Industry & Regulatory News

GAO Recommends Further Guidance for Retirement Assets Escheated to States

The U.S. Government Accountability Office (GAO) has released the findings of a survey conducted to measure the effects transfers from qualified retirement plan sponsors and IRA trustees to state unclaimed property funds.

GAO was asked to study what happens after retirement assets transfer to states and to review IRS and DOL guidance to determine steps that can be taken by either agency to improve these transactions. The survey included responses from 22 states, and a variety of 401(k) service providers and IRA trustees.

GAO found that current guidance has resulted in uneven practices across service providers and trustees. To ensure the consistent administration of benefits, GAO has made three recommendations.

  1. The IRS should clarify if transfers to states are considered distributions subject to taxation and withholding requirements.
  2. The IRS should consider whether a transfer to a state is a permissible reason to extend the 60-day rollover period.
  3. The DOL should specify under what circumstances uncashed distribution checks from active qualified retirement plans may be transferred to a state.

The IRS has responded that it will work to implement the suggestions, while DOL has stated it will consider making the changes but will need to consider input from stakeholders before doing so.

The GAO released a Fast Facts summary, highlights of its findings, and the full report.

 

 


Retirement Spotlight: Congressional Hearings a Harbinger of Pension Reform?

We witnessed several important hearings in Congress during the first week of February. The two that drew our attention revealed what could be a healthy, bipartisan push for retirement plan reform—and this bodes well for those trying to close the retirement savings gap.

The hearings, which were held in both the Senate and the House, focused on Social Security solvency and on the importance of making retirement plans easier for private employers to adopt and maintain. Specific examples of private-sector employers having success with their own workplace plans were also provided. Both hearings included testimony from independent organizations (such as the Pew Charitable Trusts and the American Enterprise Institute), and the House hearing featured a small business owner who touted the merits of the OregonSaves automatic-IRA program for his employees.

Rather than detailing the contents of the hours-long hearings, this article outlines several key retirement plan proposals that seem to surface repeatedly. It also allows readers to make their own assessments on the proposals’ merits. But one thing this article does not try to do: predict whether any particular item will or will not become law. Ascensus has been in the retirement industry long enough to understand the foibles of retirement plan reform and simplification—and to know that that the legislative process is unpredictable.

 

Continued Bipartisan Support

Despite the frequent—and sometimes bitter—disagreements that seem to permeate lawmaking on Capitol Hill, there is widespread bipartisan support for pension reform. This was evident from the witness testimony and from the senators’ and representatives’ comments and questions during the hearings. While there remains disagreement about the depth of the retirement savings crisis and about the best remedies, both Democrats and Republicans substantially agree on many matters.

 

Issues Putting Retirement Funding at Risk

Here are some of the findings in the hearings. Many of these issues have been discussed for years and so may sound quite familiar.

  • One-third to one-half of U.S. workers have no access to a workplace retirement plan.
  • Those who do have access often don’t participate—or save much less than they need to.
  • Saving for retirement and other personal needs is difficult for a number of reasons—including low wage growth, high household debt, and the rising costs of out-of-pocket medical care.
  • Increased life expectancy, especially for women, will require more Social Security resources and additional personal savings in order to avoid financial hardship in retirement.
  • Defined contribution (DC) plans have largely replaced defined benefit (DB) plans over the past 40 years. Many DB plans—especially multiemployer (union) plans—are significantly underfunded, and DC plans shift much of the retirement savings burden from employers to employees.
  • Small business owners (in particular) face barriers to establishing retirement plans, such as high start-up costs, lack of administrative capacity, and overall unfamiliarity with complex plan rules.

 

Possible Solutions

To address these concerns, a handful of retirement plan provisions consistently appear in legislative proposals. Here are some of the most common ones—ones that seem to enjoy broad support.

