[Federal Register Volume 65, Number 29 (Friday, February 11, 2000)]
[Rules and Regulations]
[Pages 7181-7185]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-2936]



[[Page 7181]]

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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

29 CFR Part 2560

RIN 1210-AA54


Interim Rule for the Assessment of Civil Penalties Under Section 
502(c)(5) of ERISA

AGENCY: Pension and Welfare Benefits Administration, Department of 
Labor.

ACTION: Interim final rule with request for comments.

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SUMMARY: This document contains an interim final rule that describes 
procedures relating to the assessment of civil penalties under section 
502(c)(5) of the Employee Retirement Income Security Act of 1974, 
(ERISA) as amended by the Health Insurance Portability and 
Accountability Act of 1996 (HIPAA). Section 502(c)(5) authorizes the 
Secretary of Labor (the Secretary) to assess a civil penalty against 
any person of up to $1,000 a day from the date of the person's failure 
or refusal to file the information required to be filed by such person 
with the Secretary under regulations prescribed pursuant to section 
101(g){h} of ERISA. The interim final rule clarifies the manner in 
which the Secretary will assess penalties under ERISA section 
502(c)(5), as amended by HIPAA, and the procedures for agency review. 
Separate documents containing interim final rules implementing the 
reporting requirement under section 101(g){h} of ERISA and interim 
final rules relating to procedures for administrative hearings and 
appeals on assessments of penalties under ERISA section 502(c)(5) 
appear separately in this issue of the Federal Register.

DATES: Effective date: This interim final rule is effective April 11, 
2000.
    Comment date: Written comments are invited and must be received by 
the Department on or before March 13, 2000.
    Applicability date: This section applies to administrators of 
multiple employer welfare arrangements that are not group health plans 
beginning May 1, 2000.

ADDRESSES: Interested persons are invited to submit written comments 
(preferably with three copies) to: Pension and Welfare Benefits 
Administration, Room C-5331, U.S. Department of Labor, 200 Constitution 
Avenue, NW., Washington, DC 20210. Attention: MEWA reporting. Written 
comments may also be sent by Internet to the following address: 
``<a href="/cdn-cgi/l/email-protection#652820322415000b25151207044b010a094b020a13"><span class="__cf_email__" data-cfemail="1d50584a5c6d78735d6d6a7f7c33797271337a726b">[email protected]</span></a>'' (without the quotation marks).
    All submissions will be open to public inspection and copying from 
8:30 a.m. to 4:30 p.m. in the Public Documents Room, Pension and 
Welfare Benefits Administration, U.S. Department of Labor, Room N-5638, 
200 Constitution Avenue, NW., Washington, DC 20210.

FOR FURTHER INFORMATION CONTACT: Amy J. Turner, Pension and Welfare 
Benefits Administration, U.S. Department of Labor, Rm C-5331, 200 
Constitution Avenue, NW., Washington, DC 20210 (telephone (202) 219-
7006). This is not a toll-free number.

SUPPLEMENTARY INFORMATION:

A. Background

    This document contains an interim final rule that provides guidance 
relating to the assessment of civil penalties under section 502(c)(5) 
of the Employee Retirement Income Security Act of 1974 (ERISA), as 
amended by the Health Insurance Portability and Accountability Act of 
1996 (Pub. L. 104-191) (HIPAA), for the failure or refusal to file a 
report pursuant to section 101(g){h} \1\ of ERISA, as amended by HIPAA. 
This regulation is designed to parallel the procedures set forth in 
Sec. 2560.502c-2 regarding civil penalties under section 502(c)(2) of 
ERISA relating to reports required to be filed under ERISA section 
101(b)(4).
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    \1\ Both the Small Business Job Protection Act of 1996 (Pub. L. 
104-188) and the Health Insurance Portability and Accountability Act 
of 1996 (Pub. L. 104-191) created a new section 101(g) of EIRSA. 
Accordingly, section 101(g) of ERISA that relates to reporting by 
certain arrangements is referred to in this document as section 
101(g){h} of ERISA.
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B. Overview of the Interim Final Rule

