under

section 502(c)(3).

Subpart E—Adjustment of Civil

Penalties Under ERISA Title I

§ 2570.100 In general.

Section 3720E of the Debt Collection

Improvement Act of 1996 (the Act, Pub.

L. 104–134, 110 Stat. 1321–373)

amended the Federal Civil Penalties

Inflation Adjustment Act of 1990 (the

1990 Act, Pub. L. 101–410, 104 Stat.

890) to require generally that the head

of each federal agency adjust the civil

monetary penalties subject to its

jurisdiction for inflation within 180

days after enactment of the Act and at

lease once every four years thereafter.

§ 2570.209b–1 Adjusted civil penalty under

section 209(b).

In accordance with the requirements

of the 1990 Act, as amended, the

amount of the civil monetary penalty

established by section 209(b) of the

Employee Retirement Income Security

Act of 1974, as amended (ERISA), is

hereby increased from $10 for each

employee to $11 for each employee.

This adjusted penalty applies only to

violations occurring after July 29, 1997.

§ 2570.502c–1 Adjusted civil penalty under

section 502(c)(1).

In accordance with the requirements

of the 1990 Act, as amended, the

maximum amount of the civil monetary

penalty established by section 502(c)(1)

of the Employee Retirement Income

Security Act of 1974, as amended

(ERISA), is hereby increased from $100

a day to $110 a day. This adjusted

penalty applies only to violations

occurring after July 29, 1997.

§ 2570.502c–2 Adjusted civil penalty under

section 502(c)(2).

In accordance with the requirements

of the 1990 Act, as amended, the

maximum amount of the civil monetary

penalty established by section 502(c)(2)

of the Employee Retirement Income

Security Act of 1974, as amended

(ERISA), is hereby increased from $1000

a day to $1100 a day. This adjusted

penalty applies only to violations

occurring after July 29, 1997.

§ 2570.502c–3 Adjusted civil penalty under

section 502(c)(3).

In accordance with the requirements

of the 1990 Act, as amended, the

maximum amount of the civil monetary

penalty established by section 502(c)(3)

of the Employee Retirement Income

Security Act of 1974, as amended

(ERISA), is hereby increased from $100

a day to $110 a day. This adjusted

penalty applies only to violations

occurring after July 29, 1997.

Signed at Washington, DC this 22nd day of

July 1997.

Olena Berg,

Assistant Secretary, Pension and Welfare

Benefits Administration, U.S. Department of

Labor.

[FR Doc. 97–19769 Filed 7–28–97; 8:45 am]

BILLING CODE 4510–29–M