  • Automatic enrollment into employer-sponsored plans – This key provision recognizes the natural tendency for employees to stick with whatever default feature is part of the plan. If a plan “defaults” eligible employees at a certain deferral percentage (5 percent is common), they tend to accept that contribution rate. Of course, employees could always opt out or choose a different deferral percentage.
  • Automatic escalation of deferrals each year – As with the auto-enrollment feature, automatic escalation involves a default, in this case, a default deferral percentage increase each year. This increase would usually occur in increments of 1 percent every year until a participant’s overall deferral percentage reached 10 percent. Again, employees could choose another deferral rate or opt out.
  • Tax credits for new plans and small employers – Many retirement plan proposals contain provisions that could make adopting a new plan less expensive. The details differ, but for a certain number of years an employer’s start-up costs (ranging from $500 – $5,000) could be credited back, and smaller businesses could get a credit for maintaining a plan.
  • Open multiple employer plans (MEPs) – Open MEPs allow many employers to join a single qualified retirement plan (e.g., a 401(k) plan). The MEP concept isn’t new, but currently employers must have some common connection—such as belonging to the same trade—before they can join other employers in adopting a single plan. This is known as a “closed MEP.” Open MEPs (or pooled employer plans (PEPs)) would permit completely unrelated employers to adopt a plan with other employers. This approach could prove helpful for smaller employers, who would possibly enjoy both lower costs and lower liability.

While a wide array of provisions may find their way into legislative proposals, the ones just mentioned arise consistently. And in both the House and Senate hearings, these themes came up repeatedly. From employers to legislators to expert witnesses, most seemed to agree that some form of these provisions would boost savings rates and help Americans’ retirement readiness. So we can reasonably expect at least some of these provisions to appear in any broad-based retirement plan legislation.

 

More Proposed Bills in the Works

As soon as the government shutdown ended and Congress was back in session, retirement plan bills were introduced. In fact, during the House hearing, two congressmen—Rep. Ron Kind (D-WI) and Mike Kelly (R-PA)—reintroduced the Retirement Enhancement and Savings Act of 2019 (RESA 2019), which seems to have broad bipartisan support. (See our Washington Pulse article for more details on RESA 2019.) The Family Savings Act of 2019 (Rep. Mike Kelly) and the SIMPLE Modernization Act (Sen. Susan Collins (R-Maine) and Sen. Mark Warner (D-VA)) were also reintroduced. Other bills are in the pipeline, and congressional leaders appear poised to release them soon, based on their comments in the hearings.

It is tricky business predicting whether particular bills will make it through the difficult legislative process and gain the President’s signature. Many members of Congress will offer their best solutions to the widely acknowledged retirement savings gap. And they know that starting to fix a system that is so critically important to the nation’s long-term financial security can be both fiscally sound and politically popular. Based on those criteria alone some retirement plan reform seems—can we say it—likely.

Ascensus will continue to encourage federal legislators to take bold action to address America’s retirement savings shortfall. We will also try to nudge them toward comprehensive retirement plan simplification. Watch Ascensus.com News for any significant developments that may emerge.

Click here for a printable version of this issue of the Retirement Spotlight.


IRA Updates Nonresident Alien Tax Withholding Publication and Tax Treaties

The IRS has released the 2019 tax year version of Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities. This publication contains information on several aspects of withholding to satisfy potential tax obligations of nonresident aliens, one of which is associated with payments from retirement savings arrangements.

Such payments are subject to withholding at a 30 percent rate, unless a more favorable tax rate applies according to the tax treaty between the U.S. and the nonresident alien’s home country. To qualify for a treaty rate, the individual must provide the payor a completed Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting.

The treaty rates were formerly included in Publication 515, but are now found directly at the tax treaties page IRS website.

 


Washington Pulse: Familiar Retirement Reforms Already in Play in New Congress

The new 116th Congress begins with a blank slate as bills introduced in the 115th Congress have sunset with the transition. But lawmakers and Hill watchers may justifiably have a sense of déjà vu, as familiar retirement legislation has been introduced in the brief period since the new Congress convened in January. Despite the U.S. House of Representatives flipping to Democratic control in November’s midterm elections, retirement reform remains an issue where significant bipartisan support is evident, and clearly growing.

The Retirement Enhancement and Savings Act of 2019 (RESA 2019) is the latest version of a bill that has been introduced in Congress multiple times since 2016. But, despite bipartisan support the legislation has failed to advance.

RESA 2019, whose primary sponsors are Rep. Ron Kind (D-WI) and Mike Kelly (R-PA), would make many changes to the retirement saving landscape that are primarily intended to achieve three objectives: encourage more employers to offer retirement plans, and encourage greater accumulation and preservation of savings in retirement plans and IRAs

Several significant items included in the bill and intended to address the bill’s objectives are described below.

