[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-7]

[Page 533-535]
 
                             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-7  Civil penalties under section 502(c)(7).

    (a) In general. (1) Pursuant to the authority granted the Secretary 
under section 502(c)(7) of the Employee Retirement Income Security Act 
of 1974, as amended (the Act), the administrator (within the meaning of 
section 3(16)(A) of the Act) of an individual account plan (within the 
meaning of section 101(i)(8) of the Act and Sec. 2520.101-3(d)(2) of 
this chapter), shall be liable for civil penalties assessed by the 
Secretary under section 502(c)(7) of the Act for failure or refusal to 
provide notice of a blackout period to affected participants and 
beneficiaries in accordance with section 101(i) of the Act and Sec. 
2520.101-3 of this chapter.
    (2) For purposes of this section, a failure or refusal to provide a 
notice of blackout period shall mean a failure or refusal, in whole or 
in part, to provide notice of a blackout period to an affected plan 
participant or beneficiary at the time and in the manner prescribed by 
section 101(i) of the Act and Sec. 2520.101-3 of this chapter.

[[Page 534]]

    (b) Amount assessed. (1) The amount assessed under section 502(c)(7) 
of the Act for each separate violation shall be determined by the 
Department of Labor, taking into consideration the degree and/or 
willfulness of the failure or refusal to provide a notice of blackout 
period. However, the amount assessed for each violation under section 
502(c)(7) of the Act shall not exceed $100 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 provide a notice 
of blackout period up to and including the date that is the final day of 
the blackout period for which the notice was required.
    (2) For purposes of calculating the amount to be assessed under this 
section, a failure or refusal to provide a notice of blackout period 
with respect to any single participant or beneficiary shall be treated 
as a separate violation under section 101(i) of the Act and Sec. 
2520.101-3 of this chapter.
    (c) Notice of intent to assess a penalty. Prior to the assessment of 
any penalty under section 502(c)(7) of the Act, 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)(7) of the 
Act, the amount of such penalty, the number of participants and 
beneficiaries on which the penalty is based, 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(i) 
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 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 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)(7) of the Act. Such 
notice shall then become a final order of the Secretary, within the 
meaning of Sec. 2570.131(g) of this chapter, forty-five (45) days from 
the date of service of the notice.
    (g) Notice of determination on statement of reasonable cause. (1) 
The Department, following a review of all of the facts in a statement of 
reasonable cause alleged in support of no assessment or a complete or 
partial waiver of the penalty, shall notify the administrator, in 
writing, of its determination on the statement of reasonable cause and 
its determination whether 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 
assessment, not to exceed the amount described in paragraph (c) of this 
section. This notice is a ``pleading'' for purposes of Sec. 2570.131(m) 
of this chapter.
    (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 determination to assess a penalty, shall become a final 
order, within the meaning of Sec. 2570.131(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,

[[Page 535]]

within the meaning of Sec. 2570.131(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. 2570.130 through 2570.141 of this chapter, and files an 
answer to the notice. The request for hearing and answer must be filed 
in accordance with Sec. 2570.132 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 provide a notice of blackout period 
under section 101(i) of the Act and its implementing regulations (Sec. 
2520.101-3 of this chapter), all such persons shall be jointly and 
severally liable for such failure.
    (2) Any person, or persons under paragraph (j)(1) of this section, 
against whom a civil penalty has been assessed under section 502(c)(7) 
of the Act, pursuant to a final order, within the meaning of Sec. 
2570.131(g) of this chapter, shall be personally liable for the payment 
of such penalty.
    (k) Cross-reference. See Sec. Sec. 2570.130 through 2570.141 of 
this chapter for procedural rules relating to administrative hearings 
under section 502(c)(7) of the Act.

[68 FR 3736, Jan. 24, 2003]