[Federal Register Volume 61, Number 150 (Friday, August 2, 1996)]
[Notices]
[Pages 40462-40464]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-19717]
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DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
Pension Payback Program (Amended)
AGENCY: Pension and Welfare Benefits Administration, Department of
Labor.
ACTION: Notice of adoption of amended voluntary compliance program for
restoration of delinquent participant contributions.
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SUMMARY: This document announces certain amendments to a voluntary
compliance program adopted by the Department on March 7, 1996. The
program allows certain persons to avoid potential Employee Retirement
Income Security Act (ERISA) civil actions initiated by the Department
of Labor, the assessment of civil penalties under section 502(1) of
ERISA and Federal criminal prosecutions arising from their failure to
timely remit participant contributions and the failure to disclose such
non-remittance. The program also includes relief from certain
prohibited transaction liability. The amendments allow additional
persons to take advantage of the program and clarify certain
requirements. These amendments primarily conform the terms of the
program to a prohibited transaction class exemption that the Department
is also publishing today.
DATES: As amended by this notice, the program applies to certain
delinquent contributions, and lost earnings on delinquent participant
contributions, that are restored to pension plans on or after November
28, 1995, but no later than September 7, 1996. Restorative payments
must relate to amounts paid by participants or withheld by an employer
from participants' wages for contribution to a pension plan on or
before April 6, 1996. Written notification of intention to participate
in the program must be received by the Department no later than
September 7, 1996.
ADDRESSES: Notification of intention to participate in the program must
be sent in writing to: Pension Payback Program, Pension and Welfare
Benefits Administration, U.S. Department of Labor, P.O. Box 77235,
Washington, DC 20013-7235.
FOR FURTHER INFORMATION CONTACT: Jeffrey Monhart, Pension Investigator,
Office of Enforcement, Pension and Welfare Benefits Administration,
U.S. Department of Labor, Washington, DC (202) 219-4377. (This is not a
toll-free number).
SUPPLEMENTARY INFORMATION: On March 7, 1996, the Department published
in the Federal Register a notice of adoption of a voluntary compliance
program for restoration of delinquent participant contributions. 61 FR
9203. The program, which is referred to as the Pension Payback Program,
is designed to encourage employers to restore delinquent participant
contributions to employee pension benefit plans as defined in section
3(2) of ERISA. Under the program, employers who are eligible to
participate and who comply with its conditions, may avoid potential
civil actions under ERISA brought by the Department, and Federal
criminal prosecutions arising from their failure to timely remit
participant contributions and from the failure to disclose such non-
remittance.
As a part of the program, the Department also published in the
Federal Register on March 7, a proposed class exemption from the
prohibited transaction provisions of ERISA. 61 FR 9199. In the notice
of adoption, the Department stated that employers who participate in
the program could rely on the proposed exemption notwithstanding any
subsequent modifications made in issuing the final exemption. Pending
promulgation by the Department of the final class exemption, the
Department stated that it would not pursue enforcement against
employers who comply with the conditions of the program and the
proposed class exemption with respect to any prohibited transaction
liability which may have arisen as a result of a delay in forwarding
participant contributions. Similarly, the Internal Revenue Service
advised the Department that it would not seek to impose the sanctions
under sections 4975 (a) and (b) of the Internal Revenue Code with
respect to any prohibited transaction that meets the requirements of
the proposed class exemption.
Today, the Department is publishing in the Federal Register the
final class exemption setting forth the conditions for retroactive
relief from ERISA's prohibited transaction provisions for eligible
persons who comply with the conditions of the program. As a result of
comments responding to the proposed exemption, the final exemption
contains changes that, among other things, increase the number of
persons who may take advantage of the program. A description of the
changes and a discussion of the reasons for them appear in the
supplementary information to the final class exemption published today.
This document amends and supersedes the notice of adoption of the
program issued on March 7, 1996, so that the terms of the program as a
whole will remain consistent with the terms of the final class
exemption. The principal amendment is that the program now applies to
persons who restore or have restored delinquent participant
contributions and earnings at any time on or after November 28, 1995,
until September 7, 1996. The restored amounts must still relate to
delinquent
[[Page 40463]]
participant contributions that were received or withheld by the
employer no later than April 6, 1996.
