DOL Increases Civil Money Penalties for 2017, Effective January 13, 2017

Practical Law Legal Update w-005-4334 (Approx. 13 pages)

DOL Increases Civil Money Penalties for 2017, Effective January 13, 2017

by Practical Law Employee Benefits & Executive Compensation

Effective Date of 2017 Annual Adjustments

The final regulations were effective January 13, 2017. As provided by the Inflation Adjustment Act, the increased penalty levels apply to any penalties assessed after this date. This means that the final regulations' higher penalty amounts apply for penalties assessed after January 13, 2017, whose associated violations occurred after November 2, 2015.

The DOL provided a table illustrating which penalty level applies, keyed to when the underlying violation occurred and when the resulting penalty was assessed.

Violations Occurring:	Penalty Assessed:	Applicable Penalty Level:
On or before November 2, 2015	On or before August 1, 2016	Pre-August 1, 2016 levels
On or before November 2, 2015	After August 1, 2016	Pre-August 1, 2016 levels
After November 2, 2015	After August 1, 2016, but on or before January 13, 2017	August 1, 2016 levels
After November 2, 2015	After January 13, 2017	January 13, 2017 levels

Adjustment Process and Calculation

The annual adjustment is based on the Consumer Price Index for all Urban Consumers (CPI-U). In general, an adjustment is calculated using the percent change between the:

October CPI-U preceding the date of the adjustment (here, the October 2016 CPI-U).
Prior year's October CPI-U (here, the October 2015 CPI-U).

The cost-of-living adjustment multiplier for 2017, based on the CPI-U for October 2016, not seasonally adjusted, is 1.01636. To calculate the 2017 annual adjustment, the DOL multiplied the most recent penalty amount for each applicable penalty by the multiplier, 1.01636, and rounded to the nearest dollar.

EBSA Penalties

In the preamble to the final regulations, the DOL dismissed a commenter's concerns that increased civil money penalties would be a disincentive for employers to offer group health benefits, particularly those struggling with increased group health plan compliance and reporting costs under the Affordable Care Act (ACA) (see Practice Note, Affordable Care Act (ACA) Overview). The DOL responded that:

Most ERISA civil money penalties affecting group health plans are expressed in terms of "up to" or "not more than" a maximum penalty.
The DOL has not automatically imposed the maximum penalty in the past, and does not currently intend to change its enforcement policy to maximize penalty collections after the inflation adjustments.

Also, according to the DOL, the Inflation Adjustment Act generally did not provide the DOL with discretion to delay adjustments to the civil money penalties.

Table of Adjusted Penalties for Violations of Select ERISA Requirements

The below table reflects the DOL's 2017 annual inflation adjustments to the civil money penalties for violations of certain requirements under ERISA, effective January 13, 2017.

