Federal Register / Vol. 65, No. 29 / Friday, February 11, 2000 / Rules and Regulations 7185

1Both 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 ERISA.

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.

(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 § 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 § 2570.90 et seq., and

files and answer to the notice. The

request for hearing and answer shall be

filed in accordance with § 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 § 2570.91(g),

shall be personally liable for the

payment of such penalty.

(k) Cross-reference. See §§ 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 § 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

DEPARTMENT OF LABOR

Pension and Welfare Benefits

Administration

29 CFR Part 2570

RIN 1210–AA54

Interim Rule Governing Procedures for

Administrative Hearings Regarding 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.

SUMMARY: This document contains an

interim final rule that describes

procedures relating to administrative

hearings, in connection with 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) of ERISA 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. Separate

documents are also being published

today in the Federal Register containing

interim final rules implementing the

reporting requirement under section

101(g){h} of ERISA and interim final

rules describing the manner in which

the Department will assess civil

penalties under ERISA section 502(c)(5).

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:

‘‘MEWAproc@pwba.dol.gov’’ (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 procedures for

administrative hearings and appeals

regarding 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 completed 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 § 2570.502c–2

regarding civil penalties under section

502(c)(2) of ERISA relating to reports

required to be filed under ERISA section

104(b)(4).

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,

an interim final rule describing the

manner in which the Department will

assess civil penalties under ERISA

section 502(c)(5). See § 2560.502c–5.

7186 Federal Register / Vol. 65, No. 29 / Friday, February 11, 2000 / Rules and Regulations

2To the extent that any provision of Subpart A

of 29 CFR Part 18 is not incorporated, the

provisions detailed in this section are intended to

govern the rules of practice and procedure for

administrative hearings relating to civil penalties

under ERISA section 502(c)(5).

This document contains an interim

final rule that establishes procedures for

hearings before an Administrative Law

Judge (ALJ) with respect to an

assessment by the Department of Labor

(the Department) of a civil penalty

under section 502(c)(5), and for appeals

of an ALJ decision to the Secretary or

the Secretary’s delegate. In this regard,

the Secretary has established the

Pension and Welfare Benefits

Administration (PWBA) within the

Department for the purpose of carrying

out most of the Secretary’s

responsibilities under ERISA. See

Secretary of Labor’s Order 1–87, 52 FR

13139 (April 21, 1987).

The Department has published rules

of practice and procedure for

administrative hearings before the

Office of Administrative Law Judges in

Subpart A of 29 CFR Part 18, 48 FR

32538 (1983). As explained in 29 CFR

18.1, those provisions generally govern

administrative hearings before ALJs

assigned to the Department and are

intended to provide maximum

uniformity in the conduct of

administrative hearings. However, in

the event of an inconsistency or conflict

between the provisions of Subpart A of

29 CFR Part 18 and a rule or procedure

required by statute, executive order, or

regulation, the latter controls.

The Department has reviewed the

applicability of the provisions of

Subpart A of 29 CFR Part 18 to the

assessment of civil penalties under

ERISA section 502(c)(5) and has decided

to adopt many, though not all, of the

provisions of Subpart A of 29 CFR Part

18 for these proceedings. Accordingly,

adjudications relating to civil penalties

under ERISA section 502(c)(5) will be

governed by the following sections 2 of

Subpart A of 29 CFR Part 18:

§ 18.4 Time computations.

§ 18.5 (c) through (e) Responsive

pleadings—answer and request for

hearing.

§ 18.6 Motions and requests.

§ 18.7 Prehearing statements.

§ 18.8 Prehearing conferences.

§ 18.11 Consolidation of hearings.

§ 18.12 Amicus curiae.

§ 18.13 Discovery methods.

§ 18.15 Protective orders.

§ 18.16 Supplementation of responses.

§ 18.17 Stipulations regarding discovery.

§ 18.18 Written interrogatories to parties.

§ 18.19 Production of documents and other

evidence; entry upon land for inspection

and other purposes; and physical and

mental examination.

§ 18.20 Admissions.

§ 18.21 Motion to compel discovery.

§ 18.22 Depositions.

§ 18.23 Use of depositions at hearings.

§ 18.24 Subpoenas.

§ 18.25 Designation of administrative law

judge.

