Procedures for Administrative Hearings Regarding Plans
Established or Maintained Pursuant to Collective Bargaining Agreements
Under Section 3(40)(A) of ERISA [04/09/2003]
Volume 68, Number 68, Page 17484-17491
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DEPARTMENT OF LABOR
Employee Benefits Security 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: Employee Benefits Security Administration, Department of Labor.
ACTION: Final rule.
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SUMMARY: This document contains regulations under the Employee
Retirement Income Security Act of 1974, as amended, (ERISA or the Act)
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. An administrative hearing is
available
[[Page 17485]]
only if 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. A separate document published
elsewhere in this issue of the Federal Register contains a rule 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. These regulations are intended to assist labor organizations,
plan sponsors and state insurance departments in determining whether a
plan is a ``multiple employer welfare arrangement'' within the meaning
of section 3(40) of ERISA.
EFFECTIVE DATE: June 9, 2003.
FOR FURTHER INFORMATION CONTACT: Elizabeth A. Goodman, Office of
Regulations and Interpretations, Employee Benefits Security
Administration, U.S. Department of Labor, 200 Constitution Avenue, NW.,
Room N-5669, Washington, DC 20210, (202) 693-8510. This is not a toll-
free number.
SUPPLEMENTARY INFORMATION:
A. Background
These final rules set forth an administrative procedure for
obtaining a determination by the Secretary of Labor (the Secretary) as
to whether a particular employee benefit plan is established or
maintained under or pursuant to one or more agreements that are
collective bargaining agreements for purposes of section 3(40) of the
Employee Retirement Income Security Act of 1974 (ERISA). These rules
(the procedural regulations) are being published simultaneously with a
final regulation (the criteria regulation) setting forth specific
criteria that, if met and if certain other factors set forth in the
final regulation are not present, constitute a finding by the Secretary
that a plan is established or maintained under or pursuant to one or
more collective bargaining agreements for purposes of section 3(40).
Both of these final rulemakings take into account the views expressed
by the ERISA section 3(40) Negotiated Rulemaking Advisory Committee
(the Committee), which was convened by the Department under the
Negotiated Rulemaking Act (NRA) and the Federal Advisory Committee Act
(the FACA), 5 U.S.C. App. 2. Together, these final regulations will
assist states, plan sponsors, and administrators of employee benefit
plans, in determining the scope of state regulatory authority over
plans or other arrangements as set forth in sections 3(40) and
514(b)(6) of ERISA.
The procedural rules provide for administrative hearings to obtain
a determination by the Secretary as to whether a particular plan is
established or maintained under or pursuant to one or more collective
bargaining agreements for purposes of section 3(40) of ERISA. The rules
are modeled on the procedures set forth in 29 CFR sections 2570.60
through 2570.71 regarding civil penalties under section 502(c)(2) of
ERISA related to reports required to be filed under ERISA section
101(b)(1) and are designed to maintain the maximum degree of uniformity
with those rules that is consonant with the need for an expedited
procedure accommodating the specific characteristics necessary for
proceedings under section 3(40). Accordingly, the rules adopt many,
although not all, of the provisions of subpart A of 29 CFR part 18 for
the 3(40) proceedings. In this regard, it should be noted that the
rules apply only to adjudicatory proceedings before administrative law
judges (ALJs) of the United States Department of Labor (the
Department). An administrative hearing is available under these rules
only to an entity that contends it meets the exception provided in
section 3(40)(A)(i) for plans established or maintained under or
pursuant to collective bargaining agreements and only if the
jurisdiction or law of a state has been asserted against that entity.
These procedural rules were published in the Federal Register in
proposed form on October 27, 2000, (65 FR 64498), simultaneously with
the proposed criteria regulation. As discussed more fully in the
preamble to the final criteria regulation, the Department received
seven comments on the proposed criteria and procedural regulations,
only one of which related to the procedural regulations. After
considering the views of the Committee, which was reconvened by the
Department for that purpose and met in public session on March 1, 2002,
the Department has determined to issue the final procedural regulations
in the same format and language as proposed.