Allow Pooled Employer Plans to Encourage Offering Workplace Saving Options

More than one-third of Americans have no access to an employer-sponsored retirement plan. Often-cited obstacles for employers considering establishing a plan —especially among small to mid-size employers—are the cost, administrative responsibility, and potential fiduciary liability. One proposed remedy in RESA 2019 is enhancement of the multiple employer plan (MEP) option. MEP arrangements allow many employers to participate in a commonly-administered plan, with the flexibility to tailor provisions to their respective needs. Proponents hope this will yield economies of scale that lead to reduced cost, greater sharing of administrative burden and reduced fiduciary liability for participating employers

Past regulatory restrictions have required MEP-participating employers to have a commonality among them (e.g., common ownership, business purpose, etc.). This has greatly limited use of the MEP concept. Among other MEP enhancements, RESA would permit “open MEPs” by creating “pooled employer plans” (PEPs). PEPs would be exempt from the commonality requirement and would be required to specify a “pooled plan provider” that is the plan’s named fiduciary and plan administrator. The result could be more employers offering a retirement plan to their employees.

Lifetime Income Investments – a Solution to Outliving Retirement Savings?

In addition to the issue of workers having no workplace retirement plan, there is great concern that the savings of many will not be enough to support them through their retirement years. An often-proposed solution is greater use of so-called “lifetime income investments,” which can be used to transform accumulated savings into an income stream throughout retirees lives. Such investments, whose payout in retirement can resemble a payment stream from a defined benefit pension plan, have seen limited use in the past. A major obstacle to their use has been the concern of retirement plan sponsors over potential fiduciary liability for the soundness of the lifetime income provider.

RESA 2019’s sponsors hope to address employers’ fear of fiduciary liability. The bill would require an annual statement that projects potential lifetime income payments—using a participant’s actual accumulation—in the hope of stimulating increased saving and increased use of lifetime income products to provide a secure retirement. The legislation also offers a new fiduciary safe harbor to encourage more employers to offer these investments in their plans.

Will Tax Incentives Motivate Employers and Savers?

RESA 2019 contains several tax incentives for establishing retirement plans and for workers to save more. The maximum tax credit for small employers establishing a plan would be 10 times greater. A new credit for implementing automatic enrollment of employees would be created. All workers—or those whose spouse has earned income—would be eligible to make Traditional IRA contributions beyond age 70½.

Proposal to Eliminate Life Expectancy Payments to Nonspouse Beneficiaries Remains

While RESA’s provisions generally have been welcomed, one that is particularly complex would require most nonspouse beneficiaries of IRA and employer plan accounts to distribute them and pay any taxes owed within five years, for aggregate balances that exceed $450,000. Lesser amounts could be distributed and taxed over a beneficiary’s lifetime. This provision is included in RESA 2019—as it has been in other legislation—to raise tax revenue in order to offset various incentives and enhancements the bill contains.

And More …

RESA 2019 contains many more provisions that address a host of retirement saving issues. Some would offer greater latitude in when employer plans can be established and plan design changes made. Others would address the insolvency of the insurance program for defined benefit pension plans, limit pre-retirement leakage from plans, and make it easier to successfully terminate 403(b) plans.

For a more complete description of RESA 2019 provisions—which mirror those contained in RESA 2018—see the March, 2018, Ascensus Washington Pulse and watch Ascensus.com News for the latest developments.

Click here for the printable version.


Congressmen Reintroduce RESA Legislation with Retirement Savings Enhancements

Representatives Ron Kind (D-WI) and Mike Kelly (R-PA) have introduced the Retirement Enhancement and Savings Act (RESA) of 2019. Versions of this legislation have been introduced in several sessions of Congress dating back to 2016, including introduction in March of 2018. In the past, this legislation has had broad bipartisan support.

RESA of 2019 includes several provisions affecting retirement, which among other things, would results in the following if enacted.

  • Greater ability for employers to participate in multiple-employer plans (MEPs)
  • Incentives for plans to offer lifetime income investments
  • Liberalized IRA provisions
  • Expanded tax credits for establishing retirement plans and implementing automatic enrollment

Watch this ascensus.com News for a detailed analysis on this introduced legislation.


IRS Letter Expands Circumstances When Employers May Recover HSA Contributions

The IRS has released for publication an information letter that provides details on circumstances allowing an employer to request the return of Health Savings Account (HSA) contributions made on behalf of its employees. The IRS describes in Information Letter 2018-0033 certain contribution recovery circumstances that go well beyond the previous guidance found in IRS Notice 2008-59, which has served as a primary source of information on HSA issues and administrative procedures.