§ 18.26 Conduct of hearings.

§ 18.27 Notice of hearing.

§ 18.28 Continuances.

§ 18.29 Authority of administrative law

judge.

§ 18.30 Unavailability of administrative law

judge.

§ 18.31 Disqualification.

§ 18.32 Separation of functions.

§ 18.33 Expedition.

§ 18.34 Representation.

§ 18.35 Legal assistance.

§ 18.36 Standards of conduct.

§ 18.37 Hearing room conduct.

§ 18.38 Ex parte communications.

§ 18.39 Waiver of right to appear and failure

to participate or to appear.

§ 18.40 Motion for summary decision.

§ 18.42 Expedited proceedings.

§ 18.43 Formal hearings.

§ 18.44 Evidence.

§ 18.45 Official notice.

§ 18.46 In camera and protective orders.

§ 18.47 Exhibits.

§ 18.48 Records in other proceedings.

§ 18.49 Designation of parts of documents.

§ 18.50 Authenticity.

§ 18.51 Stipulations.

§ 18.52 Record of hearings.

§ 18.53 Closing of hearings.

§ 18.54 Closing the record.

§ 18.55 Receipt of documents after hearing.

§ 18.56 Restricted access.

§ 18.59 Certification of official record.

This interim final rule relates

specifically to procedures for assessing

civil penalties under section 502(c)(5) of

ERISA and are controlling to the extent

they are inconsistent with any portion

of Subpart A of 29 CFR Part 18. This

interim final rule is designed to

maintain the maximum degree of

uniformity with the rules set forth in

Subpart A of 29 CFR Part 18 consistent

with the need for an expedited

procedure, while recognizing the special

characteristics of proceedings under

ERISA section 502(c)(5). For purposes of

clarity, where a particular section of the

existing procedural rules would be

affected by these interim final rules, the

entire section of the existing procedural

rules (with the appropriate

modifications) has been set out in this

document. Thus, only a portion of the

provisions of the procedural rules set

forth below involve changes from, or

additions to, the rules in Subpart A of

29 CFR Part 18. The specific

modifications to the rules in Subpart A

29 CFR Part 18, and their relationship

to the conduct of these proceedings

generally, are outlined below.

C. Discussion of the Interim Final Rules

1. In General

The applicability of these procedural

rules under section 502(c)(5) is set forth

in § 2570.90. In this regard, it should be

noted that the procedural rules

contained herein apply only to

adjudicatory proceedings before ALJs of

the U.S. Department of Labor. The

interim rule in § 2560.502c–5, also being

published today, sets forth the

procedures relating to issuance by

PWBA of notices of intent to assess a

penalty under ERISA section 502(c)(5),

as well as procedures for agency review

of statements of reasonable cause filed

by persons against whom a penalty is

assessed. Under the interim final rule

contained in this notice, an adjudicatory

proceeding before an ALJ is commenced

only when a person against whom the

Department intends to assess a penalty

under section 502(c)(5) files an answer

to a notice of the agency’s determination

on a statement of reasonable cause. See

§ 2570.91(c) and (d) below, and

§ 2560.502c–5(h), published separately

in this issue of the Federal Register.

The definitional section (§ 2570.91) of

these interim final rules incorporates

the basic adjudicatory principles set

forth in Subpart A of 29 CFR Part 18,

but includes terms and concepts of

specific relevance to proceedings under

ERISA section 502(c)(5). In this respect,

it differs from its more general

counterpart at § 18.2 of this title. In

particular, § 2570.91 states that the term

‘‘Secretary’’ means the Secretary of

Labor and includes various persons to

whom the Secretary may delegate

authority. This definition is not

intended to suggest any limitation on

the authority that the Secretary has

delegated to the Assistant Secretary for

Pension and Welfare Benefits. As noted

above, the Secretary of Labor has

delegated most of his or her authority

under ERISA to the Assistant Secretary

for Pension and Welfare Benefits. Thus,

the Department contemplates that the

duties assigned to the Secretary under

the procedural regulation will in fact be

discharged by the Assistant Secretary

for Pension and Welfare Benefits or a

properly authorized delegate.

