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Employee Benefits Security Administration

EBSA Final Rule

Procedures for Administrative Hearings Regarding the Assessment of Civil Penalties Under Section 502(c)(5) of ERISA [04/09/2003]

[PDF Version]

Volume 68, Number 68, Page 17506-17511

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DEPARTMENT OF LABOR

Employee Benefits Security Administration

29 CFR Part 2570

RIN 1210-AA64

 
Procedures for Administrative Hearings Regarding the Assessment 
of Civil Penalties Under Section 502(c)(5) of ERISA

AGENCY: Employee Benefits Security Administration, Department of Labor.

ACTION: Final rule.

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SUMMARY: This document contains a 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) of ERISA. Separate documents are also being 
published today in the Federal Register containing final rules 
implementing the reporting requirement under section 101(g) of ERISA 
and final rules describing the manner in which the Department will 
assess civil penalties under ERISA section 502(c)(5).

EFFECTIVE DATE: This final rule is effective January 1, 2004.

FOR FURTHER INFORMATION CONTACT: Amy J. Turner or Deborah S. Hobbs, 
Employee Benefits Security Administration, U.S. Department of Labor, 
Room C-5331, 200 Constitution Avenue, NW., Washington, DC 20210 
(telephone (202) 693-8335).

SUPPLEMENTARY INFORMATION: 

A. Background and Overview of Changes in the Final Rule

    This document contains a 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 ERISA for the 
failure or refusal to file a completed report pursuant to section 
101(g) of ERISA. 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.

[[Page 17507]]

    An interim final rule relating to the procedures for administrative 
hearings and appeals relating to the assessment of civil penalties 
under section 502(c)(5) of ERISA was published in the Federal Register 
on February 11, 2000, 65 FR 7185. In the February 11, 2000 interim 
rule, the Department sought comments from those affected by this 
regulation. No comments were received.
    On October 21, 2002, the Department published interim final rules 
relating to notice of blackout periods to participants and 
beneficiaries (during which their right to direct or diversify 
investments, obtain a loan, or obtain a distribution under a pension 
plan may be suspended) and related civil penalties under ERISA section 
502(c)(7). Those rules also made conforming changes to the procedural 
regulations under this section. Specifically, Sec.  2570.94, which 
describes ``consequences of default'' was modified to provide that, if 
a respondent fails to file an answer to the notice of determination, 
the notice of determination shall become a final order of the Secretary 
45 days from the date of service of the notice. No comments were 
received with respect to this conforming amendment.
    The interim rule is, therefore, being published as a final rule 
without change.

B. Regulatory Impact Analysis

Executive Order 12866 Statement

    Under Executive Order 12866, the Department must determine whether 
a regulatory action is ``significant'' and therefore subject to the 
requirements of the Executive Order and subject to review by the Office 
of Management and Budget (OMB). Under section 3(f) of the Executive 
Order, a ``significant regulatory action'' is an action that is likely 
to result in a rule (1) having an annual effect on the economy of $100 
million or more, or adversely and materially affecting a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local or tribal governments or communities 
(also referred to as ``economically significant''); (2) creating 
serious inconsistency or otherwise interfering with an action taken or 
planned by another agency; (3) materially altering the budgetary 
impacts of entitlement grants, user fees, or loan programs or the 
rights and obligations of recipients thereof; or (4) raising novel 
legal or policy issues arising out of legal mandates, the President's 
priorities, or the principles set forth in the Executive Order. On the 
basis of these criteria, it has been determined that this regulatory 
action is significant under section 3(f)(4) of the Executive Order. 
Accordingly, OMB has reviewed this regulation.

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 a ``collection of information'' as defined in 44 
U.S.C. 3502(3).

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.), (RFA) 
requires each Federal agency to perform a 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 were 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 economic impact on a substantial number of small 
entities, or conduct a regulatory flexibility analysis. The Department 
does not anticipate that this final rule will impose a significant 
impact on a substantial number of small entities, however, regardless 
of whether one uses the definition of small entity found in regulations 
issued by the Small Business Administration (13 CFR 121.201) or one 
defines small entity, on the basis of section 104(a)(2) of ERISA, as an 
employee benefit plan with fewer than 100 participants.

