[Federal Register Volume 62, Number 145 (Tuesday, July 29, 1997)]
[Rules and Regulations]
[Pages 40696-40699]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-19769]



[[Page 40695]]

_______________________________________________________________________

Part V





Department of Labor





_______________________________________________________________________



Pension and Welfare Benefits Administration



_______________________________________________________________________



29 CFR Part 2570



Final Rule Relating to Adjustment of Civil Monetary Penalties

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

[[Page 40696]]



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.

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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.
      

[[Page 40697]]



                                                        Table A.--Inflation Adjustment of Civil Monetary Penalties Under Title I of ERISA                                                       
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                                                                                                  (E)                                                                                           
                                                                                                 Year                    (G)  Penalty        (H)         (I)        (J)                         
                                   (B)  ERISA Title I    (C)  Nature of       (D)  Penalty      penalty     (F)  CLA       after raw      Unrounded    Rounded    Uncapped       (K)  Capped    
     (A)  U.S. Code citation            section             violation         amount to be     last set  factor=456.7/  adjustment=col     penalty     penalty    maximum     penalty=min(col J,
                                                                                adjusted          or       CPI below     D x 456.7/col  increase=col  increase  penalty=col      1.1 x col D)   
                                                                                               adjusted                        F           G-col D                D+col I                       
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29 U.S.C. 1059(b)...............  209(b).............  Failure to furnish  $10 per employee..      1974        146.9         $31.09         $21.09         $20         $30   $11 per employee.  
                                                        or maintain                                                                                                                             
                                                        records.                                                                                                                                
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29 U.S.C. 1132(c)(1)(A).........  502(c)(1)(A).......  Failure to notify   Up to $100 a day..      1986        327.9         139.28          39.28          40         140   Up to $110 a day.  
                                                        plan participants                                                                                                                       
                                                        of group health                                                                                                                         
                                                        benefits under                                                                                                                          
                                                        COBRA.                                                                                                                                  
                                                      ------------------------------------------------------------------------------------------------------------------------------------------
                                                       Failure to notify   Up to $100 a day..      1990        389.1         117.37          17.37          20         120   Up to $110 a day.  
                                                        participants and                                                                                                                        
                                                        beneficiaries re:                                                                                                                       
                                                        asset transfer.                                                                                                                         
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29 U.S.C. 1132(c)(1)(B).........  502(c)(1)(B).......  Refusal to provide  Up to $100 a day..      1974        146.9         310.89         210.89         210         310   Up to $110 a day.  
                                                        required info in                                                                                                                        
                                                        timely manner.                                                                                                                          
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
29 U.S.C. 1132(c)(2)............  502(c)(2)..........  Failure or refusal  Up to $100 a day..      1987        340.1       1,342.84         342.84         300       1,300   Up to $1,100 a day.
                                                        to file an annual                                                                                                                       
                                                        report.                                                                                                                                 
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29 U.S.C. 1132(c)(3)............  502(c)(3)..........  Failure to notify   Up to $100 a day..      1989        371.7         122.87          22.87          20         120   Up to $110 a day.  
                                                        participants and                                                                                                                        
                                                        beneficiaries re:                                                                                                                       
                                                        failure to meet                                                                                                                         
                                                        minimum funding                                                                                                                         
                                                        requirements.                                                                                                                           
                                                      ------------------------------------------------------------------------------------------------------------------------------------------
                                                       Failure to notify   Up to $100 a day..      1990        389.1         117.37          17.37          20         120   Up to $110 a day.  
                                                        certain persons                                                                                                                         
                                                        re: transfer of                                                                                                                         
                                                        excess pension                                                                                                                          
                                                        assets to health                                                                                                                        
                                                        account.                                                                                                                                
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[[Page 40698]]

    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-of-living 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\ Civil 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).
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    (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.

[[Page 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 foreign-based 
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


Sec. 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.


Sec. 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.


Sec. 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.


Sec. 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.


Sec. 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