[Federal Register Volume 65, Number 209 (Friday, October 27, 2000)]
[Proposed Rules]
[Pages 64498-64509]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-27045]


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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

29 CFR Part 2570

RIN 1210-AA48


Procedures for Administrative Hearings Regarding Plans 
Established or Maintained Pursuant to Collective Bargaining Agreements 
Under Section 3(40)(A) of ERISA

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

ACTION: Proposed rule.

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SUMMARY: This document contains proposed rules under the Employee 
Retirement Income Security Act of 1974, as amended (ERISA), describing 
procedures for administrative hearings to obtain a determination by the 
Secretary of Labor (Secretary) as to whether a particular employee 
welfare benefit plan is established or maintained under or pursuant to 
one or more collective bargaining agreements for purposes of section 
3(40) of ERISA. The procedure for administrative hearings would be 
available only in situations where the jurisdiction or law of a state 
has been asserted against a plan or other arrangement that contends it 
meets the exception for plans established or maintained under or 
pursuant to one or more collective bargaining agreements. Under Section 
3(40) of ERISA, the Secretary may make a determination that an employee 
welfare benefit plan is a collectively bargained plan, and thereby 
excluded from the definition of ``multiple employer welfare 
arrangements'' under section 3(40) of ERISA, which are otherwise 
subject to state regulation of multiple employer welfare arrangements 
as provided for by ERISA. A separate document is being published today 
in the Federal Register containing proposed rules setting forth the 
criteria for determining when an employee welfare benefit plan is 
established or maintained under or pursuant to one or more collective 
bargaining agreements for purposes of section 3(40) of ERISA. If 
adopted, these proposed rules would affect employee welfare benefit 
plans, their sponsors, participants, and beneficiaries as well as 
service providers to plans.

DATES: Written comments concerning the proposed regulation must be 
received by December 26, 2000.

ADDRESSES: Interested persons are invited to submit written comments 
(preferably three copies) concerning this proposed regulation to: 
Pension and Welfare Benefits Administration, Room N-5669, U.S. 
Department of Labor, 200 Constitution Avenue, NW., Washington, DC 
20210, (Attention: Proposed Regulation Under Section 3(40)). All 
submissions will be open to public inspection at the Public Documents 
Room, Pension and Welfare Benefits Administration, Room N-5638, U.S. 
Department of Labor, 200 Constitution Avenue, NW., Washington, DC 
20210.

FOR FURTHER INFORMATION CONTACT: Elizabeth A. Goodman, Office of 
Regulations and Interpretations, Pension and Welfare Benefits 
Administration, Room N-5669, U.S. Department of Labor, 200 Constitution 
Avenue, NW., Washington, DC 20210, (202) 219-8671. This is not a toll-
free number.

SUPPLEMENTARY INFORMATION:

A. Background

    This document contains proposed rules describing procedures for 
administrative hearings to obtain a determination by the Secretary as 
to whether a particular employee benefit plan is established or 
maintained under or pursuant to one or more collective bargaining 
agreements for purposes of section 3(40) of ERISA. The procedure for 
administrative hearings would be available only in situations where the 
jurisdiction or law of a state has been asserted against a plan or 
other arrangement that contends it meets the exception for plans 
established or maintained under or pursuant to one or

[[Page 64499]]

more collective bargaining agreements. These rules are modeled on the 
procedures set forth in sections 29 CFR 2570.60 through 2570.71 
regarding civil penalties under section 502(c)(2) of ERISA relating to 
reports required to be filed under ERISA section 104(b)(4).

B. The 1995 Notice of Proposed Rulemaking

    The history of section 3(40) of ERISA and the Department's efforts 
to implement this provision is fully outlined in the proposed rule 
establishing the regulatory criteria under section 3(40), published 
separately in this issue of the Federal Register. On August 1, 1995, 
the Department published a Notice of Proposed Rulemaking on Plans 
Established or Maintained Pursuant to Collective Bargaining Agreements 
in the Federal Register. (60 FR 39209) (1995 NPRM). The Department 
proposed criteria and a process for determining whether an employee 
benefit plan is established or maintained under or pursuant to one or 
more agreements that the Secretary finds to be collective bargaining 
agreements for purposes of section 3(40) of ERISA. The approach 
proposed in the 1995 NPRM did not provide for individual findings by 
the Department. The Department received numerous comments on the NPRM. 
Commenters objected to having state regulators determine whether a 
particular agreement was a collective bargaining agreement.

C. Regulatory Negotiation

    A discussion of the process the Department followed to establish 
the ERISA Section 3(40) Negotiated Rulemaking Advisory Committee (the 
Committee) to recommend a rule implementing section 3(40) is set forth 
in the proposed rule establishing the regulatory criteria under section 
3(40), published separately in this issue of the Federal Register.
    The goal of the Committee was to develop a substantive rule to help 
the states, insurers, plans, and organized labor determine which 
entities are indeed plans established or maintained under or pursuant 
to one or more collective bargaining agreements, and therefore not 
subject to state regulation, under Section 3(40) of ERISA. These 
procedural rules, in addition to the substantive rule published 
simultaneously in this issue of the Federal Register, resulted from the 
Committee's determination that the availability of an individualized 
procedure before a Department of Labor Administrative Law Judge (ALJ), 
and for appeals of an ALJ decision to the Secretary or the Secretary's 
delegate, would be appropriate for the resolution of a dispute 
regarding an entity's legal status in situations where the jurisdiction 
or law of a state has been asserted against a plan or other arrangement 
that contends it meets the exception for plans established or 
maintained under or pursuant to one or more collective bargaining 
agreements.
    With the exception of sections F-L of the preamble, the text of the 
proposed rule and preamble is the Committee's consensus.

D. Overview of the Proposed Regulations

    This document contains proposed regulations that establish 
procedures for hearings before an ALJ with respect to individualized 
determinations under Section 3(40) of ERISA. In this regard, the 
Secretary has established the Pension and Welfare Benefits 
Administration (PWBA) within the Department for the purpose of carrying 
out the Secretary's responsibilities under ERISA. See Secretary of 
Labor's Order 1-87, 52 FR 13139 (April 21, 1987).
    The Department has also published rules of practice and procedure 
for administrative hearings before the Office of the 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.
    In drafting proposed regulatory language, the Committee reviewed 
the applicability of the provisions of Subpart A of 29 CFR Part 18 to 
the ALJ determination whether an employee benefit plan is a 
collectively bargained plan under section 3(40) of ERISA, and the 
Department, following the recommendations of the Committee, has decided 
to adopt many, though not all, of the provisions of Subpart A of 29 CFR 
Part 18 for these proceedings. These proposed rules relate specifically 
to procedures for ALJ determinations under section 3(40) of ERISA and 
are controlling to the extent that they are inconsistent with any 
portion of Subpart A of 29 CFR Part 18. Accordingly, where not 
otherwise specified in these proposed regulations, adjudications 
relating to determinations under ERISA section 3(40) will be governed 
by the following sections of Subpart A of 29 CFR Part 18:


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. 18.9  Consent Order or Settlement; Settlement Judge Procedure.


Sec. 18.11  Consolidation of Hearings.


Sec. 18.12  Amicus Curiae.


Sec. 18.13  Discovery Methods.


Sec. 18.14  Scope of Discovery.


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.

[[Page 64500]]

Sec. 18.43  Formal Hearings.


Sec. 18.44  [Reserved].


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. 18.58  Appeals.


