[Code of Federal Regulations]
[Title 29, Volume 9]
[Revised as of July 1, 2001]
From the U.S. Government Printing Office via GPO Access
[CITE: 29CFR2560.502c-5]

[Page 510-512]
 
                             TITLE 29--LABOR
 
CHAPTER XXV--PENSION AND WELFARE BENEFITS ADMINISTRATION, DEPARTMENT OF 
                                  LABOR
 
PART 2560--RULES AND REGULATIONS FOR ADMINISTRATION AND ENFORCEMENT--Table of Contents
 
Sec. 2560.502c-5  Civil penalties under section 502(c)(5).

    (a) In general. (1) Pursuant to the authority granted the Secretary 
under section 502(c)(5) of the Employee Retirement Income Security Act 
of 1974 Pub.L. 93-406, 88 Stat. 840-52, as amended by Pub. L. 104-191, 
101 Stat. 1936) (the Act), the administrator of a multiple employer 
welfare arrangement (MEWA) (within the meaning of section 3(40)(A) of 
the Act) that is not a group health plan, and that provides benefits 
consisting of medical care (within the meaning of section 733(a)(2)), 
for which a report is required to be filed under section 101(g){h} of 
the Act and Sec. 2520.101-2, shall be liable for civil penalties 
assessed by the Secretary under section 502(c)(5) of the Act for each 
failure or refusal to file a completed report required to be filed under 
section 101(g){h} and Sec. 2520.101-2. The term ``administrator'' is 
defined in Sec. 2520.101-2(b).
    (2) For purposes of this section, a failure or refusal to file the 
report required to be filed under section 101(g){h} shall mean a failure 
or refusal to file, in whole or in part, that information described in 
section 101(g){h} and Sec. 2520.101-2, on behalf of the MEWA, at the 
time and in the manner prescribed therefor.
    (b) Amount assessed--(1) The amount assessed under section 502(c)(5) 
shall be determined by the Department of Labor, taking into 
consideration the degree and/or willfulness of the failure to file the 
report. However, the amount assessed under section 502(c)(5) of the Act 
shall not exceed $1,000 a day, computed from the date of the 
administrator's failure or refusal to file the report and, except as 
provided in paragraph (b)(2) of this section, continuing up to the date 
on which a report meeting the requirements of section 101(g){h} and 
Sec. 2520.101-2, as determined by the Secretary, is filed.
    (2) If, upon receipt of a notice of intent to assess a penalty (as 
described in paragraph (c) of this section), the administrator files a 
statement of reasonable cause for the failure to file, in accordance 
with paragraph (e) of this section, a penalty shall not be assessed for 
any day from the date the Department serves the administrator with a 
copy of such notice until the day after the Department serves notice on 
the administrator of its determination on reasonable cause and its 
intention to assess a penalty (as described in paragraph (g) of this 
section).
    (3) For purposes of this paragraph, the date on which the 
administrator failed or refused to file the report shall be the date on 
which the report was due (determined without regard to any extension of 
time for filing). A report which is rejected under Sec. 2520.101-2 shall 
be treated as a failure to file a report when a revised report meeting 
the requirements of this section is not filed within 45 days of the date 
of the Department's notice of rejection. If a revised report meeting the 
requirements of this section, as determined by the Secretary, is not 
submitted within 45 days of the date of the notice of rejection by the 
Department, a penalty shall be assessed under section 502(c)(5) 
beginning on the day after the date of the administrator's failure or 
refusal to file the report.
    (c) Notice of intent to assess a penalty. Prior to the assessment of 
any penalty under section 502(c)(5), the Department shall provide to the 
administrator of

[[Page 511]]

the MEWA a written notice indicating the Department's intent to assess a 
penalty under section 502(c)(5), the amount of such penalty, the period 
to which the penalty applies, and a statement of the facts and the 
reason(s) for the penalty.
    (d) Waiver of assessed penalty. The Department may waive all or part 
of the penalty to be assessed under section 502(c)(5) on a showing by 
the administrator that there was reasonable cause for the failure to 
file the report.
    (e) Showing of reasonable cause. Upon issuance by the Department of 
a notice of intent to assess a penalty, the administrator shall have 30 
days from the date of the service of notice, as described in paragraph 
(i) of this section, to file a statement of reasonable cause for the 
failure to file a complete report or why the penalty, as calculated, 
should not be assessed. A showing of reasonable cause must be made in 
the form of a written statement setting forth all the facts alleged as 
reasonable cause. The statement must contain a declaration by the 
administrator that the statement is made under the penalties of perjury.
    (f) Failure to file a statement of reasonable cause. Failure of an 
administrator to file a statement of reasonable cause within the 30 day 
period described in paragraph (e) of this section shall be deemed to 
constitute a waiver of the right to appear and contest the facts alleged 
in the notice, and such failure shall be deemed an admission of the 
facts alleged in the notice for purposes of any proceeding involving the 
assessment of a civil penalty under section 502(c)(5). Such notice shall 
then become a final order of the Secretary, within the meaning of 
Sec. 2570.91(g).
    (g) Notice of the determination on statement of reasonable cause--
(1) The Department, following a review of all the facts alleged in 
support of a complete or partial waiver of the penalty, shall notify the 
administrator, in writing, of its intention to waive the penalty, in 
whole or in part, and/or assess a penalty. If it is the intention of the 
Department to assess a penalty, the notice shall indicate the amount of 
the penalty, not to exceed the amount described in paragraph (c) of this 
section, and a brief statement of the reasons for assessing the penalty.
    (2) Except as provided in paragraph (h) of this section, a notice 
issued pursuant to this paragraph indicating the Department's intention 
to assess a penalty shall become a final order, within the meaning of 
Sec. 2570.91(g), 30 days after the date of service of the notice.
    (h) Administrative hearing. A notice issued pursuant to paragraph 
(g) of this section will become the final order of the Department of 
Labor, unless, within 30 days from the date of the service of the 
notice, the administrator or representative thereof files a request for 
a hearing under Sec. 2570.90 et seq., and files and answer to the 
notice. The request for hearing and answer shall be filed in accordance 
with Sec. 2570.92. The answer opposing the proposed sanction shall be in 
writing, and supported by reference to specific circumstances or facts 
surrounding the notice of determination issued pursuant to paragraph 
(g).
    (i) Service of notice--(1) Service of notice shall be made either:
    (i) By delivering a copy to the administrator or representative 
thereof;
    (ii) By leaving a copy at the principal office, place of business, 
or residence of the administrator or representative thereof; or
    (iii) By mailing a copy to the last known address of the 
administrator or representative thereof.
    (2) If service is accomplished by certified mail, service is 
complete upon mailing. If done by regular mail, service is complete upon 
receipt by the addressee
    (j) Liability--(1) If more than one person is responsible as 
administrator for the failure to file the report, all such persons shall 
be jointly and severally liable with respect to such failure.
    (2) Any person against whom a civil penalty has been assessed under 
section 502(c)(5) pursuant to a final order, within the meaning of 
Sec. 2570.91(g), shall be personally liable for the payment of such 
penalty.
    (k) Cross-reference. See Secs. 2570.90 through 101 of this chapter 
for procedural rules relating to administrative hearings under section 
502(c)(5) of the Act.
    (l) Applicability date--(1) In general. This section applies to 
administrators

[[Page 512]]

of multiple employer welfare arrangements that are not group health 
plans beginning May 1, 2000.
    (2) Transitional safe harbor period. No civil penalty will be 
assessed against an administrator that has made a good faith effort to 
comply with a Sec. 2520.101-2 filing that is due in the Year 2000.

[65 FR 7184, Feb. 11, 2000]