    Section 502(c)(5) provides that the Secretary may assess a civil 
penalty against any person of up to $1,000 a day from the date of the 
person's failure or refusal to file the report required to be filed 
under section 101(g){h}. In order to implement this provision, the 
Department is publishing this interim final rule, and, in a separate 
document, interim final rules relating to procedures for administrative 
hearings and appeals on assessments of civil penalties under ERISA 
section 502(c)(5).
    In general, the interim final rule in Sec. 2560.502c-5, discussed 
in detail below, addresses:
    <bullet> The circumstances under which a penalty may be assessed 
(Sec. 2560.502c-5(a));
    <bullet> Factors considered by the Department in determining the 
amount of a penalty (Sec. 2560.502c-5(b));
    <bullet> The provision of notice to the administrator of the 
Department's intention to assess a penalty (Sec. 2560.502c-5(c));
    <bullet> Waiver of all or part of the penalty by the Department 
upon a showing of reasonable cause and the requirements relating to a 
showing of reasonable cause (Sec. 2560.502c-5(d) and (e));
    <bullet> The effect of a failure to file a statement of reasonable 
cause (Sec. 2560.502c-5(f));
    <bullet> The provision of notice to the administrator of the 
Department's findings as to reasonable cause and the effect of such 
notice where a penalty is assessed (Sec. 2560.502c-5(g));
    <bullet> The effect of a request for a hearing before an 
administrative law judge (Sec. 2560.502c-5(h));
    <bullet> Service of notices (Sec. 2560.502c-5(i));
    <bullet> The liability of the administrator for assessed penalties 
(Sec. 2560.502c-5(j));
    <bullet> A cross-reference to procedural rules relating to 
administrative hearings (Sec. 2560.502c-5(k)); and
    <bullet> An applicability date provision (Sec. 2560.502c-5(l)).
    In general, the assessment of penalties under section 502(c)(5) and 
Sec. 2560.502c-5 would occur only in those instances where the 
administrator fails or refuses to file a report within the prescribed 
time frames or, after notification that the report has been rejected 
and the reasons therefor, where the administrator fails or refuses to 
file a corrected report within the 45 day period prescribed in 
Sec. 2560.502c-5(b)(3). Accordingly, in the case of a report rejected 
under Sec. 2520.101-2(d)(2), the administrator can avoid the assessment 
of any penalty under section 502(c)(5) by making the necessary 
corrections to the filing within the prescribed time frame. Moreover, 
as reflected in paragraph (g) of the interim final rule, penalties may 
be waived, in whole or in part, upon the administrator's showing of 
reasonable cause for the failure to file a complete or timely report.

C. Discussion of the Interim Final Rule

1. Scope

    Paragraph (a) of the interim final rule addresses the general 
application of section 502(c)(5). Paragraph (a)(1) provides that the 
administrator of a MEWA that is not a group health plan and for which a 
report is required to be filed under section 101(g){h} of ERISA and 
Sec. 2520.101-2 is liable for the penalties assessed under section 
502(c)(5) for each failure or refusal to file a completed report. 
Accordingly, if a person is required to file more than

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one report because that person serves an administrator with respect to 
several entities for which a filing is required, separate penalties may 
be assessed with respect to each instance for which there is a failure 
or refusal to file the required report. Paragraph (a)(2) defines a 
failure or refusal to file the report as a failure or refusal to file, 
in whole or in part, that information described in ERISA section 
101(g){h} and Sec. 2520.101-2, at the time and in the manner prescribed 
for such filings. Accordingly, the filing of an incomplete report will 
be treated as a failure to file under section 502(c)(5). See 
Sec. 2520.101-2(d)(2).