Notice 2008-59

Notice 2008-59 described limited circumstances under which an employer may seek the return of HSA contributions by an HSA custodian or trustee. These limited circumstances included contributions made on behalf of employees who were never HSA-eligible, and contributions in excess of the annual statutory contribution limit.

Information Letter 2018-0033

The information letter lists the following additional circumstances as examples of errors that also may be corrected.

  • HSA contribution exceeded an employee’s payroll withholding election
  • Amount was mistakenly contributed to an employee due to an “incorrect spreadsheet” or “similar names … confused with one another”
  • Contribution was incorrectly entered by a payroll administrator (in-house or third-party)
  • Additional contribution was received due to a duplicate payroll file transmission
  • Over-contribution resulted from delayed processing of a payroll withholding change for an employee
  • Over-contribution resulted from disparity between elected annual contribution and actual number of pay periods
  • Incorrect contribution resulted from misplaced decimal point

As is evident in these itemized reasons, the IRS has now gone well beyond the limited circumstances for employer recoupment of HSA contributions that were authorized by Notice 2008-59, the most detailed guidance on the subject available prior to Information Letter 2018-0033.

While an Information Letter is not considered as elevated in the IRS guidance hierarchy as a notice, revenue ruling, or revenue procedure, it nevertheless can be considered to express the agency’s intent for how other guidance—such as Notice 2008-59—may be interpreted. Perhaps most telling in the letter is the statement that the previously-issued Notice 2008-59 “was not intended to provide an exclusive set of circumstances in which an employer may request the return of contributed amounts.”

 


Retirement Spotlight: Court Rules No Bankruptcy Exemption for Certain Retirement Plan Assets Acquired in Divorce

The U.S. Bankruptcy Appellate Panel for the 8th Circuit has ruled in Lerbakken v. Sieloff and Associates that bankruptcy creditors may access certain retirement plan assets obtained through a divorce. Normally, individuals who file for bankruptcy protection may keep all of their qualified retirement plan assets—and up to around $1.3 million in IRA assets. But the 8th Circuit has ruled that retirement assets received in a divorce—including those obtained through a qualified domestic relations order (QDRO)—may not always enjoy these special protections. This surprising decision reminds us that all recipients of these types of assets should carefully consider the best way to treat them—before bankruptcy is even on the radar.

 

Earlier Supreme Court Ruling Considered

In 2014, the Supreme Court ruled in Clark v. Rameker that a nonspouse’s inherited (or beneficiary) IRA did not receive special protection, called a “bankruptcy exemption,” because it was not considered a retirement fund within the meaning of the bankruptcy statute. The Court took into account several factors that are unique to inherited IRAs.

  • IRA beneficiaries cannot contribute to inherited IRAs.
  • Beneficiaries must take annual distributions, potentially years before retirement.
  • Distributions are never subject to an early distribution penalty tax.

The Court found that these factors demonstrated that inherited IRAs are not intended to provide for retirement. The Court reasoned that, because the bankruptcy statute provides an exemption for retirement assets, and because inherited IRAs are not intended for retirement, they are not covered by the exemption.

 

The 8th Circuit Court Ruling

In Lerbakken v. Sieloff and Associates, the individual filing for bankruptcy (Brian Lerbakken, the “debtor”) received a divorce decree and domestic relations order granting him both a portion of his former wife’s 401(k) plan assets and the entire value of her IRA. The court stated that he never attempted to qualify the domestic relations order and that “Lerbakken has undertaken no other action to obtain title or possession of the accounts.” A few years after the divorce decree was issued, he filed his bankruptcy petition.

Relying on the Clark decision, the U.S. Bankruptcy Court for the District of Minnesota ruled in May 2018 that the retirement assets were not exempt from creditors. This ruling was appealed, and the 8th Circuit Panel affirmed the lower court. It ruled that, like inherited IRAs, assets acquired through a divorce are not primarily retirement assets, and so do not qualify for the exemption.

 

Why Did the Court Rule This Way?

The 8th Circuit Panel provided only limited insight into its reasoning. In its opinion, the court indicated that the bankruptcy statute requires a two-part test. For the retirement assets to be considered exempt, they must

  • be for the retirement of the debtor, and
  • they must be held in an account exempt from taxation under the Internal Revenue Code.