Sec. 18.59  Certification of Official Record.

    This proposed 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, but also 
recognizing the special characteristics of proceedings under ERISA 
section 3(40). For purposes of clarity, where a particular section of 
the existing procedural rules would be affected by these proposed 
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 contain changes from, or additions to, the rules in Subpart A of 
29 CFR Part 18. The Department seeks suggestions on ways to facilitate 
and expedite the process by electronic means or otherwise. The specific 
modifications to the rules in Subpart A of 29 CFR Part 18, and their 
relationship to the conduct of these proceedings generally, are 
outlined below.

E. Discussion of the Proposed Rules

1. In General

    Generally, the proposed rule in section 2510.3-40, also being 
published today, sets forth the finding by the Secretary as to what 
constitutes an employee welfare benefit plan established or maintained 
under or pursuant to one or more collective bargaining agreements under 
section 3(40) of ERISA. The availability of the procedures in these 
proposed rules is limited. The applicability of these procedural rules 
under section 3(40) of ERISA is set forth in section 2570.130. In this 
regard, it should be noted that these procedural rules apply only to 
adjudicatory proceedings before ALJs of the United States Department of 
Labor. Pursuant to proposed rule section 2570.131, contained in this 
notice, an adjudicatory proceeding before an ALJ may be commenced only 
when the jurisdiction or law of a state has been asserted against a 
plan or other arrangement that contends it meets the exception for 
plans established or maintained under or pursuant to collective 
bargaining. Only an entity against whom the jurisdiction or law of a 
state has been asserted may initiate adjudicatory proceedings before an 
ALJ under these rules.
    The definitions section (2570.132) of these 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 section 3(40) of ERISA. In this respect, it differs from its more 
general counterpart at section 18.2 of this title. In particular, 
section 2570.132(f) 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 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 
these proposed procedural regulations 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

    Section 2570.133 (relating to parties to the proceedings) and 
section 2570.94 (relating to filing and contents of a petition) 
contemplate that adjudicatory proceedings will be initiated with the 
filing by an entity of a petition for a determination under section 
3(40) of ERISA. The service of documents by the parties to an 
adjudicatory proceeding, as well as by the ALJ, will be governed by 
section 2570.135 of these 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 
section 3(40) of ERISA. The proposed rule on the designation of parties 
(2570.133) differs from its counterpart under section 18.10 of this 
title in that it specifies that the parties in these proceedings will 
be limited to (i) the entity filing a petition under section 2750.134 
(the plan or other arrangement against whom state law or jurisdiction 
has been asserted); (ii) the state or states whose law or jurisdiction 
has been asserted to apply to the entity; (iii) any individual party 
other than a state who has asserted that a particular state has 
jurisdiction over the entity, or whose law applies; and (iv) the 
Secretary of Labor.
    Within 30 days after the service of the petition, any other party 
may file a response to the petition. Before that date, any state not 
named in the petition may intervene as of right, simply by giving 
written notice to the other parties and the ALJ. After that date, 
intervention by other states is permissive with consent of all parties 
or by order of the ALJ.
    Section 2570.136, relating to expedited proceedings, permits any of 
the parties to move to shorten the time for the scheduling of a 
proceeding, including the time for conducting discovery. Paragraph (b) 
of section 2570.136 describes the information which must be set forth 
in support of a party's motion to expedite proceedings. Paragraph (c) 
of section 2570.136 prescribes the manner of service for purposes of 
this section, while paragraph (d) generally sets a time limit of ten 
days from the date of service of the motion for all other parties to 
file an opposition in response to the motion. Paragraph (e) permits an 
ALJ to advance the schedule for pleadings, discovery, prehearing 
conferences and the adjudicatory hearing after receiving the parties' 
statements in response to the initial motion, but requires that the ALJ 
give notice of at least five business days in advance of a hearing on 
the merits, unless all parties consent otherwise to an earlier hearing. 
Paragraph (f) of section 2570.136 provides that when an expedited 
hearing is held, the ALJ must issue a decision within 20 working days 
after receipt of the transcript of an oral hearing, or within 20 
working days after the filing of all documentary evidence, if no oral 
hearing is conducted.
    The proposed rule on the allocation of the burden of proof 
(2570.137) provides that for purposes of a final decision under section 
2570.138 (decision of administrative law judge) and section 2570.139 
(review by the Secretary), the petitioner has the ultimate burden of 
establishing each of the elements of subparagraph (b)(4) of section 
2570.134, relating to whether the entity qualifies

[[Page 64501]]

as an employee welfare benefit plan established or maintained under or 
pursuant to one or more collective bargaining agreements. At the 
outset, however, the petitioner would meet its burden of going forward 
when it makes a prima facie showing that it satisfies the criteria of 
29 CFR 2510.3-40(b).
    Paragraph (a) of section 2570.138, relating to the decision of the 
ALJ, permits the ALJ to allow parties to file proposed findings of 
fact, conclusions of law and a proposed order together with supporting 
briefs. Paragraph (b) of section 2570.138 permits the ALJ to request 
that the parties present oral arguments in lieu of briefs and, in such 
an instance, requires the ALJ to issue a decision at the close of oral 
argument. Paragraph (c) of section 2570.138 provides that the ALJ shall 
issue a decision, containing findings of fact and conclusions of law, 
and reasons supporting the same, no later than 30 days, or as soon as 
possible thereafter, after the receipt of proposed findings of fact, 
conclusions of law and a proposed order, or within 30 days of receipt 
of an agreement containing consent findings and order disposing of the 
whole of the disputed issue. Paragraph (c) of section 2570.138 further 
provides, among other things, that the ALJ's order be based on the 
whole record, and that it be supported by reliable and probative 
evidence.
    The proposed rule concerning the review by the Secretary of the 
decision of the ALJ (2570.139) differs from its counterpart at section 
18.57 of this title in that it states that the decision of the ALJ in a 
Section 3(40) Finding Procedure shall become the final decision of the 
Secretary unless a timely appeal is filed. The procedures for appeals 
of ALJ decisions under section 3(40) of ERISA are governed solely by 
the rules set forth in section 2570.139, and without any reference to 
the appellate procedures contained in Subpart A of 29 CFR Part 18. 
Paragraph (a) of section 2570.139 establishes a 20-day time limit 
within which such appeals must be filed. Paragraph (b) of section 
2570.139 requires that the issues for appeal be stated with specificity 
in a party's request for review, and that the request for appeal be 
filed on all parties to the proceeding. Paragraph (c) of section 
2570.139 provides that review by the Secretary shall not be de novo, 
but rather on the basis of the record before the ALJ. Paragraph (e) of 
section 2570.139 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.

Economic Analysis Under Executive Order 12866

    Under Executive Order 12866, the Department must determine whether 
the 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), the order defines a 
``significant regulatory action'' as 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.
    Pursuant to the terms of the Executive Order, it has been 
determined that this action is ``significant'' and therefore subject to 
review by the Office of Management and Budget (OMB). OMB has determined 
that this proposed regulation is significant within the meaning of 
section 3(f)(4) of the Executive Order. Consistent with the Executive 
Order, the Department has undertaken an assessment of the costs and 
benefits of this regulatory action.
    The analysis is detailed below.