2. Amount Assessed

    Paragraph (b)(1) of the interim final rule provides that the 
Department shall take into account the degree and/or willfulness of the 
failure to file the report in determining the amount to be assessed 
under section 502(c)(5). Consistent with the terms of section 
502(c)(5), paragraph (b)(1) provides that the penalty assessed by the 
Department shall not exceed $1,000 a day. With regard to the period for 
which a penalty may be assessed, paragraph (b)(1) provides that the 
penalty generally will be computed from the date of the administrator's 
failure or refusal to file the report and continue up to the date on 
which a report meeting the requirements of section 101(g){h} and 
Sec. 2520.101-2, as determined by the Secretary, is filed. Accordingly, 
under paragraph (b)(1) of this section, liability for penalties under 
section 502(c)(5) would continue for each day up to the date compliance 
is achieved. However, under paragraph (b)(2), the interim final rule 
provides for tolling of the daily penalty where, upon receipt of a 
notice of intent to assess a penalty (as described in paragraph (c)), 
the administrator files with the Department a statement of reasonable 
cause for the failure to file (as described in paragraph (e)). Under 
paragraph (b)(2), the administrator will not incur liability for 
penalties for any day beginning with the date the Department serves the 
administrator a copy of the notice to assess a penalty and ending with 
the day after the Department issues the notice of determination on the 
statement of reasonable cause (as described in paragraph(g)). This 
limited tolling of the penalty will permit MEWA administrators to 
present arguments to the Department concerning any reasonable cause for 
the failure to file without incurring penalties for the period of time 
during which the administrator's statement of reasonable cause is being 
considered by the Department.
    Paragraph (b)(3) defines the date on which an administrator failed 
or refused to file the report as the date on which the report was due 
(determined without regard to any extension of time for filing). In 
this regard, paragraph (b)(3) provides that a report which is rejected 
under Sec. 2520.101-2(d)(2) shall be treated as a failure to file the 
report when a revised report meeting the requirements of this section 
is not filed within 45 days of the date of the Department's notice of 
rejection.
    In those situations where an extension of time is granted for the 
filing of the report and the administrator fails either to file a 
timely report or a complete report within the extension period, the 
administrator should not, for purposes of the section 502(c)(5) 
penalty, benefit from the requested extension. Accordingly, the interim 
rule states that for purposes of paragraph (b)(3), the penalty is 
assessed beginning on the day after the date of the administrator's 
failure or refusal to file the report.

3. Notice of Penalty

    Paragraph (c) of the interim final rule provides that, prior to the 
assessment of any penalty under section 502(c)(5), the Department shall 
provide the administrator with a written notice indicating the 
Department's intent to assess a penalty under section 502(c)(5), the 
amount of the penalty, the period to which the penalty applies, and a 
statement of the facts and reasons for the penalty. This notice is to 
be served in accordance with the service of notice provisions of 
Sec. 2560.502c-5(i) of this interim final rule. Under Sec. 2560.502c-
5(f) of this interim final rule, this notice becomes a final order of 
the Secretary, within the meaning of Sec. 2570.91(g) (see interim final 
rules Secs. 2570.90 et seq., published separately in this issue of the 
Federal Register), within 30 days of the service of notice, unless a 
statement of reasonable cause, described in Sec. 2560.502c-5(e) of the 
interim final rule, is filed with the Department.

4. Waiver of Penalty

    Paragraphs (d), (e), (f), (g) and (h) of the interim final rule 
generally relate to the waiver of penalties under section 502(c)(5). 
Paragraph (d) provides that the Department may waive all or part of the 
penalty to be assessed under section 502(c)(5) upon a showing of 
reasonable cause for the failure to file the report. Paragraph (e) 
provides that, subsequent to the issuance of a notice of the 
Department's intent to assess a penalty, the administrator shall have 
30 days from the date of the service of notice to make an affirmative 
showing of reasonable cause for the failure to file a complete report 
or why the penalty, as calculated, should not be assessed. Paragraph 
(e) requires that the statement of reasonable cause be in the form of a 
written statement that sets forth all the facts alleged in support of 
reasonable cause and contains a declaration by the administrator that 
the statement is made under penalties of perjury.
    Paragraph (f) describes the effect of a failure to file the 
statement of reasonable cause within the prescribed 30 day period. A 
failure on the part of the administrator to file a timely statement of 
reasonable cause will constitute a waiver of the right to appear and 
contest the facts alleged in the Department's notice and an admission 
of the facts alleged in the notice for purposes of any adjudicatory 
proceeding involving the assessment of a penalty under section 
502(c)(5). Under paragraph (f), the Department's notice of intent to 
assess a penalty, described in paragraph (c), then becomes a final 
order of the Secretary, within the meaning of paragraph (g) of 
Sec. 2570.91. (See Secs. 2570.90 et seq., published separately in this 
issue of the Federal Register).
    Paragraph (g)(1) of the interim final rule provides that, following 
a review of the facts alleged in the statement of reasonable cause, the 
Department, in a notice of determination, shall notify the 
administrator of its intention to waive the penalty, in whole or in 
part, and/or assess a penalty. If it is the intention of the Department 
to assess a penalty, the notice shall indicate the amount of the 
penalty and a brief statement of the reasons for assessing the penalty. 
Under paragraph (g)(2), this notice becomes a final order 30 days after 
the date of service of the notice, except as provided in paragraph (h). 
In general, paragraph (h) provides that the notice described in 
paragraph (g) shall not become a final order unless, within 30 days of 
the date of service of the notice, the administrator or representative 
thereof files a request for a hearing under Sec. 2570.90 et seq. 
(published separately in this issue of the Federal Register), and files 
an answer to the notice. The request for hearing and answer shall be 
filed in accordance with Sec. 2570.92. The answer opposing the proposed 
sanction shall be in writing, and supported by reference to specific 
circumstances or facts surrounding the notice of determination issued 
pursuant to paragraph (g).