2. Proceedings Before Administrative

Law Judges

In general, the burden to initiate

adjudicatory proceedings before an ALJ

will be on the party against whom the

Department is seeking to assess a civil

penalty under ERISA section 502(c)(5)

(the respondent). However, a

respondent must have complied with

the procedures relating to agency review

set forth in § 2560.502c–5 before

Federal Register / Vol. 65, No. 29 / Friday, February 11, 2000 / Rules and Regulations 7187

initiating adjudicatory proceedings

under this section. In this regard, it

should be noted that both the notice of

intent to assess a penalty, as described

in § 2560.502c–5(c), and the notice of

determination on a statement of

reasonable cause, as described in

§ 2560.502c–5(g), will be issued by

PWBA, the agency responsible for

administration and enforcement of

ERISA section 502(c)(5), in accordance

with the service of notice provisions

described in § 2560.502c–5(i). Paragraph

(c) of § 2570.91 (relating to respondent’s

answer), paragraph (d) of § 2570.91

(relating to commencement of

proceedings), and paragraph (h) of

§ 2570.91 (relating to administrative

hearings) contemplate that adjudicatory

proceedings will be initiated with the

filing by a respondent of an answer to

a notice of the agency’s determination

on a statement of reasonable cause.

The service of documents by the

parties to an adjudicatory proceeding, as

well as by the ALJ, will be governed by

§ 2570.92 of these interim final rules.

In general, the rules in Subpart A of

29 CFR Part 18 concerning the

computation of time, pleadings and

motions, and prehearing conferences

and statements, are adopted in these

procedures for adjudications under

ERISA section 502(c)(5). The section on

the designation of parties (§ 2570.93)

differs from its counterpart under

§ 18.10 of this title in that it specifies

that the respondent in these proceedings

will, as indicated above, be the party

against whom the Department seeks to

assess a civil penalty under ERISA

section 502(c)(5).

Section 2590.94 describes the

consequences of default. This section

provides that if the respondent fails to

file an answer to the Department’s

notice of determination, described in

§ 2560.502c–5(g), within the 30-day

period provided by § 2560.502c–5(h),

such failure shall be deemed to

constitute a waiver of the right to appear

and contest the facts alleged in the

notice and 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).

Section 2570.94 clarifies that, in the

event of such a failure, the assessment

of the penalty becomes final.

Section 2590.95 addresses consent

orders or settlements. This section

permits parties, up to 5 days prior to a

scheduled hearing, to request that a

hearing be deferred for a reasonable

period of time to permit negotiation of

a settlement or agreement resolving the

whole or any part of the issues relating

to assessment of a penalty under ERISA

section 502(c)(5). The section also states

that the ALJ’s decision shall include the

terms and conditions of any consent

order or settlement that has been agreed

to by the parties. That section also

provides that the decision of the ALJ,

which incorporates such consent order,

shall become a final agency action

within the meaning of 5 U.S.C. 704.

Finally, this section prescribes rules for

the content, submission and disposition

of any settlement agreement under this

section, and a process for settling the

whole or any part of the issues where all

parties have not consented to the terms

of the proposed settlement.

Section 2570.96 states that discovery

may be ordered by the ALJ only upon

a showing of good cause by the party

seeking discovery. This differs from the

more liberal standard for discovery

contained in 29 CFR 18.14. In cases in

which discovery is ordered by the ALJ,

the order shall expressly limit the scope

and terms of discovery to that for which

good cause has been shown. To the

extent that the order of the ALJ does not

specify rules for the conduct of the

discovery permitted by such order, the

rules governing the conduct of

discovery from Subpart A of 29 CFR

Part 18 are to be applied in these

proceedings under section 502(c)(5). For

example, if the order of the ALJ states

only that interrogatories on certain

subjects may be permitted, the rules

under Subpart A of 29 CFR Part 18

concerning the service and answering of

such interrogatories shall apply. The

procedures under Subpart A of 29 CFR

Part 18 for the submission of facts to the

ALJ during the hearing are also to be

applied in proceedings under ERISA

section 502(c)(5).

The section on summary decisions

(§ 2570.97) provides the requisite

authorization for an ALJ to issue a

summary decision which may become

final when there are no genuine issues

of material fact in a case arising under

ERISA section 502(c)(5). The section

concerning the decision of the ALJ

(§ 2570.98) differs from its counterpart

at § 18.57 of this title in that it states that

the decision of the ALJ in a section

502(c)(5) case shall become the final

decision of the Secretary unless a timely

appeal is filed.