Summary

    Pursuant to the requirements of Executive Order 12866 the 
Department undertook an analysis of the economic impact of this 
proposed regulation. Based on its analysis, the Department has 
concluded that the proposed regulation's benefits exceed its costs 
although neither has been quantified.\1\ The Department seeks data on 
benefits and costs. The Department has concluded that the proposed 
regulation will benefit plans, states, insurers, and organized labor by 
reducing the cost of resolving some disputes over states' jurisdiction 
to regulate certain multiple employer welfare benefit arrangements, 
likely facilitating the conduct of hearings, reducing disputes over 
plans' and arrangements' status, and by improving the efficiency and 
ensuring the consistency in determinations of such jurisdiction.
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    \1\ See below for data relevant to the number of MEWAs and 
collectively bargained plans and the costs of filing petitions.
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    The regulation establishes procedures for administrative hearings 
to obtain a determination from the Secretary as to whether a multiple 
employer welfare benefit plan is established or maintained under or 
pursuant to one or more collective bargaining agreements. Plans so 
established or maintained are excluded from the definition of multiple 
employer welfare arrangements (MEWAs) and consequently are not subject 
to state regulation. When state jurisdiction is asserted over entities 
that claim this collective bargaining exclusion, they would have the 
option of using these procedures to resolve the dispute. In the absence 
of the promulgation of specific criteria which would form the basis of 
a determination concerning whether a given plan is established or 
maintained pursuant to a collective bargaining agreement, such disputes 
have generally been resolved in courts. It is expected that giving 
entities over whom state jurisdiction has been asserted the opportunity 
to resolve disputes via the procedures established by the proposed 
regulation will generally be more efficient and less costly than 
resolving them in courts when these procedures are chosen. It is also 
expected that determinations made in the single, specialized venue of 
the administrative hearings provided for in the proposed regulation may 
be more consistent than determinations made in multiple, non-
specialized court venues.

Background

    A multiple employer welfare arrangement (MEWA) is a group benefit 
program which is geared toward providing welfare benefits, most 
frequently to small employers and their employees. Because they provide 
health, life, disability or other welfare benefits, all MEWAs, whether 
or not they are ERISA-covered employee benefit plans, are subject to 
state insurance regulation unless they fall

[[Page 64502]]

under one of the statutory exceptions to ERISA's MEWA definition. The 
exception relevant here states that the term MEWA does not include 
plans which are established or maintained under or pursuant to one or 
more agreements which the Secretary of Labor (the Secretary) finds to 
be collective bargaining agreements. Some unscrupulous MEWA operators 
have taken advantage of the ``collective bargaining agreements'' 
exception to establish sham MEWAs which are often underfunded and 
incapable of paying employees health benefit claims. A General 
Accounting Office Report, published in March 1992, entitled, ``Employee 
Benefits: States Need Labor's Help Regulating Multiple Employer Welfare 
Arrangements'' (GAO/HRD-92-40) stated that, ``Between January 1988 and 
June 1991, MEWAs left at least 398,000 participants and their 
beneficiaries with more than $124 million in unpaid claims and many 
other participants without insurance. More than 600 MEWAs failed to 
comply with state insurance laws, and some violated criminal 
statutes.'' The Department is proposing today, two regulations, one 
defining what is a plan established or maintained under or pursuant to 
one or more collective bargaining agreements (29 CFR 2510.3-40), and 
this regulation, providing for a procedure before a Department 
Administrative Law Judicial Hearing (ALJ) concerning the legal status 
of an entity when a state's jurisdiction has been asserted over or 
against that entity.
    Historically, the usual means for determining a plan's legal status 
under state insurance laws has been a judgment in a court of law. The 
1992 GAO Report noted that although most states were able to establish 
jurisdiction without going to court, thirteen states had found it 
necessary to establish jurisdiction in a court of law. States described 
these legal battles as costly in terms of staff and time. Moreover, 
states claimed that, on occasion, fraudulent MEWAs claimed the 
collective bargaining agreement exemption in order to stall state 
action and continue collecting premiums from unsuspecting employers. 
States contacted by GAO recommended that the Department clarify ERISA's 
collective bargaining preemption provision in a regulation. Ultimately, 
the Report recommended, ``that the Secretary of Labor direct the 
Assistant Secretary for PWBA to * * * (2) improve procedures to quickly 
answer questions about such issues as ERISA preemption and state 
regulatory authority, thus enabling states to more aggressively deal 
with problem MEWAs.''
    Recognizing that additional guidance was needed, in 1995 the 
Department proposed criteria and a process for determining whether an 
employee benefit plan was established or maintained under or pursuant 
to one or more agreements that the Secretary finds to be a collective 
bargaining agreement. The approach proposed in the 1995 NPRM did not 
provide for individual findings by the Department but instead relied on 
state regulators to make the determination as to whether a collective 
bargaining agreement existed--a procedure which drew negative comments 
from the public.
    Convinced that guidance was still needed, in 1998 the Secretary 
established the ERISA Section 3(40) Negotiated Rulemaking Advisory 
Committee under the Negotiated Rulemaking Act and the Federal Advisory 
Committee Act. The Committee included representatives from labor 
unions, multiemployer plans, state governments, employers, third party 
administrators, insurance carriers, brokers and agents providing health 
care products and services, and the National Railway Labor Conference. 
As a result of the Committee's work and as an alternative to the 1995 
proposed regulation, the Department is proposing two regulations: this 
regulation, which establishes procedures for administrative hearings to 
obtain a determination from the Secretary as to whether a plan is 
established or maintained under or pursuant to one or more collective 
bargaining agreements, and its accompanying regulation, which sets 
forth standards for distinguishing whether a plan is so established or 
maintained.
    In formulating the process for an administrative hearing, the 
Committee reviewed the applicability of the rules of practice and 
procedure currently used by the Office of Administrative Law Judges 
(ALJs) and adopted many, though not all, of the provisions. These 
proposed rules relate specifically to procedures for ALJ determinations 
under section 3(40) of the Act and are controlling to the extent that 
they are inconsistent with any portion of the ALJ published rules of 
practice and procedure.
    In order to initiate adjudicatory proceedings, an entity will be 
required to file with the ALJ a petition for a determination under 
section 3(40) of the Act. The petition shall: (1) Provide the name and 
address of the entity for which the petition is filed; (2) provide the 
names and addresses of the plan administrator and plan sponsor(s) of 
the plan or other arrangement for which the finding is sought; (3) 
identify the state or states whose law or jurisdiction the petitioner 
claims has been asserted over the plan or other arrangement at issue, 
and provide the addresses and names of responsible officials; (4) 
include affidavits or other written evidence showing that (i) state 
jurisdiction has been asserted over or legal process commenced against 
the plan or other arrangement pursuant to state law; (ii) the plan is 
an employee welfare benefit plan as defined at section 3(1) of ERISA 
and is covered by ERISA pursuant to section 4 of the Act; (iii) the 
plan is established or maintained for the purpose of offering or 
providing benefits described in section 3(1) of ERISA to employees of 
two or more employers (including one or more self-employed individuals) 
or their beneficiaries; (iv) the plan satisfies the criteria in new 
section 3-40(b); and (v) service has been made as provided by this 
proposed regulation; (5) affidavits shall set forth such facts as would 
be admissible in evidence in a proceeding under part 18 of this title 
and shall show affirmatively that the affiant is competent to testify 
to the matters stated therein. The affidavit or other written evidence 
must set forth specific facts showing the factors required under 
subparagraph (b)(4). In addition, copies of all documents shall be 
served on all parties of record, attorneys for the parties, and the 
Secretary. If an entity chooses to request an expedited proceeding, the 
motion must be made in writing, with a description of the circumstances 
necessitating an expedited hearing, the harm which would result if the 
motion were denied, and supporting affidavits.
    The section of the proposed rule on the allocation of the burden of 
proof provides that for purposes of a final decision by the ALJ (and 
for purposes of review by the Secretary) the petitioner has the 
ultimate burden of establishing each of the elements relating to 
whether the entity qualifies as an employee welfare benefit plan 
established or maintained under or pursuant to one or more collective 
bargaining agreements. The decision of the ALJ is final unless an 
appeal is filed with the Secretary within twenty days. A request for 
review by the Secretary must state the issue(s) in the administrative 
law judge's final decision upon which review is sought and shall be 
served on all parties to the proceeding. The review by the Secretary is 
the final agency action.

