Procedures for Administrative Hearings Regarding Plans
Established or Maintained Pursuant to Collective Bargaining Agreements
Under Section 3(40)(A) of ERISA
[10/27/2000]
Volume 65, Number 209, Page 64498-64509
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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
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