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Regulation and Compliance > Federal Regulation

EBSA Releases PPA Penalty Regs

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The federal government now has the rules it needs to fine plan administrators for violating Pension Protection Act of 2006 notice requirements.

The Employee Benefits Security Administration, an arm of the U.S. Labor Department, today published a final version of the rules, “Civil Penalties Under ERISA Section 502(c)(4),” in the Federal Register.

The PPA expanded the notice requirements in the Employee Retirement Income Security Act of 1974.

Administrators now must notify participants and beneficiaries of a single-employer defined benefit pension plan about new limits on benefits and accruals, and they must notify participants in a defined contribution plan with an automatic contribution arrangement about their rights and obligations under the arrangement.

Plan administrators also must provide certain documents to any employer, beneficiary or plan participant that has an obligation to contribute to a multiemployer plan, and they must send a notice of potential withdrawal liability to any employer with an obligation to contribute to a multiemployer plan.

Administrators that violate the notice requirements may have to pay a fine of up to $1,000 per day for each violation, officials write in a preamble to the final regulations.

EBSA received only 2 comments on the draft version of the regulations, which was released in December.

One commenter suggested that it might be premature to issue this civil penalty regulation, because EBSA is working on other PPA regulations, but EBSA officials say the new final regulations is “merely procedural in nature” and should not be affected by any new PPA regulations.

One provision of the final regulations sets out the procedure a plan administrator can follow to contest Labor Department allegations that the administrator has violated the PPA notice rules and request a hearing.

Another section explains how administrators can show that there were mitigating circumstances that explain any noncompliance.

“Paragraph (j)(2) provides that any person against whom a penalty is assessed under section 502(c)(4) of ERISA, pursuant to a final order, is personally liable for the payment of such penalty,” officials note.

The paragraph means that the administrator must pay the penalty from the administrator’s own resources, without using plan assets, officials write.

“It is the [Labor] Department’s view that payment of penalties assessed under ERISA Section 502(c) from plan assets would not constitute a reasonable expense of administering a plan,” officials write.


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