ERISA Provision	Description of Violation	2017 Penalty (As Adjusted)
ERISA § 209(b) (29 U.S.C. §1059(b))	Failure to furnish certain reports (such as pension benefit statements) or to maintain records	$28
ERISA § 502(c)(2) (29 U.S.C. § 1132(c)(2))	Failure or refusal to file annual Form 5500 or failure of a multiemployer plan to certify endangered or critical status (see Practice Note, Multiemployer Pension Plans)	$2,097
ERISA § 502(c)(4) (29 U.S.C. § 1132(c)(4))	Failure to (i) notify participants of certain benefit restrictions or limitations under Internal Revenue Code (Code) Section 436(f); (ii) for multiemployer plans, (A) provide certain financial and actual reports and (B) provide estimates of withdrawal liability; and (iii) furnish automatic contribution arrangement notices (QACA notices) (see Standard Document, Safe Harbor Notice for Qualified Retirement Plans with Optional QACA Provisions)	$1,659
ERISA § 502(c)(5) (29 U.S.C. § 1132(c)(5))	Failure of a multiple employer welfare arrangement (MEWA) to file certain reports	$1,527
ERISA § 502(c)(6) (29 U.S.C. § 1132(c)(6))	Failure to provide information requested by the Secretary of Labor under ERISA Section 104(a)(6)	$149 not to exceed $1,496 per request
ERISA § 502(c)(7) (29 U.S.C. § 1132(c)(7))	Failure to provide a required blackout notice and of right to divest employer securities (see Standard Document, Blackout Notice)	$133
ERISA § 502(c)(8) (29 U.S.C. § 1132(c)(8))	Failure of multiemployer plan in endangered status to adopt a funding improvement plan (or if in critical status, a rehabilitation plan) Failure also applies to an endangered status plan (that is not a seriously endangered status plan) that fails to meet its benchmark by end of funding improvement period (see Practice Note, Multiemployer Pension Plans)	$1,317
ERISA § 502(c)(9)(A) (29 U.S.C. § 1132(c)(9)(A))	Failure by an employer to inform employees of CHIP coverage opportunities under ERISA Section 701(f)(3)(B)(i)(l)	$112
ERISA § 502(c)(9)(B) (29 U.S.C. § 1132(c)(9)(B))	Failure by a plan administrator to timely provide to any state information required to be disclosed under ERISA Section 701(f)(3(B)(ii)	$112
ERISA § 502(c)(10) (29 U.S.C. § 1132(c)(10))	Failure by any plan sponsor of a group health plan, or any health insurer offering coverage in connection with the plan, to satisfy ERISA's requirements regarding genetic information (multiple subparts)	$112 $2,790 $16,742 $558,078
ERISA § 502(c)(12) (29 U.S.C. § 1132(c)(12))	Failure of CSEC plan sponsor to establish or update a funding restoration plan	$102
ERISA § 502(m) (29 U.S.C. § 1132(m))	Prohibited distribution under ERISA Section 206(e)	$16,169
ERISA § 715 (29 U.S.C. § 1185d and 42 U.S.C. § 300gg-15)	Failure to provide required summaries of benefits and coverage (SBC) (see Practice Note, Summaries of Benefits and Coverage Under the ACA)	$1,105

Table of Adjusted Penalties for Violations of Select WHD Requirements

The below table reflects the DOL's 2017 annual inflation adjustments to the civil money penalties for violations of certain requirements under WHD enforcement authority, effective January 13, 2017.

Statute/Regulation	Description of Violation	2017 Penalty (As Adjusted)
MSPA, 29 U.S.C. § 1853(a)(1); 29 C.F.R. § 500.1(e)	Violation of MSPA or any of its regulations	$2,394
INA, INA § 218(g)(2) (8 U.S.C. § 1188(g)(2)); 29 C.F.R. § 501.19(c)	Violation of work contract or of H-2A visa program's statutory or regulatory requirements	$1,658
INA, INA § 218(g)(2) (8 U.S.C. § 1188(g)(2)); 29 C.F.R. § 501.19(c)(1)	Willful violation of work contract or of H-2A visa program's statutory or regulatory requirements, or for each act of discrimination prohibited by Section 501.4	$5,581
INA, INA § 218(g)(2) (8 U.S.C. § 1188(g)(2)); 29 C.F.R. § 501.19(c)(2)	Violation of housing or transportation safety and health provision of work contract or of H-2A visa program's statutory or regulatory requirements that proximately causes worker's death or serious injury	$55,263 for each worker
INA, INA § 218(g)(2) (8 U.S.C. § 1188(g)(2)); 29 C.F.R. § 501.19(c)(4)	Repeat or willful violation of housing or transportation safety and health provision of work contract or of H-2A visa program's statutory or regulatory requirements that proximately causes worker's death or serious injury	$110,524 for each worker
INA, INA § 218(g)(2) (8 U.S.C. § 1188(g)(2)); 29 C.F.R. § 501.19(d)	Failure to cooperate with WHD investigation into H-2A violation	$5,581 for each investigation
INA, INA § 218(g)(2) (8 U.S.C. § 1188(g)(2)); 29 C.F.R. § 501.19(e)	Laying off or displacing a US worker employed under circumstances specified in Section 501.19(e)	$16,579 for each violation for each worker
INA, INA § 218(g)(2) (8 U.S.C. § 1188(g)(2)); 29 C.F.R. § 501.19(f)	Improperly rejecting a US worker applicant for employment in violation of the H-2A visa program's statutory or regulatory requirements	$16,579 for each violation for each worker
INA, INA § 258(c)(4)(E)(i) (8 U.S.C. § 1288(c)(4)(E)(i)); 20 C.F.R. § 655.620(a)	Violation of D-1 visa program involving crewmembers for longshore activities in US ports	$9,054 for each crewmember for whom there has been a violation
INA, INA § 212(n)(2)(C) (8 U.S.C. § 1182(n)(2)(C)); 20 C.F.R. § 655.810(b)	Violation of H-1B visa program	$1,811
INA, INA § 212(n)(2)(C) (8 U.S.C. § 1182(n)(2)(C)); 20 C.F.R. § 655.810(b)(2)	Willful violation of H-1B visa program or discrimination against an employee	$7,370
INA, INA § 212(n)(2)(C) (8 U.S.C. § 1182(n)(2)(C)); 20 C.F.R. § 655.810(b)(3)	Willful violation that displaced a US worker within 90 days before and 90 days after an H-1B petition was filed	$51,588 for each violation
FLSA, 29 U.S.C. § 211(d); 29 C.F.R. § 530.302	Violation related to homeworkers – recordkeeping	$20-$201 (minor), $201-$402 (substantial), $402-$1,005 (repeated, intentional, or knowing)
FLSA, 29 U.S.C. § 211(d); 29 C.F.R. § 530.302	Employment of homeworkers without a certificate	$201-$402 (substantial), $402-$1,005 (repeated, intentional, or knowing)
FLSA, 29 U.S.C. § 216(e)(2); 29 C.F.R. § 578.3(a)	Repeat or willful violation of FLSA minimum wage and overtime requirements	$1,925 for each violation
FLSA, 29 U.S.C. § 216(e)(1)(A); 29 C.F.R. § 579.1(a)(1)(i)	Violations of FLSA child labor provisions or regulations	$12,278 for each employee subject to the violation
FLSA, 29 U.S.C. § 216(e)(1)(A); 29 C.F.R. § 579.1(a)(1)(i)(B)	Violations of FLSA child labor provisions or regulations that cause death or serious injury to an employee under age 18	$55,808 for each violation (doubled to $111,616 if the violation is repeated or willful
EPPA, 29 U.S.C. § 2005(a)(1); 29 C.F.R. § 801.42(a)	Violation of EPPA or of part 801	$20,111
FMLA, 29 U.S.C. § 2619(b); 29 C.F.R. § 825.300(a)(1)	Violation of FMLA posting requirement	$166 for each separate offense