As a result of this change, it is necessary to amend the condition
in the program that the maximum amount of outstanding delinquent
participant contributions on March 7, 1996, excluding earnings, must
not exceed the aggregate amount of participant contributions that were
received or withheld for the 1995 calendar year. This condition remains
unchanged for restorations that occur on or after March 7, 1996. Under
the amended program, for restorations that occurred on or after
November 28, 1995 and prior to March 7, 1995, the total outstanding
delinquent participant contributions on November 28, 1995, excluding
earnings, must not have exceeded the aggregate participant
contributions received or withheld from the employees' wages for the
twelve calendar months immediately preceding November 1995.
This document reflects an amendment of the program provisions for
calculation of the earnings or interest that must be restored in
addition to delinquent participant contributions. Under the amendment,
the earnings or interest must be calculated from the earliest date on
which such contributions reasonably could have been segregated from the
employer's general assets. Under the program as originally announced,
earnings or interest were required to be calculated from the date on
which the participant contribution was received or withheld by the
employer.
This document also contains a number of minor amendments intended
to eliminate certain repetitive provisions of the program when it was
originally issued and clarify the language and structure of its
provisions. The amendments contained in this document are effective as
of March 7, 1996, the date on which the Department first published the
Program in the Federal Register.
Except as provided in the class exemption, the Program does not
afford relief from civil actions that may be filed by persons other
than the Departments of Labor and Justice, and the Internal Revenue
Service. Persons who have complied with the exemption's conditions will
not be subject to the restrictions of sections 406(a)(1) (A) through
(D), 406(b)(1) and 406(b)(2) of ERISA and the sanctions resulting from
the application of section 4975 (a) and (b) of the Code, by reason of
section 4975(c)(1) (A) through (E) of the Code, for transactions that
result from such persons's failure to transmit participant
contributions to pension plans in accordance with the time frames
described in the participant contribution regulation at 29 CFR 2510.3-
102. The Program does not apply to criminal prosecutions brought by
State government, although the Department has determined not to
affirmatively refer information to the States for criminal prosecution
concerning persons who voluntarily restore participant contributions in
accordance with the terms of the program.
Notice of Adoption of Amended Voluntary Compliance Program for
Restoration of Delinquent Participant Contribution
Amended Pension Payback Program
The Department of Labor (the Department) today announced adoption
of the Amended Pension Payback Program (the Program) which is designed
to benefit workers by encouraging employers to restore delinquent
participant contributions plus lost earnings to pension plans. The
Program, which supersedes a program announced on March 7, 1996 (61 FR
9199), is targeted at ``persons'', as that term is defined at section
3(9) of the Employee Retirement Income Security Act (ERISA), who failed
to transfer participant contributions to pension plans defined under
section 3(2) of ERISA including section 401(k) plans, in accordance
with the time frames described by the Department's regulations, and
thus Violated Title I of ERISA.
The Program is available to certain persons who voluntarily
restore, or have restored, delinquent participant contributions to
pension plans in accordance with the terms of the Program. Those who
comply with the terms of the Program will avoid potential ERISA civil
actions initiated by the Department, the assessment of civil penalties
under section 502(1) of ERISA and Federal criminal prosecutions arising
from their failure to timely remit such contributions and non-
disclosure of the non-remittance. The Department of Justice has
indicated its support for the Program. The Department of Labor will not
pursue enforcement against persons who comply with the conditions of
the Program with respect to any prohibited transaction liability which
may have arisen as a result of the person's delay in forwarding the
participant contributions and who comply with the class exemption
setting forth the conditions for retroactive exemptive relief published
by the Department today in the Federal Register. The Department has
further determined not to affirmatively refer information to the states
for criminal prosecution concerning those persons who voluntarily
restore participant contributions in accordance with the Program. The
Department has also granted a class exemption (published today in the
Federal Register) under section 408(a) of ERISA with respect to
prohibited transactions which may have arisen as a result of a delay in
remitting participant contributions.
The Program only applies to certain delinquent participant
contributions plus earnings that are restored to pension plans on or
after November 28, 1995, but no later than September 7, 1996. Such
restorative payments must relate to amounts paid by participants or
withheld by an employer from participants' wages for contribution to a
plan on or before April 6, 1996. The Program also applies to the
restoration, on or after November 28, 1995, but no later than September
7, 1996, of any earnings attributable to delinquent participant
contributions that were restored to the plan prior to November 28,
1995, without limit as to the amount of such earnings.