3. Review by the Secretary

The procedures for appeals of ALJ

decisions under ERISA section 502(c)(5)

are governed solely by the rules set forth

in §§ 2570.99 through 2570.101, and

without any reference to the appellate

procedures contained in Subpart A of 29

CFR Part 18. Section 2570.99 establishes

a 20-day time limit within which such

appeals must be filed, the manner in

which the issues for appeal are

determined, and the procedures for

making the entire record before the ALJ

available to the Secretary. Section

2570.100 provides that review by the

Secretary shall not be on a de novo

basis, but rather on the basis of the

record before the ALJ, and without an

opportunity for oral argument. Section

2570.101 sets forth the procedure for

establishing a briefing schedule for such

appeals, and states that the decision of

the Secretary on such an appeal shall be

a final agency action within the

meaning of 5 U.S.C. 704. As noted

above, the authority of the Secretary

with respect to the appellate procedures

has been delegated to the Assistant

Secretary for Pension and Welfare

Benefits. As required by the

Administrative Procedure Act (5 U.S.C.

552(a)(2)(A)), all final decisions of the

Department under section 502(c)(5) of

ERISA shall be compiled in the Public

Documents Room of the Pension and

Welfare Benefits Administration, Room

N–5638, U.S. Department of Labor, 200

Constitution Avenue NW., Washington,

DC 20210.

D. Interim 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 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

enforce the reporting requirements of

section 101(g)(h) of ERISA and the

implementing regulations under

§ 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

7188 Federal Register / Vol. 65, No. 29 / Friday, February 11, 2000 / Rules and Regulations

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

competition, employment, investment,

productivity, innovation, or on the

ability of United States-based

enterprises to compete with foreignbased 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 rules set forth herein are

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. 1194), and under

Secretary of Labor’s Order 1–87, 52 FR

13139, April 21, 1987.

List of Subjects in 29 CFR Part 2570

Administrative practice and

procedure, Claims, Employee benefit

plans, Employee Retirement Income

Security Act, Law enforcement, Pension

and Welfare Benefits Administration,

Reporting and disclosure.

For the reasons set out in the

preamble, Part 2570 of Chapter XXV of

Title 29 of the Code of Federal

Regulations is amended as follows:

PART 2570—[AMENDED]

1. The authority for Part 2570 is

revised to read:

Authority: 29 U.S.C. 1132(c)(2), 1132(c)(5),

1132(i), 1135, 1194, and Secretary’s Order 1–

87, 52 FR 13139 (April 21, 1987).

2. By adding in the appropriate place

in Part 2570 the following new Subpart

E:

Subpart E ‘‘ Procedures for the Assessment

of Civil Penalties Under ERISA Section

502(c)(5)

2570.90 Scope of rules.

2570.91 Definitions.

2570.92 Service: Copies of documents and

pleadings.

2570.93 Parties, how designated.

2570.94 Consequences of default.

2570.95 Consent order or settlement.

2570.96 Scope of discovery.

2570.97 Summary decision.

2570.98 Decision of the administrative law

judge.

2570.99 Review by the Secretary.

2570.100 Scope of review.

2570.101 Procedures for review by the

Secretary.

Subpart E—Procedures for the

Assessment of Civil Penalties Under

ERISA Section 502(c)(5)

§ 2570.90 Scope of rules.

The rules of practice set forth in this

subpart are applicable to ‘‘502(c)(5) civil

penalty proceedings’’ (as defined in

§ 2570.91(n) of this subpart) 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 rules of procedure for

administrative hearings published by

the Department’s Office of

Administrative Law Judges in Subpart A

of Part 18 of this title will apply to

matters arising under ERISA section

502(c)(5) except as modified by this

section. These proceedings shall be

conducted as expeditiously as possible,

and the parties shall make every effort

to avoid delay at each stage of the

proceedings.

§ 2570.91 Definitions.

For 502(c)(5) civil penalty

proceedings, this section shall apply in

lieu of the definitions in § 18.2 of this

title.

(a) Adjudicatory proceeding means a

judicial-type proceeding before an

administrative law judge leading to the

formulation of a final order;

(b) Administrative law judge means an

administrative law judge appointed

pursuant to the provisions of 5 U.S.C.

