Near the end of 2016, the Department of Treasury (Treasury) and the Internal Revenue Service (IRS) published two significant sets of proposed regulations on issues pertaining to defined benefit pension plans, including mortality table updates that likely would increase pension funding liabilities for many plan sponsors.
On July 1, 2016, Occupational Safety and Health Administration (OSHA) increased the maximum penalties under the Occupational Safety and Health Act by about 78 percent to account for inflation. Acting under authority conferred by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, Pub. L. 114-74, 701 (part of the Bipartisan Budget Act of 2015), OSHA published an interim final rule that will on August 1, 2016, increase penalties for OSHA violations as follows:
Other-than-serious violations: From $7,000 to $12,471
Serious violations: From $7,000 to $12,471
Repeated violations: From $70,000 to $124,709
Willful violations
minimum: From $5,000 to $8,908
maximum: From $70,000 to $124,709
Failure to abate: From $7,000 per day to $12,471 per day
Penalties under the Federal Mine Safety and Health Act of 1977 were also changed to account for inflation, as follows:
The maximum penalty for most violations will now be $68,300.
The minimum penalty for unwarrantable failure violations under Section 104(d)(1) of the Mine Act will now be $2,277.
The minimum penalty for unwarrantable failure violations under Section 104(d)(2) of the Mine Act will now be $4,553.
The minimum and maximum penalties for failure to provide timely notification under Section 103(j) of the Mine Act will now be $5,692 and $68,300, respectively.
The maximum penalty for failure to abate will now be $7,399 per day.
The maximum penalty for flagrant violations will now be $250,433.
Questions about these changes should be directed to Art Sapper at +1 202 756 8246.
President Barack Obama signed into law the Bipartisan Budget Act of 2015 (the Budget Act), which raised Pension Benefit Guaranty Corporation (PBGC) premium rates beginning in 2017.
Background
Single-employer defined benefit pension plans must pay annual premiums to the Pension Benefit Guaranty Corporation (PBGC), the U.S. government agency that insures these plans. All single-employer defined benefit pension plans pay an annual fixed premium. Those plans with unfunded vested benefits at year-end must pay an additional variable rate premium. The due date for payment of these premiums has generally been the fifteenth day of the tenth full calendar month of the premium payment year.
In 2016, the fixed premium is set at $64 per participant. The variable rate premium is based on the amount of potential liability that the plan creates for the PBGC. Calculated on a per-participant basis, the variable rate premium is a specified dollar amount for each $1000 of unfunded vested benefits under the plan as of the end of the preceding year, subject to a $500 per-participant cap. For 2016, it will equal $30 per $1000 of underfunding, subject to the cap. Both premiums are indexed for inflation.
Changes to PBGC Rates
The Budget Act makes the following changes:
For more information regarding the PBGC premium increases described above or the other employee benefits provisions included in the Budget Act, please contact your regular McDermott lawyer or one of the authors.
Budget legislation signed into law by President Barack Obama on November 2, 2015, the Bipartisan Budget Act of 2015, repeals the controversial automatic enrollment provision under the Affordable Care Act (ACA). Section 18A of the Fair Labor Standards Act (FLSA), added by the ACA, directed employers with more than 200 full time employees to automatically enroll new full time employees in one of the employer’s health benefits plans (subject to any waiting period authorized by law), and to continue the enrollment of current employees in a health benefits plan offered through the employer. This requirement, which had yet to take effect, was riddled with concerns and questions regarding how these employers would effectuate administration. The Budget Bill also sharply increased the amount of premiums employers pay to the Pension Benefit Guaranty Corporation, which will be detailed in a separate article.
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