5. Service of Notices

    Paragraph (i) of the interim final rule describes the manner in 
which the notice of intent to assess a penalty, described in paragraph 
(c), and the

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notice of determination on a statement of reasonable cause, described 
in paragraph (g), will be served. Under paragraph (i) of the interim 
final rule, service of notice shall be made either: (1) By delivering a 
copy to the administrator or the administrator's representative; (2) by 
leaving a copy at the principal office, place of business, or residence 
of the administrator or the administrator's representative; or (3) by 
mailing a copy to the last known address of the administrator or the 
administrator's representative. If service is accomplished by certified 
mail, service is complete upon mailing. If service is done be regular 
mail, service is complete upon receipt by the addressee.

6. Liability

    Paragraph (j) of the interim final rule clarifies the liability of 
the parties for penalties assessed under section 502(c)(5). Paragraph 
(j)(1) provides that if more than one person is responsible as 
administrator for the failure to file the report, all such persons 
shall be jointly and severally liable for such failure. Paragraph 
(j)(2) provides that any person against whom a penalty is assessed 
under section 502(c)(5) is personally liable for the payment of such 
penalty. Paragraph (j)(2) is intended to make clear that liability for 
the payment of penalties assessed under section 502(c)(5) is the 
personal liability of the person against whom the penalty is assessed 
and not a liability of the MEWA. Accordingly, assets of the MEWA can 
not be used to pay the penalty.

7. Applicability

    Paragraph (l) of the interim rule clarifies that this section 
generally applies to administrators of multiple employer welfare 
arrangements that are not group health plans beginning May 1, 2000. 
Under a transition safe harbor period, however, no civil penalty will 
be assessed against an administrator that has made a good faith effort 
to comply with a Sec. 2520.101-2 filing that is due in the Year 2000. 
This transition rule was created because, during this first year in 
particular, the Department is focused on educating administrators about 
this filing requirement and is committed to working with them to help 
them comply. In this regard, the Department has developed filers' 
guides which may be helpful in filing the Form M-1. These filers' 
guides will be made available on the Pension and Welfare Benefits 
Administration's website at www.dol.gov/dol/pwba and through their 
toll-free publication hotline at 1-800-998-7542. Also, the Pension and 
Welfare Benefits Administration's help desk (202-219-8818) is available 
in case administrators have questions or if they need any assistance 
with filings.

D. Interim Final Rule With Request for Comments

    Section 734 of ERISA (formerly section 707) authorizes the 
Secretary of Labor, consistent with section 104 of HIPAA, to promulgate 
any such regulations as may be necessary or appropriate to carry out 
the provisions of Part 7 of ERISA. In addition, this section 
specifically authorizes the Secretary to promulgate any interim final 
rules as the Secretary determines are appropriate to carry out Part 7 
of ERISA. In addition, section 505 of ERISA authorizes the Secretary to 
prescribe such regulations as the Secretary finds necessary or 
appropriate to carry out the provisions of Title I of ERISA. The report 
required to be filed under section 101(g)(h) is for the purpose of 
determining the extent to which the requirements of Part 7 are being 
carried out. Accordingly, the Department has determined that issuing 
this regulation in interim final form is necessary in order for the 
Secretary to continue to effectively enforce the requirements of 
section 101(g){h} of ERISA and the implementing regulations under 
Sec. 2520.101-2. Written comments on these interim rules are invited.

