Wagner Law Group Urges Proportionate Penalties in PBGC Comments

The Wagner Law Group has submitted comments to the Pension Benefit Guaranty Corporation (PBGC) urging the agency to implement proportionate penalties in its proposed rule. The comments, developed by partners Harold J. Ashner and Israel Goldowitz, who have over 50 years of combined experience in PBGC legal service, aim to ensure that penalties are fair and focused on conduct that truly warrants a monetary sanction.

Ashner, who previously served as the Assistant General Counsel for Legislation and Regulations at PBGC, supervised the development of the agency’s 1995 Section 4071 penalty policy and its 1996 and 1997 revisions. He also oversaw a 2001 proposal to codify an expanded policy. The 1995 and 1996 Section 4071 penalty guidance that Ashner supervised remains in effect and would be superseded by the final rule to the extent it addresses penalties governed by that rule. Goldowitz, who served as PBGC’s Chief Counsel and Deputy General Counsel for Program Law and Policy, supervised the original 1992 penalty policy.

Five additional former PBGC professionals, Linda Rosenzweig, Camille Castro, John Langhans, Jonathan Henkel, and Ellan Spring, contributed perspectives reflecting nearly 90 additional years of agency service across legal, ombuds, actuarial, financial, and benefit-policy functions.

The Firm supports the proposal’s basic structure, including ordinary Section 4071 penalty amounts of $25 and $50 per day, individualized consideration, and relief based on reasonable cause, error of law, agency delay, self-correction, and preventive measures. However, the Firm’s principal recommendations would give substantial weight to a filer’s diligence in selecting, instructing, supplying information to, and overseeing outside advisers, without automatically excusing adviser mistakes.

The comments also recommend allowing a filer’s prompt preliminary disclosure to preserve eligibility for self-correction relief while the filer investigates and corrects a possible error in good faith. Existing compliance procedures and a strong prior compliance record should remain relevant mitigating factors. Related deficiencies arising from one act or omission should not be multiplied mechanically by participants, plans, recipients, or data elements. Requests for clarification or nonmaterial supplementation should not alone turn timely submissions into continuing delinquencies.

The Firm urges PBGC to avoid double-counting aggravating facts, to establish workable standards for repeat violations and willfulness, and to provide brief explanations of material departures above ordinary penalty amounts. Demonstrated absence of actual or reasonably expected harm should mitigate penalties.

For a first inadvertent violation promptly corrected with cooperation and preventive measures, the Firm recommends a presumptive written warning if there is no material harm, no reasonably foreseeable material risk during noncompliance, and no material continuing risk after correction. This would be a rebuttable presumption, not a safe harbor; extreme lateness, recklessness, obstruction, false statements, or unusually serious risk could warrant penalties.

Additional recommendations include broader proportional relief for plans with fewer than 100 participants and a general total-penalty guideline of $100 per participant for plans of all sizes, allowing warranted departures and different treatment for advance reportable-event and certain missed-contribution notices. The Firm also recommends reasonable presumptive limits on the number of days for which penalties accrue, or diminishing accrual over time, for ordinary non-willful violations. The seriousness of a filing failure does not necessarily increase in direct proportion to its duration: a filing that is a year late is not necessarily 12 times as serious as one that is a month late, particularly where no material harm or risk results.

For multiemployer matters under Section 4302, the comments call for codifying a notice and a reasonable opportunity to cure before penalties are assessed.

The Firm also recommends a conforming administrative-review amendment clarifying reconsideration rights. Newly specified higher daily amounts should apply only to noncompliance on or after the final rule’s effective date, and the rule should preserve PBGC’s described non-enforcement treatment for covered pre-effective-date violations.

The Wagner Law Group, which advises plan sponsors, administrators, fiduciaries, financial institutions, and other stakeholders on the full range of PBGC matters, has a combined 140 years of experience in private practice and prior PBGC service.