Resolving Disputes Efficiently

    An administrative hearing under the proposed regulation will 
economically

[[Page 64503]]

benefit the small number of plans or arrangements that dispute state-
asserted jurisdiction. The Department foresees improved efficiencies 
through use of administrative hearings that are used at the option of 
entities over whom state jurisdiction has been asserted. An 
administrative hearing will allow the various parties to obtain a 
decision in a more timely and efficient manner than is customary in 
federal or state court proceedings and will provide cost savings for 
the plan or arrangement, its participating employers and employees.
    For purposes of this economic analysis, the Department considered 
the cost of obtaining determinations of plans' or arrangements' status 
and states' jurisdiction under the proposed regulation relative to the 
cost of obtaining such determinations in the current environment. The 
current practice for determining whether a plan is established or 
maintained under or pursuant to a collective bargaining agreement is 
for a plan or state to obtain a decision in a federal or state court. 
Accordingly, this analysis relates to determining plans' or 
arrangements' legal status through adjudication.
    The Department's analysis of costs involved in adjudication in a 
federal or state court versus an administrative hearing assumes that 
entities and states incur a baseline cost to resolve the question of 
their status in federal or state court. This baseline cost includes, 
but is not limited to, expenditures for document production, attorney 
fees, filing fees, depositions, etc. Because a determination of 
jurisdiction in a federal or state court may be determined in motions 
or pleadings in cases where jurisdiction is not the primary litigated 
issue, the direct cost of using the courts as a decision-maker for 
jurisdictional issues only is too variable to specify; however, custom 
and practice indicate that the cost of an administrative hearing will 
be similar to or will represent a cost savings compared with the 
baseline cost of litigating in federal or state court.
    Because the procedures and evidentiary rules of an administrative 
hearing generally track the Federal Rules of Civil Procedure and of 
Evidence, document production will be similar for both an 
administrative hearing and for a federal or state court. Documents such 
as by-laws, administrative agreements, and collective bargaining 
agreements, etc., are generally kept in the normal course of business 
for welfare benefit plans and it is unlikely that there will be any 
additional cost for an administrative hearing beyond that which would 
be required in preparation for litigation in a federal or state court. 
Certain administrative hearing practices and other new procedures 
initiated by this regulation may, however, represent a cost savings 
over litigation. For example, neither party need employ an attorney; 
the prehearing exchange is short and general; either party may move to 
shorten the time for the scheduling of a proceeding, including the time 
for conducting discovery; the general formality of the hearing may 
vary, particularly depending on whether the petitioner is appearing pro 
se; an expedited hearing is possible; and, the ALJ generally has 20 
working days after receipt of the transcript of an oral hearing or 
after the filing of all documentary evidence if no oral hearing is 
conducted to reach a decision.
    The Department cannot predict that any or all of these conditions 
will exist, nor can it predict that any of these factors represent a 
cost-savings, but, it is likely that the knowledge of state and federal 
laws which the ALJ brings to the decision-making process will 
facilitate the hearing, reduce costs, and introduce a consistent 
standard to what has been a confusion of jurisdictional decisions. ALJ 
case histories will educate MEWAs and states by articulating the 
characteristics of a collectively bargained plan, which clarity will in 
turn benefit participants and beneficiaries with secure contributions 
and paid-up claims. The Department welcomes comment on the comparative 
cost of a trial in federal or state court versus an administrative 
hearing on the issue of the legal status of a welfare benefit plan as 
it pertains to the existence of a plan that is established or 
maintained under or pursuant to an agreement or agreements that the 
Secretary finds to be collective bargaining agreements for purposes of 
section 3(40) of ERISA.

Determining Jurisdiction Accurately and Consistently

    The proposed regulation that accompanies this one establishes 
criteria for determining whether a welfare benefit plan is established 
or maintained under or pursuant to one or more collective bargaining 
agreements. While the proposed criteria will largely eliminate 
confusion in determining whether a MEWA falls under the collective 
bargaining agreement exception, given the wide variety and constructs 
of agreements, MEWA operators and the states may still disagree about 
the legal status of an entity. For this reason, the Department is 
proposing this second regulation establishing procedures that permit, 
in certain limited circumstances, an entity to seek an administrative 
hearing to obtain a finding by the Secretary that a particular plan is 
established or maintained under or pursuant to one or more collective 
bargaining agreements.
    Accurate and consistent determinations under this proposed 
regulation and the objective standards provided in the substantive 
proposal together are expected to reduce uncertainty and the incidence 
of disputes over plans' and arrangements' status. The Department has 
attributed expected cost savings from reductions in uncertainty and 
disputes to the substantive regulation, because that regulation sets 
forth the standards on which determinations will be based.
    Efficiently and accurately determining the legal status of a plan 
or arrangement will also benefit employers and employees as it will 
provide greater assurance that the entity is complying with appropriate 
federal and state laws. Due at least in part to the interaction of 
federal and state requirements, historical compliance with the various 
requirements which apply to MEWAs has been shown to be inconsistent. 
Although the provisions of Titles I and IV of ERISA generally supersede 
state laws that relate to employee benefit plans, certain state laws 
which regulate insurance may apply to MEWAs, and knowledge of both 
federal and state requirements is necessary for consistency in 
determining plans' or arrangements' legal status. This is particularly 
important where these entities are doing business in more than one 
state and each state's laws may apply independently to the MEWAs doing 
business in that state. The Department believes that the administrative 
hearing process will provide for the uniform interpretation and 
application of both federal and state regulations and will avoid 
confusion resulting from a variety of jurisdictional procedures and 
laws. Employers and employees will benefit from an administrative 
decision by assurances as to which protections, be they federal or both 
state and federal, apply to their particular arrangement. The 
Department has attributed the net benefit from the reclassification of 
currently inaccurately classified plans or arrangements (and the 
consequent application of appropriate state or federal protections) to 
the substantive proposed regulation, which sets for the standards that 
will assure accurate classifications.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) imposes 
certain requirements with respect to Federal rules that are subject to 
the