Table of Adjusted Penalties for Violations of Select OSHA Requirements

The below table reflects the DOL's 2017 annual inflation adjustments to the civil money penalties for violations of certain requirements under OSH Act, effective January 13, 2017.

Statute/Regulation	Description of Violation	2017 Penalty (As Adjusted)
29 U.S.C. § 666(a); 29 C.F.R. § 1903.15(d)(1); 29 C.F.R. § 1903.15(d)(2)	Repeated or willful violation of OSH Act Section 5, rules or orders under OSH Act Section 6, or applicable regulations	$126,749 for each violation (minimum of (8908) for each violation)
29 U.S.C. § 666(b); 29 C.F.R. § 1903.15(d)(3)	Serious violation of OSH Act Section 5, rules or orders under OSH Act Section 6, or applicable regulations	$12,675 for each violation
29 U.S.C. § 666(c); 29 C.F.R. § 1903.15(d)(4)	Other-than-serious violation of OSH Act Section 5, rules or orders under OSH Act Section 6, or applicable regulations	$12,675 for each day during which violation continues
29 U.S.C. § 666(d); 29 C.F.R. § 1903.15(d)(5)	Failure to correct a violation of OSH Act	$12,675 for each day during which violation continues
29 U.S.C. § 666(i); 29 C.F.R. § 1903.15(d)(6))	Violation of OSH Act posting requirement	$12,675 for each violation

Practical Implications

The DOL's 2017 inflation adjustment is the first of what will be an annual adjustment, to be published by the DOL by January 15 of each year. (As noted, the DOL published the required catch-up adjustment late last summer.)

As with the earlier catch-up adjustments, practitioners must be aware of the increased penalties under the final regulations to properly advise clients on their potential liability for violations of the statutes or regulations impacted by the Inflation Adjustment Act. For at least some of the affected provisions, the 2017 adjustment amount, when coupled with last summer's catch-up adjustment, represents a fairly significant increase in the overall penalty – which, as a result, raises the stakes for noncompliance.

DOL Increases Civil Money Penalties for 2017, Effective January 13, 2017 | Practical Law