The Department received only one comment relating to the proposed
procedural rules. This comment also concerned the criteria regulation
and is discussed in the preamble to that final rule. As described in
the preamble to the final criteria regulation, the Department has
clarified the language of paragraph (g)(2) of the criteria regulation
to emphasize that the ALJ proceedings do not provide a basis for a
stay-of-state administrative or judicial proceedings. The language of
the procedural regulations remains unchanged.
B. Economic Analysis Under Executive Order 12866
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), 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'' within the meaning of
3(f)(4), and therefore subject to review by the Office of Management
and Budget (OMB). 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, at the time
of the Notice of Proposed Rulemaking, the Department sought comments
and information from the public on its analysis of the benefits and
costs of the proposed regulation. Having received none, the Department
believes, based on its original discussion, that the benefits of this
final regulation justify its costs. The regulation will benefit plans,
states, insurers, and organized labor by reducing the cost of resolving
some disputes over a state's right to regulate certain multiple
employer welfare benefit arrangements, facilitating the conduct of
hearings, reducing disputes over a plan or arrangement's status, and
improving the efficiency and ensuring the consistency in determinations
of such jurisdiction.
[[Page 17486]]
Background
When state law or jurisdiction is asserted over an entity that
claims to be excepted from state regulation under the collective
bargaining exception, the entity has the option of using these
procedures to resolve the dispute. In the absence of the procedure
provided under these regulations for determining whether a given plan
or arrangement is established or maintained pursuant to a collective
bargaining agreement, such disputes have generally been resolved in
courts. The Department believes that resolving disputes through the
procedures established by these regulations will generally be more
efficient and less costly than resolving the disputes in a court of
law. Also, determinations made in the single, specialized venue of
administrative hearings are likely to be more consistent than
determinations made in multiple, non-specialized court venues.
Benefits of the Regulation
The procedure established by these regulations will complement the
criteria established by the criteria regulation. Together, the
regulations will assist in accurately identifying MEWAs and
collectively bargained plans and ensure that disputes over such
classifications are resolved efficiently. For purposes of its
assessment of the economic impact of the regulations, the Department
has attributed the net benefits of ensuring accurate determinations to
the criteria regulation. It has attributed the net benefits of ensuring
efficient resolution of disputes to these procedural regulations.
Determining Jurisdiction Accurately and Consistently
The criteria regulation will reduce existing confusion about
whether an entity falls under the collective bargaining agreement
exception. However, given the wide variety of agreements, plans and
arrangements, as well as the potential for conflicting determinations
where a MEWA is conducting business in more than one state, some
uncertainties might remain. The Department has therefore established a
procedure for obtaining an individualized hearing before a Department
of Labor ALJ and for final appeals to the Secretary or the Secretary's
delegate to determine an entity's legal status.
Employers and employees will benefit from an administrative
decision that provides greater assurance that the entity will comply
with applicable federal and state laws designed to protect welfare
benefits. In addition, both the petitioner and the state whose
authority is being asserted will benefit from the uniform application
of criteria by the ALJ, avoiding any confusion that would result from
inconsistent decisions. Finally, state insurance departments that
receive a timely resolution about an entity's status as a MEWA will be
able to swiftly deal with sham MEWAs and then re-direct saved resources
to other areas. Because an ALJ decision will be based on the criteria
regulation, 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 that regulation.
Resolving Disputes Efficiently
An administrative hearing under the final regulations will
economically benefit the small number of plans or arrangements that
dispute state assertion of law or jurisdiction. The Department foresees
improved efficiencies through use of administrative hearings that are
at the option of entities over which state jurisdiction has been
asserted. An administrative hearing allows the various parties to
obtain a decision in a timely, efficient, and less costly manner than
is usual in federal or state court proceedings, thus benefiting
employers and employees.
The Department's analysis of costs involved in adjudication in a
federal or state court versus an administrative hearing assumes that
parties seeking to establish regulatory authority incur a baseline cost
to resolve the question of status in federal or state court proceeding.