[[Page 64504]]

notice and comment requirements of section 553(b) of the Administrative 
Procedure Act (5 U.S.C. 551 et seq.) and which are likely to have a 
significant economic impact on a substantial number of small entities. 
Unless an agency certifies that a proposed rule will not have a 
significant economic impact on a substantial number of small entities, 
section 603 of the RFA requires that the agency present an initial 
regulatory flexibility analysis at the time of the publication of the 
notice of proposed rulemaking describing the impact of the rule on 
small entities and seeking public comment on such impact. Small 
entities include small businesses, organizations and governmental 
jurisdictions.
    For purposes of analysis under the RFA, PWBA proposes to continue 
to consider a small entity to be an employee benefit plan with fewer 
than 100 participants. The basis of this definition is found in section 
104(a)(2) of the Employee Retirement Income Security Act of 1974 
(ERISA), which permits the Secretary of Labor to prescribe simplified 
annual reports for pension plans which cover fewer than 100 
participants. Under section 104(a)(3), the Secretary may also provide 
for exemptions or simplified annual reporting and disclosure for 
welfare benefit plans. Pursuant to the authority of section 104(a)(3), 
the Department has previously issued at 29 CFR 2520.104-20, 2520.104-
21, 2520.104-41, 2520.104-46 and 2520.104b-10 certain simplified 
reporting provisions and limited exemptions from reporting and 
disclosure requirements for small plans, including unfunded or insured 
welfare plans covering fewer than 100 participants and which satisfy 
certain other requirements.
    Further, while some large employers may have small plans, in 
general most small plans are maintained by small employers. Thus, PWBA 
believes that assessing the impact of this proposed rule on small plans 
is an appropriate substitute for evaluating the effect on small 
entities. The definition of small entity considered appropriate for 
this purpose differs, however, from a definition of small business 
which is based on size standards promulgated by the Small Business 
Administration (SBA) (13 CFR 121.201) pursuant to the Small Business 
Act (15 U.S.C. 631 et seq.). PWBA therefore requests comments on the 
appropriateness of the size standard used in evaluating the impact of 
this proposed rule on small entities.
    On this basis, however, PWBA has preliminarily determined that this 
rule will not have a significant economic impact on a substantial 
number of small entities. In support of this determination, and in an 
effort to provide a sound basis for this conclusion, PWBA has prepared 
the following regulatory flexibility analysis.
    (a) Reason for the Action. The Department proposes this regulation 
in order to establish a procedure for an administrative hearing so that 
states and entities will be able to obtain a determination by the 
Secretary as to whether a particular employee welfare benefit plan is 
established or maintained under or pursuant to one or more collective 
bargaining agreements for purposes of an exception to section 3(40) of 
ERISA.
    (b) Objectives. The objective of the regulation is to make 
available to plans an individualized procedure for a hearing before a 
Department of Labor Administrative Law Judge, and for appeals of an ALJ 
decision to the Secretary or the Secretary's delegate, which would be 
appropriate for the resolution of a dispute regarding an entity's legal 
status in situations where the jurisdiction or law of a state has been 
asserted against a plan or other arrangement that contends it meets the 
exception for plans established or maintained under or pursuant to one 
or more collective bargaining agreements.
    (c) Estimate of Small Entities Affected. For purposes of this 
discussion, the Department has deemed a small entity to be an employee 
benefit plan with fewer than 100 participants. The basis of this 
definition is found in section 104(a)(2) of ERISA, which permits the 
Secretary of Labor to prescribe simplified annual reports for pension 
plans which cover fewer than 100 participants. For this purpose, it is 
assumed that arrangements with fewer than 100 participants and which 
are (1) multiemployer collectively bargained group welfare benefit 
plans; (2) non-collectively bargained multiple employer group welfare 
benefit plans, or; (3) other multiple employer arrangements which 
provide welfare benefits, are small plans. PWBA believes that assessing 
the impact of this proposed rule on small plans is an appropriate 
substitute for evaluating the effect on small entities as that term is 
defined in the RFA. No small governmental jurisdictions will be 
affected.
    Based on Form 5500 filings and available research, it is estimated 
that there are a possible 4,180 plans which can be classified as either 
collectively bargained plans or as MEWAs; however, PWBA estimates that 
a very small number of these arrangements will have fewer than 100 
participants. By their nature, the affected arrangements must involve 
at least two employers, which decreases the likelihood of coverage of 
fewer than 100 participants. Also, underlying goals of the formation of 
these arrangements, such as gaining purchasing and negotiating power 
through economies of scale, improving administrative efficiencies, and 
gaining access to additional benefit design features, are not readily 
accomplished if the group of covered lives remains small.
    While there are no statistics to determine the number of small 
plans among the 4,180 plans, based on the health coverage reported in 
the Employee Benefits Supplement to the 1993 Current Population Survey 
and on a 1993 Small Business Administration survey of retirement and 
other benefit coverages in small firms, research data indicate that 
there are more than 2.5 million private group health plans with fewer 
than 100 participants. Thus, the 4,180 collectively bargained plans or 
MEWAs, even if all were to have fewer than 100 participants, represent 
approximately one-tenth of one percent of all small group health plans.
    The Department is not aware of any source of information indicating 
the number of instances in which state jurisdiction has been asserted 
over these entities, or the portion of those instances which involved 
the collective bargaining agreement exception. However, in order to 
develop an estimate of the number of plans which might seek to clarify 
their legal status by using an administrative hearing as proposed by 
this regulation, the Department examined the number of lawsuits to 
which the Department had previously been a party. While this number is 
not viewed as a measure of the incidence of the assertion of state 
jurisdiction, it is considered the only reasonable available proxy for 
an estimate of a maximum number of instances in which the applicability 
of state requirements might be at issue. The Department has been a 
party to 375 civil and 75 criminal cases from 1990 to 1999, or an 
average of 45 cases per year. The proportion of these lawsuits that 
involved a dispute over state jurisdiction based on plans' or 
arrangements' legal status is unknown. On the whole, 45 is considered a 
reasonable estimate of an upper bound number of plans which could have 
been a party to a lawsuit involving a determination of the plan's legal 
status. Because this procedural regulation and the related substantive 
regulation are expected to reduce the number of disputes, the 
Department assumes that

[[Page 64505]]

45 represents a conservatively high estimate of the number of plans or 
arrangements which would petition for an administrative hearing. Of all 
small plans, then, the greatest number of plans likely to petition for 
an administrative hearing represents a very tiny fraction of the total 
number of small plans. In addition, the Department has assumed that an 
entity's exercise of the opportunity to petition for a finding will 
generally be less costly than available alternatives. Accordingly, the 
Department has concluded that this regulation will not have a 
significant economic impact on a substantial number of small entities, 
but requests comments on the comparative costs of establishing a small 
entity's legal status in a court of law or at ALJ hearing.
    (e) Duplication. No federal rules have been identified that 
duplicate, overlap, or conflict with the proposed rule.
    (f) Alternatives. The proposed regulation represents the consensus 
report of a committee established in 1998 by the Secretary to provide 
an alternative to guidance proposed by the Department in 1995. 
Recognizing that guidance was needed in clarifying collective 
bargaining exceptions to the MEWA regulation, the Secretary had, in 
1995, published a Notice of Proposed Rulemaking on Plans Established or 
Maintained Pursuant to Collective Bargaining Agreements in the Federal 
Register (60 FR 39209). At that time, the Department also proposed, as 
part of the NPRM, that it would be within the authority of state 
insurance regulators to identify and regulate MEWAs operating in their 
jurisdictions. In other words, the proposed approach did not establish 
a method for obtaining individual findings by the Department.
    The Department received numerous comments on the NPRM. Commenters 
expressed concerns about their ability to comply with the standards set 
forth in the NPRM and to establish compliance with the criteria 
proposed by the Department. Commenters also objected to the part of the 
proposal which would have had state regulators determine whether a 
particular agreement was a collective bargaining agreement. Commenters 
strongly preferred that determination of whether a plan was established 
under or pursuant to a collective bargaining agreement lie with a 
federal agency and not with individual states.
    Based on the comments received, the Department turned to negotiated 
rulemaking as an appropriate method of developing a revised Notice of 
Proposed Rulemaking. In September 1998, the Secretary established the 
ERISA Section 3(40) Negotiated Rulemaking Advisory Committee under the 
Negotiated Rulemaking Act. (5 U.S.C. 561 et seq.) (NRA). The Committee 
membership was chosen from the organizations that submitted comments on 
the Department's August 1995 NPRM and from the petitions and 
nominations for membership received in response to the Notice of 
Intent. The membership included representatives from labor unions, 
multiemployer plans, state governments, employer/management 
associations, Railway Labor Act plans, third-party administrators, 
independent agents and brokers of insurance products, insurance 
carriers, and the federal government. This regulation represents the 
Committee's consensus, in the form of a proposed rule, for determining 
the legal status of a welfare benefit plan. Based on the fact that this 
Notice of Proposed Rulemaking is the result of a Committee decision by 
consensus, and the fact that the Committee represents a cross section 
of the state, federal, association, and private sector insurance 
universe, the Department believes that, as an alternative to the 1995 
NPRM, this regulation will accomplish the stated objectives of the 
Secretary and will have a beneficial impact on MEWAs and on state 
insurance commissions. No other significant alternatives which would 
minimize the economic impact on small entities have been identified.
    Participating in an administrative hearing to determine legal 
status is a voluntary undertaking on the part of a MEWA. It would be 
inappropriate to create an exemption for small MEWAs under the proposed 
regulation because small MEWAs are as in need of clarification of their 
legal status as are larger MEWAs.

