[Code of Federal Regulations]
[Title 29, Volume 9]
[Revised as of July 1, 2005]
From the U.S. Government Printing Office via GPO Access
[CITE: 29CFR2560.502c-2]

[Page 527-529]
 
                             TITLE 29--LABOR
 
 CHAPTER XXV--EMPLOYEE BENEFITS SECURITY ADMINISTRATION, DEPARTMENT OF 
                                  LABOR
 
PART 2560_RULES AND REGULATIONS FOR ADMINISTRATION AND ENFORCEMENT
--Table of Contents
 
Sec. 2560.502c-2  Civil penalties under section 502(c)(2).

    (a) In general. (1) Pursuant to the authority granted the Secretary 
under section 502(c)(2) of the Employee Retirement Income Security Act 
of 1974, as amended (the Act), the administrator (within the meaning of 
section 3(16)(A)) of an employee benefit plan (within the meaning of 
section 3(3) and Sec. 2510.3-1, et seq.) for which an annual report is 
required to be filed under section 101(b)(1) shall be liable for civil 
penalties assessed by the Secretary under section 502(c)(2) of the Act 
in each case in which there is a failure or refusal to file the annual 
report required to be filed under section 101(b)(1).
    (2) For purposes of this section, a failure or refusal to file the 
annual report required to be filed under section 101(b)(1) shall mean a 
failure or refusal to file, in whole or in part, that information 
described in section 103 and Sec. 2520.103-1, et seq., on behalf of the 
plan at the time and in the manner prescribed therefor.
    (b) Amount assessed. (1) The amount assessed under section 502(c)(2) 
of the Act shall be determined by the Department of Labor, taking into 
consideration the degree and/or willfulness of the failure or refusal to 
file the annual report. However, the amount assessed under section 
502(c)(2) of the Act shall not exceed $1,000 a day (or such other 
maximum amount as may be established by regulation pursuant to the 
Federal Civil Penalties Inflation Adjustment Act of 1990, as amended), 
computed from the date of the administrator's failure or refusal to file 
the annual report and, except as provided

[[Page 528]]

in paragraph (b)(2) of this section, continuing up to the date on which 
an annual report satisfactory to 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 annual report shall be the 
date on which the annual report was due (determined without regard to 
any extension for filing). An annual report which is rejected under 
section 104(a)(4) for a failure to provide material information shall be 
treated as a failure to file an annual report when a revised report 
satisfactory to the Department is not filed within 45 days of the date 
of the Department's notice of rejection.

A penalty shall not be assessed under section 502(c)(2) for any day 
earlier than the day after the date of an administrator's failure or 
refusal to file the annual report if a revised filing satisfactory to 
the Department is not submitted within 45 days of the date of the notice 
of rejection by the Department.
    (c) Notice of intent to assess a penalty. Prior to the assessment of 
any penalty under section 502(c)(2), the Department shall provide to the 
administrator of the plan a written notice indicating the Department's 
intent to assess a penalty under section 502(c)(2), the amount of such 
penalty, the period to which the penalty applies, and the reason(s) for 
the penalty.
    (d) Reconsideration or waiver of penalty to be assessed. The 
Department may determine that all or part of the penalty amount in the 
notice of intent to assess a penalty shall not be assessed on a showing 
that the administrator complied with the requirements of section 
101(b)(1) of the Act or on a showing by the administrator of mitigating 
circumstances regarding the degree or willfulness of the noncompliance.
    (e) Showing of reasonable cause. Upon issuance by the Department of 
a notice of intent to assess a penalty, the administrator shall have 
thirty (30) days from the date of service of the notice, as described in 
paragraph (i) of this section, to file a statement of reasonable cause 
explaining why the penalty, as calculated, should be reduced, or not be 
assessed, for the reasons set forth in paragraph (d) of this section. 
Such statement must be made in writing and set forth all the facts 
alleged as reasonable cause for the reduction or nonassessment of the 
penalty. 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 thirty 
(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 of intent, 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)(2) of the Act. Such notice shall then become a final order of the 
Secretary, within the meaning of Sec. 2570.61(g) of this chapter, 
forty-five (45) days from the date of service of the notice.
    (g) Notice of the determination on statement of reasonable cause. 
(1) The Department, following a review of all the facts alleged in 
support of no assessment or a complete or partial waiver of the penalty, 
shall notify the administrator, in writing, of its determination to 
waive the penalty, in whole or in part, and/or assess a penalty. If it 
is the determination 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. This notice is a 
``pleading'' for purposes of Sec. 2570.61(m) of this chapter.

[[Page 529]]

    (2) Except as provided in paragraph (h) of this section, a notice 
issued pursuant to paragraph (g)(1) of this section, indicating the 
Department's intention to assess a penalty, shall become a final order, 
within the meaning of Sec. 2570.61(g) of this chapter, forty-five (45) 
days from the date of service of the notice.
    (h) Administrative hearing. A notice issued pursuant to paragraph 
(g) of this section will not become a final order, within the meaning of 
Sec. 2570.61(g) of this chapter, if, within thirty (30) days from the 
date of the service of the notice, the administrator or a representative 
thereof files a request for a hearing under Sec. Sec. 2570.60 through 
2570.71 of this chapter, and files an answer to the notice. The request 
for hearing and answer must be filed in accordance with Sec. 2570.62 of 
this chapter and Sec. 18.4 of this title. 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) of this section.
    (i) Service of notices and filing of statements. (1) Service of a 
notice for purposes of paragraphs (c) and (g) of this section shall be 
made:
    (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 service is by regular mail, service is 
complete upon receipt by the addressee. When service of a notice under 
paragraph (c) or (g) of this section is by certified mail, five (5) days 
shall be added to the time allowed by these rules for the filing of a 
statement, or a request for hearing and answer, as applicable.
    (3) For purposes of this section, a statement of reasonable cause 
shall be considered filed:
    (i) Upon mailing, if accomplished using United States Postal Service 
certified mail or Express Mail;
    (ii) Upon receipt by the delivery service, if accomplished using a 
``designated private delivery service'' within the meaning of 26 U.S.C. 
7502(f);
    (iii) Upon transmittal, if transmitted in a manner specified in the 
notice of intent to assess a penalty as a method of transmittal to be 
accorded such special treatment; or
    (iv) In the case of any other method of filing, upon receipt by the 
Department at the address provided in the notice of intent to assess a 
penalty.
    (j) Liability. (1) If more than one person is responsible as 
administrator for the failure to file the annual 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)(2) pursuant to a final order, within the meaning of Sec. 
2570.61(g), shall be personally liable for the payment of such penalty.
    (k) Cross-reference. See Sec. Sec. 2570.60 through 2570.71 of this 
chapter for procedural rules relating to administrative hearings under 
section 502(c)(2) of the Act.

[54 FR 26894, June 26, 1989, as amended by 67 FR 777, Jan. 7, 2002; 68 
FR 3734, Jan. 24, 2003]