E. Executive Order 12866 Statement

    Under Executive Order 12866, the Department must determine whether 
a regulatory action is ``significant'' and therefore subject to the 
requirements of the Executive Order and subject to review by the Office 
of Management and Budget (OMB). Under section 3(f) of the Executive 
Order, a ``significant regulatory action'' is an action that is likely 
to result in a rule (1) having an annual effect on the economy of $100 
million or more, or adversely and materially affecting a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local or tribal governments or communities 
(also referred to as ``economically significant''); (2) creating 
serious inconsistency or otherwise interfering with an action taken or 
planned by another agency; (3) materially altering the budgetary 
impacts of entitlement grants, user fees, or loan programs or the 
rights and obligations of recipients thereof; or (4) raising novel 
legal or policy issues arising out of legal mandates, the President's 
priorities, or the principles set forth in the Executive Order. On the 
basis of these criteria, the Department has determined that this 
regulatory action is not significant within the meaning of the 
Executive Order.

F. Paperwork Reduction Act

    The rule being issued here is not subject to the requirements of 
the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) because it 
does not contain an ``information collection request'' as defined in 44 
U.S.C. 3502(3).

G. Regulatory Flexibility Act

    The Regulatory Flexibility Act, 5 U.S.C. 601 et seq., (RFA) 
requires each Federal agency to perform an initial regulatory 
flexibility analysis for all rules subject to the notice and comment 
requirements of section 553(b) of the Administrative Procedure Act (5 
U.S.C 551 et seq.) unless the head of the agency certifies that the 
rule will not, if promulgated, have a significant economic impact on a 
substantial number of small entities. Small entities include small 
businesses, organizations, and governmental jurisdictions.
    Because these rules are being issued as interim final rules and not 
as a notice of proposed rulemaking, the RFA does not apply and the 
Department is not required to either certify that the rule will not 
have a significant impact on a substantial number of small entities or 
conduct a regulatory flexibility analysis. The Department does not 
anticipate that this interim final rule will impose a significant 
impact on a substantial number of small entities, however, regardless 
of whether one uses the definition of small entity found in regulations 
issued by the Small Business Administration (13 CFR 121.201) or one 
defines small entity, on the basis of section 104(a)(2) of ERISA, as an 
employee benefit plan with fewer than 100 participants. The Department 
invites comments on the effect of this interim final rule on small 
entities.

H. Small Business Regulatory Enforcement Fairness Act

    The interim final rule being issued here is subject to the 
provisions of the Small Business Regulatory Enforcement Fairness Act of 
1996 (5 U.S.C. 801 et seq.) and has been transmitted to Congress and 
the Comptroller General for review. The rule is not a ``major rule'' as 
that term is defined in 5 U.S.C. 804, because it is not likely to 
result in (1) an annual effect on the economy of $100 million or more; 
(2) a major increase in costs or prices for consumers, individual 
industries, or federal, State, or local government agencies, or 
geographic regions; or (3) significant adverse effects on

[[Page 7184]]

competition, employment, investment, productivity, innovation, or on 
the ability of United States-based enterprises to compete with foreign-
based enterprises in domestic or export markets.

I. Unfunded Mandates Reform Act

    For purposes of the Unfunded Mandates Reform Act of 1995 (Pub. L. 
104-4), as well as Executive Order 12875, this proposed rule does not 
include any Federal mandate that may result in expenditures by State, 
local, or tribal governments, and will not impose an annual burden of 
$100 million or more on the private sector.

Statutory Authority

    The interim final rule set forth herein is issued pursuant to 
the authority contained in section 502(c)(5) of ERISA (Pub. L. 104-
191, 110 Stat. 1936, 1952, 29 U.S.C. 1132(c)(5)), section 505 of 
ERISA (Pub. L. 93-406, 88 Stat. 892, 894, 29 U.S.C. 1135) and 
section 734 of ERISA (Pub. L. 104-204, 110 Stat. 2874, 2935, 29 
U.S.C. 1194c), and under Secretary of Labor's Order 1-87, 52 FR 
13139, April 21, 1987.