Small Business Regulatory Enforcement Fairness Act

    The 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.

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 final 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.

Federalism Statement Under Executive Order 13132

    Executive Order 13132 outlines fundamental principles of 
federalism, and requires the adherence to specific criteria by federal 
agencies in the process of their formulation and implementation of 
policies that have substantial direct effects on the states, the 
relationship between the national government and the states, or on the 
distribution of power and responsibilities among the various levels of 
government. Agencies promulgating regulations that have these 
federalism implications must consult with state and local officials, 
and describe in the preamble to the regulation the extent of their 
consultation and the nature of the concerns of state and local 
officials, as well as the agency's position supporting the need to 
issue the regulation, and a statement of the extent to which the 
concerns of state and local officials have been met.
    In the Department's view, these final regulations do not have 
federalism implications because they do not have substantial direct 
effects on the states, the relationship between the national government 
and the states, or on the distribution of power and responsibilities 
among various levels of government. Not only do these regulations not 
reduce state discretion, the reports they require will facilitate state 
enforcement of their own laws as they apply to MEWAs since the reports 
will be available to the states and will identify MEWAs operating in 
each state.
    Although the Department concludes that these final regulations do 
not have federalism implications, in keeping with the spirit of the 
Executive Order that agencies shall closely examine any policies that 
may have federalism implications or limit the policy making discretion 
of the states, the Department of Labor engages in extensive efforts to 
consult with and work cooperatively with affected state and local 
officials.

[[Page 17508]]

    For example, the Department attends quarterly meetings of the 
National Association of Insurance Commissioners (NAIC) to listen to the 
concerns of state insurance departments. The NAIC is a non-profit 
corporation established by the insurance commissioners in the 50 
states, the District of Columbia, and the four U.S. territories that, 
among other things, provides a forum for the development of uniform 
policy when uniformity is appropriate. Its members meet, discuss, and 
offer solutions to mutual problems. The NAIC sponsors quarterly 
meetings to provide a forum for the exchange of ideas, and in-depth 
consideration of insurance issues by regulators, industry 
representatives, and consumers. In addition to the general discussions, 
committee meetings, and task force meetings, the NAIC sponsors standing 
HIPAA meetings for members during the quarterly conferences, including 
a Centers for Medicare and Medicaid Services (CMS)/Department of Labor 
(DOL) meeting on HIPAA issues. (This meeting provides CMS and DOL the 
opportunity to provide updates on regulations, bulletins, enforcement 
actions, and outreach efforts regarding HIPAA.) In these quarterly 
meetings, issues relating to MEWAs and the implementation of the Form 
M-1 filing requirement are frequently discussed and, periodically, 
entire sessions are scheduled that are dedicated exclusively to MEWA/
Form M-1 issues.
    The Department also cooperates with the states in several ongoing 
outreach initiatives, through which information is shared among federal 
regulators, state regulators, and the regulated community. For example, 
the Department has established a Health Benefits Education Campaign 
with more than 70 partners, including CMS, the NAIC, and many business 
and consumer groups. In addition, the Department Web site offers links 
to important state Web sites and other resources, facilitating 
coordination between the state and federal regulators and the regulated 
community.
    The Department also coordinates with state insurance departments to 
freeze assets when a MEWA operator is committing fraud or operating in 
a financially unsound manner. In these situations, typically, a state 
will obtain a cease and desist order to stave off further action by the 
MEWA in that state. In certain situations, the Department will then 
obtain a temporary restraining order (TRO) to freeze assets of the MEWA 
nationwide. In one case this year, the Department obtained a TRO to 
freeze assets of a MEWA whose operators were committing fraud and not 
paying benefits. This case affects more than 23,000 participants and 
beneficiaries in 50 states and the amount of unpaid claims could exceed 
$6 million. In a similar case last year, the Department obtained a TRO 
to freeze assets of a MEWA that was diverting plan assets for personal 
use of the MEWA's operators. That case affected at least 1,500 
participants and $2.8 million in unpaid claims. A court order was also 
issued in that case appointing an independent fiduciary to manage the 
MEWA.
    In conclusion, the Department has stayed in contact with state 
regulators and considered their concerns in developing these 
regulations. These regulations should help the states enforce their own 
laws as they apply to MEWAs since the reports they require will be 
available to them and will identify MEWAs operating in each state.