3105;

(c) Answer means a written statement

that is supported by reference to specific

circumstances or facts surrounding the

notice of determination issued pursuant

to § 2560.502c–5(g);

Federal Register / Vol. 65, No. 29 / Friday, February 11, 2000 / Rules and Regulations 7189

(d) Commencement of proceeding is

the filing of an answer by the

respondent;

(e) Consent agreement means any

written document containing a specified

proposed remedy or other relief

acceptable to the Department and

consenting parties;

(f) ERISA means the Employee

Retirement Income Security Act of 1974,

as amended;

(g) Final Order means the final

decision or action of the Department of

Labor concerning the assessment of a

civil penalty under ERISA section

502(c)(5) against a particular party. Such

final order may result from a decision of

an administrative law judge or the

Secretary, the failure of a party to file a

statement of reasonable cause described

in § 2560.502c–5(e) within the

prescribed time limits, or the failure of

a party to invoke the procedures for

hearings or appeals under this title

within the prescribed time limits. Such

a final order shall constitute final

agency action within the meaning of 5

U.S.C. 704;

(h) Hearing means that part of a

proceeding which involves the

submission of evidence, either by oral

presentation or written submission, to

the administrative law judge;

(i) Order means the whole or any part

of a final procedural or substantive

disposition of a matter under ERISA

section 502(c)(5);

(j) Party includes a person or agency

named or admitted as a party to a

proceeding;

(k) Person includes an individual,

partnership, corporation, employee

benefit plan, association, exchange or

other entity or organization;

(l) Petition means a written request,

made by a person or party, for some

affirmative action;

(m) Pleading means the notice as

defined in § 2560.502c–5(g), the answer

to the notice, any supplement or

amendment thereto, and any reply that

may be permitted to any answer,

supplement or amendment;

(n) 502(c)(5) civil penalty proceeding

means an adjudicatory proceeding

relating to the assessment of a civil

penalty provided for in section 502(c)(5)

of ERISA;

(o) Respondent means the party

against whom the Department is seeking

to assess a civil sanction under ERISA

section 502(c)(5);

(p) Secretary means the Secretary of

Labor and includes, pursuant to any

delegation of authority by the Secretary,

any assistant secretary (including the

Assistant Secretary for Pension and

Welfare Benefits), administrator,

commissioner, appellate body, board, or

other official of the Department of

Labor; and

(q) Solicitor means the Solicitor of

Labor or his or her delegate.

§ 2570.92 Service: Copies of documents

and pleadings.

For 502(c)(5) penalty proceedings,

this section shall apply in lieu of § 18.3

of this title.

(a) In general. Copies of all documents

shall be served on all parties of record.

All documents should clearly designate

the docket number, if any, and short

title of all matters. All documents to be

filed shall be delivered or mailed to the

Chief Docket Clerk, Office of

Administrative Law Judges (OALJ), 800

K Street, N.W., Suite 400, Washington,

DC 20001–8002, or to the OALJ Regional

Office to which the proceeding may

have been transferred for hearing. Each

document filed shall be clear and

legible.

(b) By parties. All motions, petitions,

pleadings, briefs, or other documents

shall be filed with the Office of

Administrative Law Judges with a copy,

including any attachments, to all other

parties of record. When a party is

represented by an attorney, service shall

be made upon the attorney. Service of

any document upon any party may be

made by personal delivery or by mailing

a copy to the last known address. The

Department shall be served by delivery

to the Associate Solicitor, Plan Benefits

Security Division, ERISA section

502(c)(5) Proceeding, P.O. Box 1914,

Washington, DC 20013. The person

serving the document shall certify to the

manner and date of service.

(c) By the Office of Administrative

Law Judges. Service of orders, decisions

and all other documents shall be made

by regular mail to the last known

address.

(d) Form of pleadings— (1) Every

pleading shall contain information

indicating the name of the Pension and

Welfare Benefits Administration

(PWBA) as the agency under which the

proceeding is instituted, the title of the

proceeding, the docket number (if any)

assigned by the Office of Administrative

Law Judges and a designation of the

type of pleading or paper (e.g., notice,

motion to dismiss, etc.). The pleading or

paper shall be signed and shall contain

the address and telephone number of

the party or person representing the

party. Although there are no formal

specifications for documents, they

should be typewritten when possible on

standard size 81⁄2×11 inch paper.