List of Subjects in 29 CFR Part 2560

    Claims, Employee benefit plans, Employee Retirement Income Security 
Act, Law enforcement, Multiple Employer Welfare Arrangements, Pension 
and Welfare Benefits Administration, Reporting and disclosure.
    For the reasons set out in the preamble, Part 2560 of Chapter XXV 
of Title 29 of the Code of Federal Regulations is amended as follows:

PART 2560--[AMENDED]

    1. The authority for Part 2560 is revised to read:

    Authority:  29 U.S.C. 1132, 1135, 1194 and Secretary's Order 1-
87, 52 FR 13139 (April 21, 1987).
    Section 2560.502-1 also issued under 29 U.S.C. 1132(b)(2).
    Section 2560.502i-1 also issued under 29 U.S.C. 1132(i).
    Section 2560.503-1 also issued under 29 U.S.C. 1133.

    2. Part 2560 is amended by adding Sec. 2560.502c-5 to read:


Sec. 2560.502c-5--  Civil penalties under section 502(c)(5).

    (a) In general. (1) Pursuant to the authority granted the Secretary 
under section 502(c)(5) of the Employee Retirement Income Security Act 
of 1974 Pub.L. 93-406, 88 Stat. 840-52, as amended by Pub. L. 104-191, 
101 Stat. 1936) (the Act), the administrator of a multiple employer 
welfare arrangement (MEWA) (within the meaning of section 3(40)(A) of 
the Act) that is not a group health plan, and that provides benefits 
consisting of medical care (within the meaning of section 733(a)(2)), 
for which a report is required to be filed under section 101(g){h} of 
the Act and Sec. 2520.101-2, shall be liable for civil penalties 
assessed by the Secretary under section 502(c)(5) of the Act for each 
failure or refusal to file a completed report required to be filed 
under section 101(g){h} and Sec. 2520.101-2. The term ``administrator'' 
is defined in Sec. 2520.101-2(b).
    (2) For purposes of this section, a failure or refusal to file the 
report required to be filed under section 101(g){h} shall mean a 
failure or refusal to file, in whole or in part, that information 
described in section 101(g){h} and Sec. 2520.101-2, on behalf of the 
MEWA, at the time and in the manner prescribed therefor.
    (b) Amount assessed.--(1) The amount assessed under section 
502(c)(5) shall be determined by the Department of Labor, taking into 
consideration the degree and/or willfulness of the failure to file the 
report. However, the amount assessed under section 502(c)(5) of the Act 
shall not exceed $1,000 a day, computed from the date of the 
administrator's failure or refusal to file the report and, except as 
provided in paragraph (b)(2) of this section, continuing up to the date 
on which a report meeting the requirements of section 101(g){h} and 
Sec. 2520.101-2, as determined by the Secretary, is filed.
    (2) If, upon receipt of a notice of intent to assess a penalty (as 
described in paragraph (c) of this section), the administrator files a 
statement of reasonable cause for the failure to file, in accordance 
with paragraph (e) of this section, a penalty shall not be assessed for 
any day from the date the Department serves the administrator with a 
copy of such notice until the day after the Department serves notice on 
the administrator of its determination on reasonable cause and its 
intention to assess a penalty (as described in paragraph (g) of this 
section).
    (3) For purposes of this paragraph, the date on which the 
administrator failed or refused to file the report shall be the date on 
which the report was due (determined without regard to any extension of 
time for filing). A report which is rejected under Sec. 2520.101-2 
shall be treated as a failure to file a report when a revised report 
meeting the requirements of this section is not filed within 45 days of 
the date of the Department's notice of rejection. If a revised report 
meeting the requirements of this section, as determined by the 
Secretary, is not submitted within 45 days of the date of the notice of 
rejection by the Department, a penalty shall be assessed under section 
502(c)(5) beginning on the day after the date of the administrator's 
failure or refusal to file the report.
    (c) Notice of intent to assess a penalty. Prior to the assessment 
of any penalty under section 502(c)(5), the Department shall provide to 
the administrator of the MEWA a written notice indicating the 
Department's intent to assess a penalty under section 502(c)(5), the 
amount of such penalty, the period to which the penalty applies, and a 
statement of the facts and the reason(s) for the penalty.
    (d) Waiver of assessed penalty. The Department may waive all or 
part of the penalty to be assessed under section 502(c)(5) on a showing 
by the administrator that there was reasonable cause for the failure to 
file the report.
    (e) Showing of reasonable cause. Upon issuance by the Department of 
a notice of intent to assess a penalty, the administrator shall have 30 
days from the date of the service of notice, as described in paragraph 
(i) of this section, to file a statement of reasonable cause for the 
failure to file a complete report or why the penalty, as calculated, 
should not be assessed. A showing of reasonable cause must be made in 
the form of a written statement setting forth all the facts alleged as 
reasonable cause. The statement must contain a declaration by the 
administrator that the statement is made under the penalties of 
perjury.
    (f) Failure to file a statement of reasonable cause. Failure of an 
administrator to file a statement of reasonable cause within the 30 day 
period described in paragraph (e) of this section shall be deemed to 
constitute a waiver of the right to appear and contest the facts 
alleged in the notice, and such failure shall be deemed an admission of 
the facts alleged in the notice for purposes of any proceeding 
involving the assessment of a civil penalty under section 502(c)(5). 
Such notice shall then become a final order of the Secretary, within 
the meaning of Sec. 2570.91(g).
    (g) Notice of the determination on statement of reasonable cause--
(1) The Department, following a review of all the facts alleged in 
support of a complete or partial waiver of the penalty, shall notify 
the administrator, in writing, of its intention to waive the penalty, 
in whole or in part, and/or assess a penalty. If it is the intention of 
the Department to assess a penalty, the notice shall indicate the 
amount of the penalty, not to exceed the amount described in paragraph 
(c) of this section, and a brief statement of the reasons for assessing 
the penalty.