Retirement funds not meeting this test do not qualify for the exemption. The court ruled that Lerbakken’s assets were not for his retirement, using the Clark opinion to support its finding that “the exemption is limited to individuals who create and contribute funds into the retirement account.” The court also found that the debtor’s interest in the assets in question was nothing more than a property settlement, and thus not subject to special protection.

The Supreme Court reasoned that, because inherited IRAs are not intended to provide for a beneficiary’s retirement, they are not subject to the distinctive protections that retirement assets receive in bankruptcy. The 8th Circuit Panel may have understood that most individuals who receive retirement plan funds through a divorce treat those assets quite differently from inherited IRA assets. In practice, most of them will move those assets into an IRA or other eligible plan that they hold in their own name, thus treating them as their own retirement funds. But the debtor in this case, Mr. Lerbakken, did nothing at all with his ex-spouse’s retirement funds. He simply left them alone. And this allowed the 8th Circuit Panel to conclude that the retirement assets obtained through this divorce were functionally the same as inherited IRAs.

 

Who Will This Ruling Affect?

The U.S. Court of Appeals for the 8th Circuit covers Minnesota, Iowa, Missouri, Arkansas, North Dakota, South Dakota, and Nebraska. The 8th Circuit is the only one to have ruled on this issue so far, but other courts could certainly adopt this interpretation of the law if a similar case arises. If Mr. Lerbakken were to appeal the ruling, the U.S. Court of Appeals for the 8th Circuit would hear the appeal. But based on his circumstances, it seems unlikely that he will appeal.

So this Lerbakken ruling could affect individuals filing for bankruptcy protection anywhere in the United States—if they have retirement assets that were initially obtained through a divorce. The practical importance of the ruling, however, may be minimal. The decision properly addresses the unique facts in this case, but it does not address how a bankruptcy filer with divorce assets may be able to shield retirement funds from creditors. If Mr. Lerbakken had contributed the divorce assets into his own retirement account through a permissible transfer or rollover, would this court have ruled differently? It seems quite possible.

 

Case Implications

Bankruptcy trustees are required to zealously seek all appropriate debtor assets in order to pay the creditors of the bankruptcy estate. The Lerbakken ruling may catch the eyes of these trustees, who will likely seek to challenge any future exemptions that are claimed under similar circumstances. But the Lerbakken facts are unusual. Typically, individuals who receive retirement assets from a former spouse will take some action, perhaps moving assets into their own retirement plans. But most will not simply sit on their hands, letting assets languish “unclaimed” in the former spouse’s IRA or 401(k) plan.

This case reminds us that this ruling could have been avoided entirely. Had Mr. Lerbakken been advised of the importance of carefully considering the merits of moving his ex-spouse’s retirement funds into his own account, these assets might have been protected. Keep in mind that there may be good reasons not to treat all retirement assets obtained in a divorce as one’s own. For example, the recipient may need to take some assets directly from the former spouse’s 401(k) plan in order to avoid the 10% early distribution penalty. Your clients can make the best decisions in each circumstance only by fully understanding the consequences of their actions. So even if this case has created some uncomfortable ripples in the industry, it may contain some valuable lessons to share.

Ascensus will monitor progress on similar cases and will release ongoing analysis of this issue. Visit ascensus.com for the latest developments.

 

Click here for a printable version of this issue of the Retirement Spotlight.


Updated IRA Publication Notes Conversion Changes and Revised Form 1040 Reporting

The IRS has released the 2018 version of Publication 590-B, Distributions From Individual Retirement Arrangements (IRAs). This publication describes taxpayer rules for IRA distributions and is one of two IRA-specific IRS publications—Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs), is the second. The 2018 version of Publication 590-A was released in December 2018.

The What’s New section of Publication 590-B notes that it is no longer possible to recharacterize a Roth IRA conversion or a rollover of non-Roth employer-sponsored retirement plan assets to a Roth IRA. It also notes that Form 1040, U.S. Individual Income Tax Return, has been redesigned, and that Forms 1040A and 1040-EZ and some miscellaneous itemized tax deductions are no longer available.

Rules associated with IRA-based employer-sponsored retirement plans, including SIMPLE IRA or SEP plans, generally are not part of these publications, but are covered in Publication 560, Retirement Plans for Small Business.