Paperwork Reduction Act

    As part of its continuing effort to reduce paperwork and respondent 
burden, the Department of Labor conducts a preclearance consultation 
program to provide the general public and Federal agencies with an 
opportunity to comment on proposed and continuing collections of 
information in accordance with the Paperwork Reduction Act of 1995 (PRA 
95) (44 U.S.C. 3506(c)(2)(A)). This helps to ensure that requested data 
can be provided in the desired format, reporting burden (time and 
financial resources) is minimized, collection instruments are clearly 
understood, and the impact of collection requirements on respondents 
can be properly assessed.
    Currently, PWBA is soliciting comments concerning the proposed 
information collection request (ICR) included in this Proposed Rule 
Governing Procedures for Administrative Hearings Regarding Plans 
Established or Maintained Pursuant to Collective Bargaining Agreements 
under Section 3(40)(A) of ERISA. A copy of the ICR may be obtained by 
contacting the individual identified below in this notice.
    The Department has submitted a copy of the proposed information 
collection to OMB in accordance with 44 U.S.C. 3507(d) for review of 
its information collections. The Department and OMB are particularly 
interested in comments that:
     Evaluate whether the proposed collection of information is 
necessary for the proper performance of the functions of the agency, 
including whether the information will have practical utility;
     Evaluate the accuracy of the agency's estimate of the 
burden of the collection of information, including the validity of the 
methodology and assumptions used;
     Enhance the quality, utility, and clarity of the 
information to be collected; and
     Minimize the burden of the collection of information on 
those who are to respond, including through the use of appropriated 
automated, electronic, mechanical, or other technological collection 
techniques or other forms of information technology, e.g., permitting 
electronic submission of responses.
    Comments should be sent to the Office of Information and Regulatory 
Affairs, Office of Management and Budget, Room 10235, New Executive 
Office Building, Washington, DC 20503; Attention: Desk Officer for the 
Pension and Welfare Benefits Administration. Although comments may be 
submitted through December 26, 2000. OMB requests that comments be 
received within 30 days of publication of the Notice of Proposed 
Rulemaking to ensure their consideration.
    Address requests for copies of the ICR to Gerald B. Lindrew, Office 
of Policy and Research, U.S. Department of Labor, Pension and Welfare 
Benefits Administration, 200 Constitution Avenue, NW., Room N-5647, 
Washington, DC 20210. Telephone (202) 219-4782; Fax: (202) 219-4745. 
These are not toll-free numbers.
    This proposed regulation establishes procedures for hearings before 
an Administrative Law Judge (ALJ) with respect to determinations under 
Section 3(40) of the Employee Retirement Income Security Act of 1974 
(ERISA). Section 3(40) excepts from the definition of a multiple 
employer welfare arrangement any plan or

[[Page 64506]]

arrangement established or maintained under or pursuant to one or more 
agreements which the Secretary of Labor (the Secretary) finds to be a 
collective bargaining agreement. This proposed regulation sets forth 
administrative procedures pursuant to which an entity may, under 
limited circumstances, seek an individual determination from the 
Secretary as to whether it is a plan established or maintained under or 
pursuant to one or more collective bargaining agreements.
    As stated in the Regulatory Flexibility Act analysis, the 
Department estimates that 45 entities would be the maximum number of 
petitioners for an ALJ hearing. Those entities seeking a finding under 
section 3(40) must file a written petition by delivering or mailing to 
the ALJ a petition which shall: (1) Provide the name and address of the 
entity for which the petition is filed; (2) provide the names and 
addresses of the plan administrator and plan sponsor(s) of the plan or 
other arrangement for which the finding is sought; (3) identify the 
state or states whose law or jurisdiction the petitioner claims has 
been asserted over the plan or other arrangement at issue, and provide 
the addresses and names of responsible officials; (4) include 
affidavits or other written evidence showing that--(i) state 
jurisdiction has been asserted over or legal process commenced against 
the plan or other arrangement pursuant to state law; (ii) the plan is 
an employee welfare benefit plan as defined at section 3 (1) of ERISA 
and is covered by ERISA pursuant to section 4 of the Act; (iii) the 
plan is established or maintained for the purpose of offering or 
providing benefits described in section 3(1) of ERISA to employees of 
two or more employers (including one or more self-employed individuals) 
or their beneficiaries; (iv) the plan satisfies the criteria in 29 CFR 
2510.3-40(b); and (v) service has been made as provide in subsection 
2570.95; (5) The affidavits shall set forth such facts as would be 
admissible in evidence in a proceeding under part 18 of Title 1 and 
shall show affirmatively that the affiant is competent to testify to 
the matters stated therein. The affidavit or other written evidence 
must set forth specific facts showing the factors required under 
subparagraph (b)(4).
    The Department believes that preparing and filing the petition will 
require 32 hours of an attorney's time, at $72 per hour, and that 
entities will purchase services to complete the petition rather than do 
this work themselves. Most of the factual information will be readily 
available in the office of any business or plan and will not require a 
great deal of time to assemble, either because they are maintained in 
the ordinary course of business, or they have been assembled at least 
in part in response to the assertion of jurisdiction by the state. The 
majority of the time is expected to be associated with drafting 
documents describing the facts related to whether a plan is established 
or maintained under or pursuant to a collective bargaining agreement. 
The total estimated cost for an attorney's time is $2,300 per petition 
filed. Additional costs are estimated at $10.00 per petition for 
materials and mailing costs. Additional actions following the 
establishment of a proceeding by the ALJ are excepted from PRA under 
the provisions of 5 CFR1320.4(a)(2).
    Type of Review: New.
    Agency: Pension and Welfare Benefits Administration.
    Title: Petition for Finding under Section 3(40) of ERISA.
    OMB Number: 1210-NEW.
    Affected Public: Business or other for-profit; not-for-profit 
institutions; state government.
    Respondents: 45.
    Responses: 45.
    Average Time per Response: 32 hours.
    Estimated Total Burden Hours: 1.
    Estimated Total Burden Cost (Operating and Maintenance): $104,100.
    Comments submitted in response to this comment request will be 
summarized and/or included in the request for Office of Management and 
Budget approval of the information collection request; they will also 
become a matter of public record.

