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CCH® PENSION AND BENEFITS — 01/19/09

EBSA final regs issued on civil penalty rules reflecting PPA changes

The Employee Benefits Security Administration (EBSA) has issued final regulations that provide procedures for assessing civil penalties for the failure to disclose certain documents to participants, beneficiaries and others as required by ERISA. The regulations reflect amendments to ERISA 502(c)(4) by the Pension Protection Act of 2006 (PPA; P.L. 109-280) and finalize proposed regulations issued in December 2007 without change. The regulations are effective on March 3, 2008.

The procedures are for failures by plan administrators: (1) of single-employer defined benefit plans to provide notices of funding-based limits under ERISA 101(j) , (2) of multiemployer plans to provide actuarial or financial information upon request under ERISA 101(k) , (3) of multiemployer employee benefit plans to provide notices of potential withdrawal liability upon request under ERISA 101(l) , and (4) of plans with automatic contribution arrangements to provide notices of participants’ rights and obligations under ERISA 514(e)(3).

The final regulations explain how the maximum penalty amounts are computed, the circumstances under which a penalty may be assessed, rules for service of the notice of penalty assessment and for filing statements of reasonable cause, and the procedure for a plan administrator to contest a civil penalty assessment. The Department of Labor (DOL) may decide to not assess a penalty, or may waive all or part of the penalty, upon a showing by the administrator of compliance with the relevant notice requirements or of mitigating circumstances for noncompliance.

The final regulations clarify the liability of the parties for the assessed penalties. If more than one person is responsible as administrator for the disclosure failure, all of the persons are jointly and severally liable for the failure. Any person who is assessed a penalty is personally liable for payment of the penalty. The payment of penalties under ERISA 502(c) from plan assets is not a reasonable expense of administering a plan, according to the DOL.

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