IRS Releases Guidance on Tax Reform’s Pass-Through Income Provisions

The Treasury Department and Internal Revenue Service have issued several elements of guidance for pass-through income taxation provisions of the Tax Cuts and Jobs Act (TCJA) of 2017. Many of the legislation’s provisions took effect for 2018 tax years. In addition to significantly reducing the corporate tax rate, TCJA provided special tax treatment for certain taxpayers who receive what is known as “pass-through income.” This includes sole proprietors and partners. Also some S-Corporation businesses generate pass-through income.

Pass-through income is “passed through” to a recipient’s individual income tax return and taxed at their individual tax rate, which under changes wrought by TCJA may now range from 10 to 37 percent. This taxable pass-through income may be reduced, however, by a Qualified Business Income Deduction. Calculation of this deduction is highly complex, but considering several potential variables, including payment of W-2 income to employees, it generally is not greater than 20 percent of Qualified Business Income. (While W-2 income does have a bearing on the magnitude of a retirement plan contribution in many cases, it has particular relevance in determining the general business income deduction available to pass-through businesses.)

Of significant concern during the TCJA legislative process was whether new pass-through income taxation rules might create a disincentive for those who receive such income to establish—or continue to maintain—an employer-sponsored retirement plan. By all indications, such disincentives have not materialized. In fact, under certain circumstances, it can be highly advantageous for a pass-through business owner to establish and contribute to a retirement plan, and thereby qualify for a greater Qualified Business Income Deduction.

Following are four pieces of guidance released by the IRS affecting pass-through income taxation. Note that the final and proposed regulations below are released in pre-published form, and minor editorial changes could be made when the final versions are released in the Federal Register (no publication date has been announced).

Final Regulations on Qualified Business Income Deduction
These final regulations provide guidance on the deduction for Qualified Business Income under TCJA’s new pass-through taxation rules. They are effective upon publication in the Federal Register, and generally apply to taxable years ending after their publication. However, the guidance further states that they—or the proposed version issued in August of 2018—generally can be relied upon for tax years ending in calendar year 2018.

Proposed Regulations for Those With Mutual Fund or Trust Interests, etc.
These new proposed regulations provide guidance on deductions available to pass-through income recipients with interests in certain regulated investment companies (mutual funds) or certain trusts, and for certain “previously suspended losses” considered Qualified Business Income. They amend certain elements of the August 2018 proposed regulations and provide anti-avoidance guidance relevant to applying TCJA’s new pass-through income taxation rules. These new proposed regulations generally are applicable for taxable years ending after their publication in the Federal Register, but may be relied upon until finalized. Public comments on these new proposed regulations and requests for a public hearing must be received within 60 days of their publication in the Federal Register.

IRS Revenue Procedure 2019-11
Revenue procedure 2019-11 provides a method for calculating W-2 wages paid by an employer—a factor that influences taxable Qualified Business Income. It generally is effective for 2018 and later tax years.

IRS Notice 2019-07
Notice 2019-07 is narrow, special-purpose guidance that addresses real estate rentals that may qualify as trades or businesses for pass-through income taxation purposes. It is effective for 2018 and later tax years.


DOL Increases Civil Penalties for Certain Plan Failures

The Department of Labor recently issued a pre-publication version of a final rule containing several 2019 inflation-adjusted penalty amounts for certain failures associated with qualified retirement plans. The pre-publication version is for informational purposes only and the final rule will not be effective until published in the Federal Register. Publication of the final rule has been delayed due to a lapse in appropriations funding for certain government agencies, including the Office of the Federal Register.

The following increased penalty amounts will apply to any penalties assessed after the final rule’s effective date.

  • Failure to properly file a plan annual report (Form 5500 series): $2,194, per day
  • Failure to properly provide a plan black-out notice, or notice of right to divest employer securities (each recipient being a separate failure): $139, per day
  • Failure to provide DOL-requested documents: $156 (not to exceed $1,566 per request), per day
  • Failure to properly provide benefit statements and maintain records vis-à-vis former participants and beneficiaries: $30 per required statement
  • Failure of a fiduciary to comply with the prohibition on certain types of distributions from defined benefit pension plans with certain liquidity shortfalls; maximum penalty: $16,915 (penalty will be the amount of any distribution, if less)
  • Failure of a fiduciary to provide notice to participants and beneficiaries of the above-described distribution restrictions for certain plans with liquidity shortfalls; per violation per day: $1,736

These adjustments for 2019 are made under the authority of the Federal Civil Penalties Inflation Adjustment Act.