This baseline cost includes, but is not limited to, expenditures for
document production, attorney fees, filing fees, depositions, etc.
Because regulatory authority may be decided in motions or pleadings in
cases where that issue is not primary, the direct cost of using only
the courts as a decision-maker for such issues is too variable to
specify; however, custom and practice indicate that the cost of an
administrative hearing is similar to or represents 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 is similar for both an administrative
hearing and for a federal or state court proceeding. Documents such as
by-laws, administrative agreements, collective bargaining agreements,
and other documents and instruments governing the entity are generally
kept in the normal course of business, and it is likely that the cost
for an administrative hearing will be no more than that which would be
incurred 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 30
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. However, it is likely that the specialized knowledge of
ERISA that the ALJ will bring to the process will facilitate a prompt
decision, reduce costs, and introduce a consistent standard to what has
been a confusion of decisions on regulatory authority. ALJ case
histories will educate MEWAs and states by articulating the
characteristics of a collectively bargained plan, which clarity will in
turn promote compliance with appropriate federal and state regulations.
Participants and beneficiaries of arrangements that are newly
identified as MEWAs will especially benefit from appropriate state
oversight that provides for secure contributions and paid-up claims. In
its Notice of Proposed Rulemaking, the Department solicited comments on
the comparative cost of a trial in federal or state court versus an
administrative hearing on the issue of whether an entity is a 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. No comments
concerning the comparative costs of a trial versus an administrative
hearing were received.
C. 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 notice and comment requirements of
[[Page 17487]]
section 553(b) of the Administrative Procedure Act (5 U.S.C. 551 et
seq.) and that 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 604 of the RFA requires
that the agency present a final regulatory flexibility analysis at the
time of the publication of the notice of final rulemaking describing
the impact of the rule on small entities. Small entities include small
businesses, organizations, and governmental jurisdictions.
For purposes of analysis under the RFA, EBSA continues 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 ERISA, which permits the Secretary of Labor to prescribe
simplified annual reports for pension plans that 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 benefit 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, EBSA
believes that assessing the impact of this final 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 that 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.). In its Notice of Proposed Rulemaking, EBSA requested comments on
the appropriateness of the size standard used; no comments were
received.
On this basis, EBSA has determined that this rule does 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, EBSA has prepared the following final
regulatory flexibility analysis.
(1) Reason for the Action. The Department is establishing 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.
(2) Objectives. The objective of these regulations is to make
available to plans an individualized procedure for obtaining a hearing
before a Department of Labor ALJ, and for appeals of an ALJ decision to
the Secretary or the Secretary's delegate. The procedure is 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 that contends it meets the exception for plans
established or maintained under or pursuant to one or more collective
bargaining agreements.
(3) 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. No small governmental
jurisdictions are affected.
Based on Form 5500 filings and Form M-1 filings by MEWAs pursuant
to interim final rules published in the Federal Register on February
11, 2000 (65 FR 7152), it is estimated that there about 2,600 entities
that can be classified as either collectively bargained plans or as
MEWAs; however, EBSA believes 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.
The number of small plans found within the group of 2,600
collectively bargained plans or MEWAs is about 200, or eight percent.
The Employee Benefits Supplement to the 1993 Current Population Survey
and a 1993 Small Business Administration survey of retirement and other
benefit coverages in small firms indicate that there are more than 2.5
million private group health plans with fewer than 100 participants.
Thus, the 200 small entities potentially affected represent a very
small portion of all small group health plans. Even if all 2,600
potentially affected entities were to have fewer than 100 participants,
they would 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 law or jurisdiction has been
asserted over these entities, or the portion of those instances that
involved the collective bargaining agreement exception. However, in
order to develop an estimate of the number of plans or arrangements
that might seek to clarify their legal status by using an
administrative hearing as proposed by these regulations, 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.
