[Federal Register Volume 65, Number 29 (Friday, February 11, 2000)]
[Rules and Regulations]
[Pages 7185-7191]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-2937]


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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.

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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: 
``[email protected]'' (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 Sec. 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).
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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 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.
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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, an interim final rule describing the manner in which the 
Department will assess civil penalties under ERISA section 502(c)(5). 
See Sec. 2560.502c-5.

[[Page 7186]]

    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:
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    \2\ To 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).

Sec. 18.4  Time computations.
Sec. 18.5  (c) through (e)  Responsive pleadings--answer and request 
for hearing.
Sec. 18.6  Motions and requests.
Sec. 18.7  Prehearing statements.
Sec. 18.8  Prehearing conferences.
Sec. 18.11  Consolidation of hearings.
Sec. 18.12  Amicus curiae.
Sec. 18.13  Discovery methods.
Sec. 18.15  Protective orders.
Sec. 18.16  Supplementation of responses.
Sec. 18.17  Stipulations regarding discovery.
Sec. 18.18  Written interrogatories to parties.
Sec. 18.19  Production of documents and other evidence; entry upon 
land for inspection and other purposes; and physical and mental 
examination.
Sec. 18.20  Admissions.
Sec. 18.21  Motion to compel discovery.
Sec. 18.22  Depositions.
Sec. 18.23  Use of depositions at hearings.
Sec. 18.24  Subpoenas.
Sec. 18.25  Designation of administrative law judge.
Sec. 18.26  Conduct of hearings.
Sec. 18.27  Notice of hearing.
Sec. 18.28  Continuances.
Sec. 18.29  Authority of administrative law judge.
Sec. 18.30  Unavailability of administrative law judge.
Sec. 18.31  Disqualification.
Sec. 18.32  Separation of functions.
Sec. 18.33  Expedition.
Sec. 18.34  Representation.
Sec. 18.35  Legal assistance.
Sec. 18.36  Standards of conduct.
Sec. 18.37  Hearing room conduct.
Sec. 18.38  Ex parte communications.
Sec. 18.39  Waiver of right to appear and failure to participate or 
to appear.
Sec. 18.40  Motion for summary decision.
Sec. 18.42  Expedited proceedings.
Sec. 18.43  Formal hearings.
Sec. 18.44  Evidence.
Sec. 18.45  Official notice.
Sec. 18.46  In camera and protective orders.
Sec. 18.47  Exhibits.
Sec. 18.48  Records in other proceedings.
Sec. 18.49  Designation of parts of documents.
Sec. 18.50  Authenticity.
Sec. 18.51  Stipulations.
Sec. 18.52  Record of hearings.
Sec. 18.53  Closing of hearings.
Sec. 18.54  Closing the record.
Sec. 18.55  Receipt of documents after hearing.
Sec. 18.56  Restricted access.
Sec. 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 Sec. 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 Sec. 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 
Sec. 2570.91(c) and (d) below, and Sec. 2560.502c-5(h), published 
separately in this issue of the Federal Register.
    The definitional section (Sec. 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 Sec. 18.2 
of this title. In particular, Sec. 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 Sec. 2560.502c-5 before

[[Page 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 Sec. 2560.502c-5(c), and the notice of determination on 
a statement of reasonable cause, as described in Sec. 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 Sec. 2560.502c-5(i). Paragraph (c) of 
Sec. 2570.91 (relating to respondent's answer), paragraph (d) of 
Sec. 2570.91 (relating to commencement of proceedings), and paragraph 
(h) of Sec. 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 Sec. 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 
(Sec. 2570.93) differs from its counterpart under Sec. 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 Sec. 2560.502c-5(g), 
within the 30-day period provided by Sec. 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 (Sec. 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 (Sec. 2570.98) differs from its counterpart at 
Sec. 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 Secs. 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 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

[[Page 7188]]

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 Sec. 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 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 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)


Sec. 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 Sec. 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.


Sec. 2570.91  Definitions.

    For 502(c)(5) civil penalty proceedings, this section shall apply 
in lieu of the definitions in Sec. 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 Sec. 2560.502c-5(g);

[[Page 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 Sec. 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 Sec. 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.


Sec. 2570.92  Service: Copies of documents and pleadings.

    For 502(c)(5) penalty proceedings, this section shall apply in lieu 
of Sec. 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 8\1/2\ x 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.


Sec. 2570.93  Parties, how designated.

    For 502(c)(5) civil penalty proceedings, this section shall apply 
in lieu of Sec. 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

[[Page 7190]]

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.


Sec. 2570.94  Consequences of default.

    For 502(c)(5) civil penalty proceedings, this section shall apply 
in lieu of Sec. 18.5 (a) and (b) of this title. Failure of the 
respondents to file an answer to the notice of determination described 
in Sec. 2560.502c-5(g) within the 30-day period provided by 
Sec. 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.


Sec. 2570.95  Consent order or settlement.

    For 502(c)(5) civil penalty proceedings, the following shall apply 
in lieu of Sec. 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.


Sec. 2570.96  Scope of discovery.

    For 502(c)(5) civil penalty proceedings, this section shall apply 
in lieu of Sec. 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.


Sec. 2570.97  Summary decision.

    For 502(c)(5) civil penalty proceedings, this section shall apply 
in lieu of Sec. 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

[[Page 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.


Sec. 2570.98  Decision of the administrative law judge.

    For 502(c)(5) civil penalty proceedings, this section shall apply 
in lieu of Sec. 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 Secs. 2570.99 through 2570.101.


Sec. 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.


Sec. 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.


Sec. 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 Sec. 2570.3 as follows:


Sec. 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]
BILLING CODE 4510-29-P