The Program is available only if the following conditions are met:
(1) All delinquent participant contributions, are restored to the
employee benefit plan plus the greater of (a) or (b) below.
(a) The amount that otherwise would have been earned on the
participant contributions from the earliest date on which such
contributions reasonably could have been segregated from the employer's
general assets by the employer until the date such money is fully
restored to the plan had such contributions been invested during such
period in accordance with applicable plan provisions, or
(b) Interest at a rate equal to the underpayment rate defined in
section 6621(a)(2) of the Internal Revenue Code from the earliest date
on which such contributions reasonably could have been segregated from
the employer's general assets by the employer until the date such money
is fully restored to the plan,
In determining the amount described in (a) above for a participant
directed defined contribution plan, the person seeking relief under the
Program may apply the highest rate of return earned by any of the
investment alternatives available under the plan during the applicable
period.
(2) The total outstanding delinquent contributions do not exceed
the following limits:
[[Page 40464]]
(a) For amounts restored on or after March 7, 1996, the delinquent
contributions outstanding on March 7, 1996, excluding earnings, may not
exceed the aggregate amount of participant contributions that were
received or withheld from the employees' wages for calendar year 1995.
(b) For amounts restored on or after November 28, 1995, but before
March 7, 1996, the total of all outstanding delinquent participant
contributions, excluding earnings, on November 28, 1995, cannot exceed
the aggregate amount of participant contributions that were received or
withheld from the employees' wages for the twelve calendar months
immediately preceding November 1995.
(3) The Department is notified in writing no later than September
7, 1996 of the person's decision to participate in the Program and
provided with: (a) Copies of cancelled checks or other written evidence
demonstrating that all participant contributions and earnings have been
restored to the employee benefit plan; (b) the certification described
in paragraph (7) below; and (c) evidence of such bond as may be
required under section 412 of ERISA.
(4) The person informs the affected participants within 90 days
following the notification of the Department described in paragraph (3)
above, that prior delinquent contributions and lost earnings have been
restored to their accounts pursuant to the person's participation in
the Program and, thereafter, provides a copy of such notification to
the Department. If a statement of account or other scheduled
communication between the plan or its sponsor and the participants is
scheduled to occur within this time period, such statement may include
the notification required by this paragraph.
(5) The person has complied with all conditions set forth in the
class exemption issued by the Department today.
(6) At the time that the Department is notified of the person's
determination to participate in the Program, neither the Department nor
any other Federal agency has informed such person of an intention to
investigate or examine the plan or otherwise made inquiry with respect
to the status of participant contributions under the plan.
(7) Each person who applies for relief under the program shall
certify in writing, under oath and pain of perjury, that it is in
compliance with all terms and conditions of the Program and, to its
knowledge, neither it nor any person acting under its supervision or
control with respect to the operation of an ERISA covered employee
benefit plan:
(a) Is the subject of any criminal investigation or prosecution
involving any offense against the United States;*
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*For purposes of this paragraph, an ``offense'' includes
criminal activity for which the Department of Justice may seek civil
injunctive relief under the Racketeer Influenced and Corrupt
Organizations statute (18 U.S.C. Sec. 1964(b)). A ``subject'' is any
individual or entity whose conduct is within the scope of any
ongoing inquiry being conducted by a federal investigator(s) who is
authorized to investigate criminal offenses against the United
States.
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(b) Has been convicted of a criminal offense involving employee
benefit plans at any time or any other offense involving financial
misconduct which was punishable by imprisonment exceeding one year for
which sentence was imposed during the preceding thirteen years or which
resulted in actual imprisonment ending within the last thirteen years,
nor has such person entered into a consent decree with the Department
or been found by a court of competent jurisdiction to have violated any
fiduciary responsibility provisions of ERISA during such period; or
(c) Has sought to assist or conceal the non-remittance of
participant contributions by means of bribery, graft payments to
persons with responsibility for ensuring remittance of plan
contributions or with the knowing assistance of persons engaged in
ongoing criminal activity.
Signed at Washington, DC this 30th day of July, 1996.
Olena Berg,
Assistant Secretary, Pension and Welfare Benefits Administration,
Department of Labor.
[FR Doc. 96-19717 Filed 8-1-96; 8:45 am]
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