(2) Illegible documents, whether

handwritten, typewritten, photocopies,

or otherwise, will not be accepted.

Papers may be reproduced by any

duplicating process provided all copies

are clear and legible.

§ 2570.93 Parties, how designated.

For 502(c)(5) civil penalty

proceedings, this section shall apply in

lieu of § 18.10 of this title.

(a) The term party wherever used in

these rules shall include any natural

person, corporation, employee benefit

plan, association, firm, partnership,

trustee, receiver, agency, public or

private organization, or government

agency. A party against whom a civil

penalty is sought shall be designated as

‘‘respondent.’’ The Department shall be

designated as the ‘‘complainant.’’

(b) Other persons or organizations

shall be permitted to participate as

parties only if the administrative law

judge finds that the final decision could

directly and adversely affect them or the

class they represent, that they may

contribute materially to the disposition

of the proceedings and their interest is

not adequately represented by existing

parties, and that in the discretion of the

administrative law judge the

participation of such persons or

organizations would be appropriate.

(c) A person or organization not

named as a respondent wishing to

participate as a party under this section

shall submit a petition to the

administrative law judge within fifteen

(15) days after the person or

organization has knowledge of or should

have known about the proceeding. The

petition shall be filed with the

administrative law judge and served on

each person or organization who has

been made a party at the time of filing.

Such petition shall concisely state:

(1) Petitioner’s interest in the

proceeding;

(2) How his or her participation as a

party will contribute materially to the

disposition of the proceeding;

(3) Who will appear for petitioner;

(4) The issues on which petitioner

wishes to participate; and

(5) Whether petitioner intends to

present witnesses.

(d) Objections to the petition may be

filed by a party within fifteen (15) days

of the filing of the petition. If objections

to the petition are filed, the

administrative law judge shall then

determine whether petitioners have the

requisite interest to be a party in the

proceedings, as defined in paragraph (b)

of this section, and shall permit or deny

participation accordingly. Where

petitions to participate as parties are

made by individuals or groups with

common interests, the administrative

law judge may request all such

petitioners to designate a single

representative, or he or she may

7190 Federal Register / Vol. 65, No. 29 / Friday, February 11, 2000 / Rules and Regulations

recognize one or more of such

petitioners. The administrative law

judge shall give each such petitioner as

well as the parties, written notice of the

decision on his or her petition. For each

petition granted, the administrative law

judge shall provide a brief statement of

the basis of the decision. If the petition

is denied, he or she shall briefly state

the grounds for denial and shall then

treat the petition as a request for

participation as amicus curiae.

§ 2570.94 Consequences of default.

For 502(c)(5) civil penalty

proceedings, this section shall apply in

lieu of § 18.5 (a) and (b) of this title.

Failure of the respondents to file an

answer to the notice of determination

described in § 2560.502c–5(g) within the

30-day period provided by § 2560.502c–

5(h) shall be deemed to constitute a

waiver of his or her right to appear and

contest the allegations of the notice of

determination, and such failure shall be

deemed to be an admission of the facts

as 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.

§ 2570.95 Consent order or settlement.

For 502(c)(5) civil penalty

proceedings, the following shall apply

in lieu of § 18.9 of this title.

(a) In general. At any time after the

commencement of a proceeding, but at

least five (5) days prior to the date set

for hearing, the parties jointly may move

to defer the hearing for a reasonable

time to permit negotiation of a

settlement or an agreement containing

findings and an order disposing of the

whole or any part of the proceeding.

The allowance of such deferment and

the duration thereof shall be in the

discretion of the administrative law

judge, after consideration of such factors

as the nature of the proceeding, the

requirements of the public interest, the

representations of the parties and the

probability of reaching an agreement

which will result in a just disposition of

the issues involved.

(b) Content. Any agreement

containing consent findings and an

order disposing of a proceeding or any

part thereof shall also provide:

(1) That the order shall have the same

force and effect as an order made after

full hearing;

(2) That the entire record on which

any order may be based shall consist

solely of the notice and the agreement;

(3) A waiver of any further procedural

steps before the administrative law

judge;

(4) A waiver of any right to challenge

or contest the validity of the order and

decision entered into in accordance

with the agreement; and

(5) That the order and decision of the

administrative law judge shall be final

agency action.