Statutory Authority

    29 U.S.C. 1132(c)(5) and 1135 and Secretary of Labor's Order 1-
2003, 68 FR 5374 (Feb.3, 2003).

List of Subjects in 29 CFR Part 2570

    Administrative practice and procedure, Claims, Employee benefit 
plans, Law enforcement, Penalties, Pensions, Reporting and 
recordkeeping requirements.

0
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]

0
1. The authority for part 2570 continues to read:

    Authority: 5 U.S.C. 8477, 29 U.S.C. 1002(40), 1021, 1108, 1132, 
1135, sec. 102, Reorganization Plan No. 4 of 1978, 43 FR 47713, 3 
CFR, 1978 Comp., p. 332, and E.O. 12108, 44 FR 1065, 3 CFR, 1978 
Comp., p. 275; Secretary of Labor's Order 1-2003, 68 FR 5374 (Feb.3, 
2003).


0
2. Sec. 2570.3 is amended to revise paragraph (a) to read 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.
* * * * *

0
3. Subpart E of part 2570 is amended to read as follows:

Subpart E--Procedures for the Assessment of Civil Penalties Under 
ERISA Section 502(c)(5)

Sec.
2570.90 Scope of Rules.
2570.91 Definitions.
2570.92 Service: Copies of documents and pleadings.
2570.93 Parties, how designated.
2570.94 Consequnces 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.


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 2570.91(n)) 
under section 502(c)(5) of the Employee Retirement Income Security Act 
of 1974. The rules of procedure for administrative hearings published 
by the Department's Office of Administrative Law Judges in subpart A of 
29 CFR part 18 will apply to matters arising under ERISA section 
502(c)(5) except as described 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 29 CFR 2560.502c-5(g);
    (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;

[[Page 17509]]

    (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 29 CFR 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 29 CFR 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 Employee Benefits 
Security), 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 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, NW., 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 Employee Benefits Security Administration 
(EBSA) 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 29 CFR 18.10.
    (a) The term party wherever used in this subpart 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 
recognize one or more of such petitioners. The administrative law judge 
shall give each such petitioner as

[[Page 17510]]

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 29 CFR 18.5(a) and (b). Failure of the respondent to file an 
answer to the notice of determination described in 29 CFR 2560.502c-
5(g) within the 30 day period provided by 29 CFR 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) of the Act. Such notice shall 
then become a final order of the Secretary, within the meaning of Sec.  
2570.91(g), forty-five (45) days from the date of the service of the 
notice.


Sec.  2570.95  Consent order or settlement.

    For 502(c)(5) civil penalty proceedings, the following shall apply 
in lieu of 29 CFR 18.9.
    (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;
    (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 therefor, 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 29 CFR 18.14.
    (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 29 CFR 18.41.
    (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 Sec. Sec.  2570.99 through 2570.101, shall 
become a final order.

[[Page 17511]]

    (2) A decision made under this paragraph shall include a statement 
of:
    (i) Findings of fact and conclusions of law, and the reasons 
therefore, 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 29 CFR 18.57.
    (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 Sec. Sec.  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.

    Signed at Washington DC, this 31st day of March, 2003.
Ann L. Combs,
Assistant Secretary, Employee Benefits Security Administration, 
Department of Labor.
[FR Doc. 03-8117 Filed 4-7-03; 8:45 am]

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