Small Business Regulatory Enforcement Fairness Act

    The 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, if finalized, will be 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.

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, or the private sector, which may impose 
an annual burden of $100 million.

Executive Order 13132

    When an agency promulgates a regulation that has federalism 
implications, Executive Order 13132 (64 FR 43255, August 10, 1999) 
requires that the Agency provide a federalism summary impact statement. 
Pursuant to section 6(c) of the Order, such a statement must include a 
description of the extent of the agency's consultation with State and 
local officials, a summary of the nature of their concerns and the 
agency's position supporting the need to issue the regulation, and a 
statement of the extent to which the concerns of the State have been 
met.
    This proposed regulation has Federalism implications because it 
sets forth standards and procedures for an ALJ hearing for determining 
whether certain entities may be regulated under certain state laws or 
whether such state laws are preempted with respect to such entities. 
The state laws at issue are those that regulate the business of 
insurance. A representative from the National Association of Insurance 
Commissioners (NAIC), which represents the interest of state 
governments in the regulation of insurance, participated in this 
rulemaking from the inception of the Negotiated Rulemaking Committee.
    In the course of this rulemaking, the NAIC raised a concern that 
the proposed process by which the Department issues ALJ determinations 
regarding the collectively bargained status of entities, move forward 
as quickly as possible and not result in a stay of state enforcement 
proceedings against MEWAs. The regulation specifically states that the 
proceedings shall be conducted as expeditiously as possible, the 
parties shall make every effort to avoid delay at each stage of the 
proceeding, and the companion regulation that establishes criteria 
provides that proceedings under this regulation are not intended to 
change existing law regarding stay and abstention.

Statutory Authority

    These regulations are proposed pursuant to section 3(40) of ERISA 
(Pub. L. 97-473, 96 Stat. 2611, 2612, 29 U.S.C. 1002(40)) and section 
505 (Pub. L. 93-406, 88 Stat. 892, 894, 29 U.S.C. 1135) of ERISA and 
under Secretary of Labor's Order No. 1-87, 52 FR 13139, April 21, 1987.

[[Page 64507]]

List of Subjects in 29 CFR Part 2570

    Administrative practice and procedure, Collective Bargaining, 
Employee benefit plans, Government employees, Penalties, Pensions, 
Reporting and recordkeeping requirements, Retirement.

Proposed Regulations

    For the reasons set out in the preamble, the Department proposes to 
amend Part 2570 of Chapter XXV of Title 29 of the Code of Federal 
Regulations as follows:

PART 2570--[AMENDED]

    1. The authority for Part 2570 is revised to read as follows:

    Authority: 5 U.S.C. 8477(c)(3); Section 3(40), 502(c)(2), 
502(c)(5), 502(i), 505 and 734 of ERISA, 29 U.S.C. 1002(40) 
1132(c)(2), 1132(c)(5), 1132(i), 1135, 1191(c); Reorganization Plan 
No. 4 of 1978; 5 U.S.C. 8477(c)(3); Secretary of Labor Order No. 1-
87, 52 FR 13139 (April 21, 1987).
    Subpart A is also issued under 29 U.S.C. 1132(c)(1).
    Subpart G is also issued under sec. 4, Pub. L. 101-410, 104 
Stat. 890 (28 U.S.C. 2461 note), as amended by sec. 31001(s)(1), 
Publ. L. 104-134, 110 Stat. 1321-373.

    2. Subpart G is added in Part 2570 to read as follows:

Subpart G--Procedures for Issuance of Findings Under ERISA 
Sec. 3(40)

Sec.
2570.130   Scope of rules.
2570.131   In general.
2570.132   Definitions.
2570.133   Parties.
2570.134   Filing and contents of petition.
2570.135   Service.
2570.136   Expedited proceedings.
2570.137   Allocation of burden of proof.
2570.138   Decision of the Administrative Law Judge.
2570.139   Review by the Secretary.


Sec. 2570.130  Scope of rules.

    The rules of practice set forth in this Subpart G apply to 
``Section 3(40) Finding Proceedings'' (as defined in Sec. 2570.132(g)), 
under section 3(40) of the Employee Retirement Income Security Act of 
1974 (ERISA or the Act). Refer to 29 CFR 2510.3-40 for the definition 
of relevant terms of section 3(40) of ERISA, 29 U.S.C. 1002(40). To the 
extent that the regulations in this subpart differ from the regulations 
in subpart A of part 18 of this title, the regulations in this subpart 
apply to matters arising under section 3(40) of ERISA rather than 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. 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. 2570.131  In general.

    If there is an attempt to assert state jurisdiction or the 
application of state law, either by the issuance of a state 
administrative or court subpoena to, or the initiation of 
administrative or judicial proceedings against, a plan or other 
arrangement that alleges it is covered title I of ERISA, 29 U.S.C. 
1003, the plan or other arrangement may petition the Secretary to make 
a finding under section 3(40) of ERISA that the plan is established or 
maintained under or pursuant to an agreement or agreements that the 
Secretary finds to be collective bargaining agreements for purposes of 
section 3(40) of ERISA.


Sec. 2570.132  Definitions.

    For section 3(40) Finding Proceedings, this section shall apply 
instead of the definitions in 29 CFR 18.2.
    (a) ERISA means the Employee Retirement Income Security Act of 
1974, et seq., 29 U.S.C. 1001, et seq., as amended.
    (b) Order means the whole or part of a final procedural or 
substantive disposition by the administrative law judge of a matter 
under section 3(40) of ERISA. No order will be appealable to the 
Secretary except as provided in this subpart.
    (c) Petition means a written request under the procedures in this 
subpart for a finding by the Secretary under section 3(40) of ERISA 
that a plan or arrangement is established or maintained under or 
pursuant to one or more collective bargaining agreements.
    (d) Petitioner means the plan or arrangement filing a petition.
    (e) Respondent means:
    (1) A state government instrumentality charged with enforcing the 
law which is alleged to apply or which has been identified as asserting 
jurisdiction over a plan or other arrangement, including any agency, 
commission, board, or committee charged with investigating and 
enforcing state insurance laws, including parties joined under 
Sec. 2570.136;
    (2) The person or entity asserting that state law or state 
jurisdiction applies to the petitioner;
    (3) The Secretary of Labor; and
    (4) A state not named in the petition who has intervened under 
Sec. 2570.133(b).
    (f) Secretary means the Secretary of Labor, and includes, pursuant 
to any delegation or sub-delegation of authority, the Assistant 
Secretary for Pension and Welfare Benefits or other employee of the 
Pension and Welfare Benefits Administration.
    (g) Section 3(40) Finding Proceeding means a proceeding before the 
Office of Administrative Law Judges relating to whether the Secretary 
finds a plan to be established or maintained under or pursuant to one 
or more collective bargaining agreements within the meaning of section 
3(40) of ERISA.


Sec. 2570.133  Parties.