(c) Submission. On or before the

expiration of the time granted for

negotiations, but, in any case, at least

five (5) days prior to the date set for

hearing, the parties or their authorized

representative or their counsel may:

(1) Submit the proposed agreement

containing consent findings and an

order to the administrative law judge; or

(2) Notify the administrative law

judge that the parties have reached a full

settlement and have agreed to dismissal

of the action subject to compliance with

the terms of the settlement; or

(3) Inform the administrative law

judge that agreement cannot be reached.

(d) Disposition. In the event that a

settlement agreement containing

consent findings and an order is

submitted within the time allowed

therefore, the administrative law judge

shall issue a decision incorporating

such findings and agreement within

thirty (30) days of receipt of such

document. The decision of the

administrative law judge shall

incorporate all of the findings, terms,

and conditions of the settlement

agreement and consent order of the

parties. Such decision shall become a

final agency action within the meaning

of 5 U.S.C. 704.

(e) Settlement without consent of all

parties. In cases in which some, but not

all, of the parties to a proceeding submit

a consent agreement to the

administrative law judge, the following

procedure shall apply:

(1) If all of the parties have not

consented to the proposed settlement

submitted to the administrative law

judge, then such non-consenting parties

must receive notice, and a copy, of the

proposed settlement at the time it is

submitted to the administrative law

judge;

(2) Any non-consenting party shall

have fifteen (15) days to file any

objections to the proposed settlement

with the administrative law judge and

all other parties;

(3) If any party submits an objection

to the proposed settlement, the

administrative law judge shall decide

within thirty (30) days after receipt of

such objections whether to sign or reject

the proposed settlement. Where the

record lacks substantial evidence upon

which to base a decision or there is a

genuine issue of material fact, then the

administrative law judge may establish

procedures for the purpose of receiving

additional evidence upon which a

decision on the contested issues may

reasonably be based;

(4) If there are no objections to the

proposed settlement, or if the

administrative law judge decides to sign

the proposed settlement after reviewing

any such objections, the administrative

law judge shall incorporate the consent

agreement into a decision meeting the

requirements of paragraph (d) of this

section.

§ 2570.96 Scope of discovery.

For 502(c)(5) civil penalty

proceedings, this section shall apply in

lieu of § 18.14 of this title.

(a) A party may file a motion to

conduct discovery with the

administrative law judge. The motion

for discovery shall be granted by the

administrative law judge only upon a

showing of good cause. In order to

establish ‘‘good cause’’ for the purposes

of this section, a party must show that

the discovery requested relates to a

genuine issue as to a material fact that

is relevant to the proceeding. The order

of the administrative law judge shall

expressly limit the scope and terms of

discovery to that for which ‘‘good

cause’’ has been shown, as provided in

this paragraph.

(b) A party may obtain discovery of

documents and tangible things

otherwise discoverable under paragraph

(a) of this section and prepared in

anticipation of or for the hearing by or

for another party’s representative

(including his or her attorney,

consultant, surety, indemnitor, insurer,

or agent) only upon showing that the

party seeking discovery has substantial

need of the materials or information in

the preparation of his or her case and

that he or she is unable without undue

hardship to obtain the substantial

equivalent of the materials or

information by other means. In ordering

discovery of such materials when the

required showing has been made, the

administrative law judge shall protect

against disclosure of the mental

impressions, conclusions, opinions, or

legal theories of an attorney or other

representative of a party concerning the

proceeding.

§ 2570.97 Summary decision.

For 502(c)(5) civil penalty

proceedings, this section shall apply in

lieu of § 18.41 of this title.

(a) No genuine issue of material fact.

(1) Where no issue of material fact is

found to have been raised, the

administrative law judge may issue a

decision which, in the absence of an

appeal pursuant to 2570.99 through

Federal Register / Vol. 65, No. 29 / Friday, February 11, 2000 / Rules and Regulations 7191

2570.101 of this subpart, shall become

a final order.

(2) A decision made under this

paragraph shall include a statement of:

(i) Findings of fact and conclusions of

law, and the reasons therefor, on all

issues presented; and

(ii) Any terms and conditions of the

rule or order.

