Source: https://cheiron.us/cheironHome/viewArtAction.do?artID=167
Timestamp: 2019-04-24 14:13:40+00:00

Document:
The Pension Benefit Guaranty Corporation (PBGC) has issued an interim final rule that significantly increases the maximum penalties provided for under sections 4071 and 4302 of the Employee Retirement Income Security Act of 1974 (ERISA). The rule, published in the Federal Register on May 13, 2016, is at this link.
Action Need Now: No action needed; however plan sponsors and plan administrators need to be aware of the significant increase in the maximum penalties.
Background: The interim final rule amends the regulations on Penalties for Failure to Provide Certain Notices or Other Material Information (ERISA § 4071) and Penalties for Failure to Provide Certain Multiemployer Plan Notices (ERISA § 4302). In addition, conforming amendments are made to the regulations on Annual Financial and Actuarial Information Reporting (ERISA § 4010) and Termination of Single Employer Plans (ERISA § 4041).
In general, the penalties under ERISA § 4071 apply to a failure to notify the PBGC of certain events with respect to single-employer pension plans. Examples are notices with respect to plan termination and with respect to the failure to meet the minimum funding requirements.
The penalties under ERISA § 4302 generally apply to failures to notify the PBGC of certain events with respect to multiemployer plans. Examples are notices with respect to mergers and transfers, and with respect to insolvent plans.
The increases are required by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (FCPIAAIA), which requires agencies to adjust civil monetary penalties for inflation and to publish the adjustments in the Federal Register. Per the FCPIAAIA, the initial adjustment (with the increase capped at 150% of the current amount so that the adjusted amount will not be more than 250% of the current amount) had to be made via an interim final rule published by July 1, 2016, and effective by August 1, 2016. Subsequent adjustments must be promulgated by January 15 of each year after 2016. The adjustments must be based on changes in the Consumer Price Index and rounded to the nearest dollar.
The maximum penalty amount under ERISA § 4071 increases from $1,100 a day to $2,063 a day.
The maximum penalty amount under ERISA § 4302 increases from $110 a day to $275 a day.
Applicability: These maximum penalty amount increases apply on and after August 1, 2016.
These penalty amounts, which have not increased since 1997, generally were due for adjustment. More significant is that going forward, these new maximum penalty amounts will adjust annually for inflation. Plan sponsors will want to be careful to be aware of the due date for notices to the PBGC, or else risk substantial penalty assessments.
Cheiron pension consultants can assist plan sponsors in meeting their notice requirements and assessing the impact of this interim final rule.

References: § 4071
 § 4302
 § 4010
 § 4041
 § 4071
 § 4302
 § 4071
 § 4302