    For section 3(40) Finding Proceedings, this section shall apply 
instead of 29 CFR 18.10.
    (a) The term ``party'' with respect to a Section 3(40) Finding 
Proceeding means the petitioner and the respondents.
    (b) States not named in the petition may participate as parties in 
a Section 3(40) Finding Proceeding by notifying the OALJ and the other 
parties in writing prior to the date for filing a response to the 
petition. After the date for service of responses to the petition, a 
state not named in the petition may intervene as a party only with the 
consent of all parties or as otherwise ordered by the ALJ.
    (c) The Secretary of Labor shall be named as a ``respondent'' to 
all actions.
    (d) The failure of any party to comply with any order of the ALJ 
may, at the discretion of the ALJ, result in the denial of the 
opportunity to present evidence in the proceeding.


Sec. 2570.134  Filing and contents of petition.

    (a) A person seeking a finding under section 3(40) of ERISA must 
file a written petition by delivering or mailing it to the Chief Docket 
Clerk, Office of Administrative Law Judges (OALJ), 800 K Street, NW, 
Suite 400, Washington, DC 20001-8002.
    (b) The petition shall--
    (1) Provide the name and address of the entity for which the 
petition is filed;
    (2) Provide the names and addresses of the plan administrator and 
plan sponsor(s) of the plan or other arrangement for which the finding 
is sought;
    (3) Identify the state or states whose law or jurisdiction the 
petitioner claims has been asserted over the plan or other arrangement 
at issue, and provide the addresses and names of responsible officials;
    (4) Include affidavits or other written evidence showing that--
    (i) State jurisdiction has been asserted over or legal process 
commenced against the plan or other arrangement pursuant to state law;

[[Page 64508]]

    (ii) The plan is an employee welfare benefit plan as defined at 
section 3(1) of ERISA (29 U.S.C. 1002(1)) and 29 CFR 2510.3-1 and is 
covered by title I of ERISA (see 29 U.S.C. 1003);
    (iii) The plan is established or maintained for the purpose of 
offering or providing benefits described in section 3(1) of ERISA (29 
U.S.C. 1002(1)) to employees of two or more employers (including one or 
more self-employed individuals) or their beneficiaries;
    (iv) The plan satisfies the criteria in 29 CFR 2510.3-40(b); and
    (v) Service has been made as provided in Sec. 2570.135.
    (5) The affidavits shall set forth such facts as would be 
admissible in evidence in a proceeding under part 18 of this title and 
shall show affirmatively that the affiant is competent to testify to 
the matters stated therein. The affidavit or other written evidence 
must set forth specific facts showing the factors required under 
paragraph (b)(4) of this section.


Sec. 2570.13  Service.

    For section 3(40) proceedings, this section shall apply instead of 
29 CFR 18.3. (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 by first class, prepaid U.S. mail, a 
copy to the last known address. The Secretary shall be served by 
delivery to the Associate Solicitor, Plan Benefits Security Division, 
ERISA Section 3(40) 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 to all parties of 
record by regular mail to their 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. 2570.136  Expedited proceedings

    For Section 3(40) Finding Proceedings, this section shall apply 
instead of 29 CFR 18.42.
    (a) At any time after commencement of a proceeding, any party may 
move to advance the scheduling of a proceeding, including the time for 
conducting discovery.
    (b) Except when such proceedings are directed by the Chief 
Administrative Law Judge or the administrative law judge assigned, any 
party filing a motion under this section shall:
    (1) Make the motion in writing;
    (2) Describe the circumstances justifying advancement;
    (3) Describe the irreparable harm that would result if the motion 
is not granted; and
    (4) Incorporate in the motion affidavits to support any 
representations of fact.
    (c) Service of a motion under this section shall be accomplished by 
personal delivery, or by facsimile, followed by first class, prepaid, 
U.S. mail. Service is complete upon personal delivery or mailing.
    (d) Except when such proceedings are required, or unless otherwise 
directed by the Chief Administrative Law Judge or the administrative 
law judge assigned, all parties to the proceeding in which the motion 
is filed shall have ten (10) days from the date of service of the 
motion to file an opposition in response to the motion.
    (e) Following the timely receipt by the administrative law judge of 
statements in response to the motion, the administrative law judge may 
advance pleading schedules, discovery schedules, prehearing 
conferences, and the hearing, as deemed appropriate; provided, however, 
that a hearing on the merits shall not be scheduled with less than five 
(5) working days notice to the parties, unless all parties consent to 
an earlier hearing.
    (f) When an expedited hearing is held, the decision of the 
administrative law judge shall be issued within twenty (20) days after 
receipt of the transcript of any oral hearing or within twenty (20) 
days after the filing of all documentary evidence if no oral hearing is 
conducted.


Sec. 2570.137  Allocation of burden of proof.

    For purposes of a final decision under Sec. 2570.138 (Decision of 
the Administrative Law Judge) or Sec. 2570.139 (Review by the 
Secretary), the petitioner shall have the burden of proof as to whether 
it meets 29 CFR 2510.3-40.


Sec. 2570.138  Decision of the Administrative Law Judge.

    For section 3(40) finding proceedings, this section shall apply 
instead of 29 CFR 18.57.
    (a) Proposed findings of fact, conclusions of law, and order. 
Within twenty (20) days of filing 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 under 29 CFR 18.55, proposed findings of fact, 
conclusions of law, and order together with the supporting brief 
expressing the reasons for such proposals. Such proposals and brief 
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 based on oral argument in lieu of briefs. In any case 
in which the administrative law judge believes that written briefs or 
proposed findings of fact and conclusions of law may not be necessary, 
the administrative law judge shall notify the parties at the opening of 
the hearing or as soon thereafter as is practicable that he or she may 
wish to hear oral argument in lieu of briefs. The administrative law 
judge shall issue his or her decision at the close of oral argument, or 
within 30 days thereafter.
    (c) Decision of the administrative law judge. Within 30 days, or as 
soon as possible thereafter, 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 order disposing of the disputed matter in whole, the 
administrative law judge shall make his

[[Page 64509]]

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. It shall be supported by reliable and probative evidence. Such 
decision shall be in accordance with the regulations found at 29 CFR 
2510.3-40 and shall be limited to whether the petitioner, based on the 
facts presented at the time of the proceeding, is a plan established or 
maintained under or pursuant to collective bargaining for the purposes 
of section 3(40) of ERISA.


Sec. 2570.139  Review by the Secretary.

    (a) A request for review by the Secretary of an appealable decision 
of the administrative law judge may be made by any party. Such a 
request must be filed within 20 days of the issuance of the final 
decision or the final decision of the administrative law judge will 
become the final agency order for purposes of 5 U.S.C. 701 et seq.
    (b) A request for review by the Secretary shall state with 
specificity the issue(s) in the administrative law judge's final 
decision upon which review is sought. The request shall be served on 
all parties to the proceeding.
    (c) The review by the Secretary shall not be a de novo proceeding 
but rather a review of the record established by the administrative law 
judge.
    (d) The Secretary may, in his or her discretion, allow the 
submission of supplemental briefs by the parties to the proceeding.
    (e) The Secretary shall issue a decision as promptly as possible, 
affirming, modifying, or setting aside, in whole or in part, the 
decision under review, and shall set forth a brief statement of reasons 
therefor. Such decision by the Secretary shall be the final agency 
action within the meaning of 5 U.S.C. 704.

    Signed this 16th day of October 2000.
Leslie B. Kramerich,
Acting Assistant Secretary, Pension and Welfare Benefits 
Administration.
[FR Doc. 00-27045 Filed 10-26-00; 8:45 am]
BILLING CODE 4510-29-P