(3) A copy of any decision under this

paragraph shall be served on each party.

(b) Hearings on issues of fact. Where

a genuine question of material fact is

raised, the administrative law judge

shall, and in any other case may, set the

case for an evidentiary hearing.

§ 2570.98 Decision of the administrative

law judge.

For 502(c)(5) civil penalty

proceedings, this section shall apply in

lieu of § 18.57 of this title.

(a) Proposed findings of fact,

conclusions, and order. Within twenty

(20) days of the filing of the transcript

of the testimony or such additional time

as the administrative law judge may

allow, each party may file with the

administrative law judge, subject to the

judge’s discretion, proposed findings of

fact, conclusions of law, and an order

together with a supporting brief

expressing the reasons for such

proposals. Such proposals and briefs

shall be served on all parties, and shall

refer to all portions of the record and to

all authorities relied upon in support of

each proposal.

(b) Decision of the administrative law

judge. Within a reasonable time after the

time allowed for the filing of the

proposed findings of fact, conclusions of

law, and order, or within thirty (30)

days after receipt of an agreement

containing consent findings and an

order disposing of the disputed matter

in whole, the administrative law judge

shall make his or her decision. The

decision of the administrative law judge

shall include findings of fact and

conclusions of law with reasons therefor

upon each material issue of fact or law

presented on the record. The decision of

the administrative law judge shall be

based upon the whole record. In a

contested case in which the Department

and the Respondent have presented

their positions to the administrative law

judge pursuant to the procedures for

502(c)(5) civil penalty proceedings as

set forth in this subpart, the penalty (if

any) which may be included in the

decision of the administrative law judge

shall be limited to the penalty expressly

provided for in section 502(c)(5) of

ERISA. It shall be supported by reliable

and probative evidence. The decision of

the administrative law judge shall

become a final agency action within the

meaning of 5 U.S.C. 704 unless an

appeal is made pursuant to the

procedures set forth in §§ 2570.99

through 2570.101.

§ 2570.99 Review by the Secretary

(a) The Secretary may review a

decision of an administrative law judge.

Such a review may occur only when a

party files a notice of appeal from a

decision of an administrative law judge

within twenty (20) days of the issuance

of such decision. In all other cases, the

decision of the administrative law judge

shall become final agency action within

the meaning of 5 U.S.C. 704.

(b) A notice of appeal to the Secretary

shall state with specificity the issue(s)

in the decision of the administrative law

judge on which the party is seeking

review. Such notice of appeal must be

served on all parties of record.

(c) Upon receipt of a notice of appeal,

the Secretary shall request the Chief

Administrative Law Judge to submit to

him or her a copy of the entire record

before the administrative law judge.

§ 2570.100 Scope of review.

The review of the Secretary shall not

be a de novo proceeding but rather a

review of the record established before

the administrative law judge. There

shall be no opportunity for oral

argument.

§ 2570.101 Procedures for review by the

Secretary.

(a) Upon receipt of the notice of

appeal, the Secretary shall establish a

briefing schedule which shall be served

on all parties of record. Upon motion of

one or more of the parties, the Secretary

may, in his or her discretion, permit the

submission of reply briefs.

(b) The Secretary shall issue a

decision as promptly as possible after

receipt of the briefs of the parties. The

Secretary may affirm, modify, or set

aside, in whole or in part, the decision

on appeal and shall issue a statement of

reasons and bases for the action(s)

taken. Such decision by the Secretary

shall be final agency action within the

meaning of 5 U.S.C. 704.

3. By revising paragraph (a) of

§ 2570.3 as follows:

§ 2570.3 Service: Copies of documents

and pleadings.

* * * * *

(a) General. Copies of all documents

shall be served on all parties of record.

All documents should clearly designate

the docket number, if any, and short

title of all matters. All documents shall

be delivered or mailed to the Chief

Docket Clerk, Office of Administrative

Law Judges, 800 K Street, NW., Suite

400, Washington, DC 20001–8002, or to

the OALJ regional Office to which the

proceedings may have been transferred

for hearing. Each document filed shall

be clear and legible.

* * * * *

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. 00–2937 Filed 2–10–00; 8:45 am]

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