In recent years, the Department has been a party to an average of
45 legal actions annually. The proportion of these lawsuits that
involved a dispute over state jurisdiction based on a plan's or an
arrangement's legal status is unknown. On the whole, 45 is therefore
considered a reasonable estimate of an upper bound number of plans that
could have been a party to a lawsuit involving a determination of the
plan's legal status. Because this procedural regulation and the related
criteria regulation are expected to reduce the number of disputes, the
Department assumes that 45 represents a conservatively high estimate of
the number of plans or arrangements that would petition for an
administrative hearing. Of all small plans and arrangements, then, the
greatest number of plans or arrangements likely to petition for an
administrative hearing represents a 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 these regulations will not have a significant economic
impact on a substantial number of small entities.
(4) Reporting and Recordkeeping. In most cases, the records that
will be used to support a petition for a hearing pursuant to these
procedures will be maintained by plans and MEWAs in the
[[Page 17488]]
ordinary course of their business. Certain documents, such as
affidavits, would likely be required to be prepared specifically for
purposes of the petition. It is assumed that documents will most often
be assembled and drafted by attorneys, although this is not required by
the express terms of the procedure.
(5) Duplication. No federal rules have been identified that
duplicate, overlap, or conflict with the final rule.
(6) Alternatives. The regulations are based on the consensus report
of the Committee. Recognizing that guidance was needed in clarifying
collective bargaining exceptions to the MEWA regulation, in 1995, the
Department had published a Notice of Proposed Rulemaking on Plans
Established or Maintained Under or Pursuant to Collective Bargaining
Agreements in the Federal Register (60 FR 39209). Under the terms of
the 1995 NPRM, it would have been within the authority of state
insurance regulators to identify and regulate MEWAs operating in their
jurisdictions. The 1995 proposal did not establish a method for
obtaining individual findings by the Department.
The Department received numerous comments on the NPRM expressing
concerns about plans' abilities to meet the standards set forth in the
NPRM. Commenters also objected to granting authority to state
regulators for determining 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
Committee under the 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 a Department Notice of Intent. These regulations are based
on the Committee's consensus on the need for an individualized
administrative proceeding in limited circumstances for determining the
legal status of an entity. Based on the fact that the Committee
represented a cross section of the state, federal, association, and
private sector insurance organizations concerned with these issues, the
Department believes that, as an alternative to the 1995 NPRM, these
regulations accomplish the stated objectives of the Secretary and will
have a beneficial effect on MEWAs, state insurance regulators, small
employers who offer group health coverage, and plan participants. No
other significant alternatives that 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 plan or arrangement.
It would be inappropriate to create an exemption for small entities
under the regulation because small entities are as much in need of
clarification of their legal status as are larger entities.
D. Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1995 (PRA 95) (44
U.S.C. 3501 et seq.), the Department submitted the information
collection request (ICR) included in the Procedures for Administrative
Hearings Regarding Plans Established or Maintained Pursuant to
Collective Bargaining Agreements under section 3(40)(A) of ERISA to the
Office of Management and Budget (OMB) for review and clearance at the
time the NPRM was published in the Federal Register (65 FR 64498). A
request for comments on the ICR was included in the NPRM. No comments
were received about the ICR, and no changes have been made to the ICR
in connection with this Notice of Final Rulemaking. OMB subsequently
approved the ICR under control number 1210-0119. The approval will
expire on January 31, 2004.
Agency: Employee Benefits Security Administration, Department of
Labor.
Title: Petition for Finding under section 3(40) of ERISA.
OMB Number: 1210-0119.
Affected Public: Business or other for-profit; not-for-profit
institutions.
Respondents: 45.
Responses: 45.
Average Time Per Response: 32 hours.
Estimated Total Burden Hours: 1.
Estimated Total Burden Cost (Operating and Maintenance): $104,100.
E. Small Business Regulatory Enforcement Fairness Act
The rule being issued here is subject to the Congressional Review
Act 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.
F. Unfunded Mandates Reform Act
For purposes of the Unfunded Mandates Reform Act of 1995 (2 U.S.C.
1501 et seq.), 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.