[[Page 7185]]

    (2) Except as provided in paragraph (h) of this section, a notice 
issued pursuant to this paragraph indicating the Department's intention 
to assess a penalty shall become a final order, within the meaning of 
Sec. 2570.91(g), 30 days after the date of service of the notice.
    (h) Administrative hearing. A notice issued pursuant to paragraph 
(g) of this section will become the final order of the Department of 
Labor, unless, within 30 days from the date of the service of the 
notice, the administrator or representative thereof files a request for 
a hearing under Sec. 2570.90 et seq., and files and answer to the 
notice. The request for hearing and answer shall be filed in accordance 
with Sec. 2570.92. The answer opposing the proposed sanction shall be 
in writing, and supported by reference to specific circumstances or 
facts surrounding the notice of determination issued pursuant to 
paragraph (g).
    (i) Service of notice--(1) Service of notice shall be made either:
    (i) By delivering a copy to the administrator or representative 
thereof;
    (ii) By leaving a copy at the principal office, place of business, 
or residence of the administrator or representative thereof; or
    (iii) By mailing a copy to the last known address of the 
administrator or representative thereof.
    (2) If service is accomplished by certified mail, service is 
complete upon mailing. If done by regular mail, service is complete 
upon receipt by the addressee
    (j) Liability--(1) If more than one person is responsible as 
administrator for the failure to file the report, all such persons 
shall be jointly and severally liable with respect to such failure.
    (2) Any person against whom a civil penalty has been assessed under 
section 502(c)(5) pursuant to a final order, within the meaning of 
Sec. 2570.91(g), shall be personally liable for the payment of such 
penalty.
    (k) Cross-reference. See Secs. 2570.90 through 101 of this chapter 
for procedural rules relating to administrative hearings under section 
502(c)(5) of the Act.
    (l) Applicability date--(1) In general. This section applies to 
administrators of multiple employer welfare arrangements that are not 
group health plans beginning May 1, 2000.
    (2) Transitional safe harbor period. No civil penalty will be 
assessed against an administrator that has made a good faith effort to 
comply with a Sec. 2520.101-2 filing that is due in the Year 2000.

    Signed at Washington DC, this 4th day of February, 2000.
Leslie B. Kramerich,
Acting Assistant Secretary, Pension and Welfare Benefits 
Administration, Department of Labor.
[FR Doc. 00-2936 Filed 2-10-00; 8:45 am]
BILLING CODE 4510-29-P


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