G. Executive Order 13132
When an agency promulgates a regulation that has federalism
implications, Executive Order 13132 (64 FR 43255, Aug. 10, 1999)
requires the Agency to 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 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
member of the National Association of Insurance Commissioners (NAIC),
representing the interest of state governments in the regulation of
insurance, participated in the negotiations throughout the negotiated
rulemaking process that provided the basis for this regulation.
In response to comments from the public about the proposed rule,
the NAIC raised a concern that the process by which the Department
issues ALJ determinations regarding the collectively bargained status
of entities should move forward as quickly as possible and not result
in a stay of state enforcement proceedings against MEWAs. The final
regulation specifically states that the proceedings shall be conducted
as expeditiously as possible and that the parties shall make every
effort to avoid delay at each stage of the proceeding. The companion
[[Page 17489]]
regulation that establishes criteria for determining whether an
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 provides that ALJ proceedings under this regulation are
not intended to provide the basis for a stay or delay of a state
administrative or court proceeding or enforcement of a subpoena.
List of Subjects in 29 CFR Part 2570
Administrative practice and procedure, Claims, Employee benefit
plans, Government employees, 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 to read as
follows:
PART 2570--[AMENDED]
0
1. The authority citation for part 2570 is revised to read as follows:
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. Add new Subpart H to read as follows:
Subpart H--Procedures for Issuance of Findings Under ERISA Sec. 3(40)
Sec.
2570.150 Scope of rules.
2570.151 In general.
2570.152 Definitions.
2570.153 Parties.
2570.154 Filing and contents of petition.
2570.155 Service.
2570.156 Expedited proceedings.
2570.157 Allocation of burden of proof.
2570.158 Decision of the Administrative Law Judge.
2570.159 Review by the Secretary.
Sec. 2570.150 Scope of rules.
The rules of practice set forth in this subpart H apply to
``section 3(40) Finding Proceedings'' (as defined in Sec.
2570.152(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 29 CFR part 18, 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 29 CFR part 18. 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. 2570.151 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 by 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)(A)(i) of ERISA that it is a plan
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. 2570.152 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 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 that 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.
2570.153;
(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 that has intervened under
Sec. 2570.153(b).
(f) Secretary means the Secretary of Labor, and includes, pursuant
to any delegation or sub-delegation of authority, the Assistant
Secretary for Employee Benefits Security or other employee of the
Employee Benefits Security Administration.
(g) Section 3(40) Finding Proceeding means a proceeding before the
Office of Administrative Law Judges (OALJ) relating to whether the
Secretary finds an entity to be 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. 2570.153 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. 2570.154 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, or by making a filing by any
electronic means permitted under procedures established by the OALJ.
(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 petitioner, and provide
the addresses and names of responsible officials;
(4) Include affidavits or other written evidence showing that:
[[Page 17490]]
(i) State jurisdiction has been asserted over or legal process
commenced against the petitioner pursuant to state law;
(ii) The petitioner 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 petitioner 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 petitioner satisfies the criteria in 29 CFR 2510.3-40(b);
and
(v) Service has been made as provided in Sec. 2570.155.
(5) The affidavits shall set forth such facts as would be
admissible in evidence in a proceeding under 29 CFR part 18 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. 2570.155 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, 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 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, PO 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 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
OALJ 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. 2570.156 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. 2570.157 Allocation of burden of proof.
For purposes of a final decision under Sec. 2570.158 (Decision of
the Administrative Law Judge) or Sec. 2570.159 (Review by the
Secretary), the petitioner shall have the burden of proof as to whether
it meets 29 CFR 2510.3-40.
Sec. 2570.158 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
[[Page 17491]]
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 or her decision. The decision
of the administrative law judge shall include findings of fact and
conclusions of law, with reasons therefore, 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. 2570.159 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 31st day of March, 2003.
Ann L. Combs,
Assistant Secretary, Employee Benefits Security Administration.
[FR Doc. 03-8114 Filed 4-7-03; 8:45 am]
BILLING CODE 4510-29-P
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