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Title 29—Labor–Volume 9

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Title 29—Labor–Volume 9



SUBTITLE B—Regulations Relating to Labor (Continued)

Part


chapter xx—Occupational Safety and Health Review Commission

2200


chapter xxv—Employee Benefits Security Administration, Department of Labor

2509


chapter xxvii—Federal Mine Safety and Health Review Commission

2700


chapter xl—Pension Benefit Guaranty Corporation

4000


Subtitle B—Regulations Relating to Labor (Continued)

CHAPTER XX—OCCUPATIONAL SAFETY AND HEALTH REVIEW COMMISSION

PARTS 2000-2199 [RESERVED]

PART 2200—RULES OF PROCEDURE


Authority:29 U.S.C. 661(g), unless otherwise noted.


Section 2200.96 is also issued under 28 U.S.C. 2112(a).



Source:84 FR 14558, Apr. 10, 2019, unless otherwise noted.

Subpart A—General Provisions

§ 2200.1 Definitions.

As used in this part:


(a) Act means the Occupational Safety and Health Act of 1970, 29 U.S.C. 651-678.


(b) Commission, person, employer, and employee have the meanings set forth in section 3 of the Act, 29 U.S.C. 652.


(c) Secretary means the Secretary of Labor or the Secretary’s duly authorized representative.


(d) Executive Secretary means the Executive Secretary of the Commission.


(e) Affected employee means an employee of a cited employer who is exposed to or has access to the hazard arising out of the allegedly violative circumstances, conditions, practices, or operations.


(f) Judge means an Administrative Law Judge appointed pursuant to section 12(e) of the Act, 29 U.S.C. 661(e), as amended by Public Law 95-251, 92 Stat. 183, 184 (1978).


(g) Authorized employee representative means a labor organization that has a collective bargaining relationship with the cited employer and that represents affected employees who are members of the collective bargaining unit.


(h) Representative means any person, including an authorized employee representative, authorized by a party or intervenor to represent it in a proceeding.


(i) Citation means a written communication issued by the Secretary to an employer pursuant to section 9(a) of the Act, 29 U.S.C. 658(a).


(j) Notification of proposed penalty means a written communication issued by the Secretary to an employer pursuant to section 10(a) or (b) of the Act, 29 U.S.C. 659(a) or (b).


(k) Day means a calendar day.


(l) Working day means all days except Saturdays, Sundays, or Federal holidays.


(m) Proceeding means any proceeding before the Commission or before a Judge.


(n) Pleadings are complaints and answers filed under § 2200.34, statements of reasons and employers’ responses filed under § 2200.38, and petitions for modification of abatement and objecting parties’ responses filed under § 2200.37. A motion is not a pleading within the meaning of these rules.


[84 FR 14558, Apr. 10, 2019; 84 FR 45654, Aug. 30, 2019]


§ 2200.2 Scope of rules; applicability of Federal Rules of Civil Procedure; construction.

(a) Scope. These rules shall govern all proceedings before the Commission and its Judges.


(b) Applicability of Federal Rules of Civil Procedure. In the absence of a specific provision, procedure shall be in accordance with the Federal Rules of Civil Procedure.


(c) Construction. These rules shall be construed to secure an expeditious, just, and inexpensive determination of every case.


§ 2200.3 Use of number.

Words importing the singular number may extend and be applied to the plural and vice versa.


[87 FR 8948, Feb. 17, 2022]


§ 2200.4 Computing time.

(a) Computation. The following rules apply in computing any time period specified in these rules or by any order that does not specify a method of computing time.


(1) Period stated in days or longer unit. When the period is stated in days or a longer unit of time:


(i) Exclude the day of the event that triggers the period;


(ii) Count every day, including intermediate Saturdays, Sundays, and Federal holidays; and


(iii) Include the last day of the period, but if the last day is a Saturday, Sunday, or Federal holiday, the period continues to run until the end of the next day that is not a Saturday, Sunday, or Federal holiday.


(2) Period stated in working days. When the period is stated in working days, count every day except intermediate Saturdays, Sundays, and Federal holidays.


(3) Operating status of receiving Commission office. Unless the Commission or the Judge orders otherwise, if the receiving Commission office is closed on the last day for filing due to inclement weather or other circumstance, then the time for filing is extended to the first day the office is open that is not a Saturday, Sunday, or Federal holiday.


(4) “Last day” defined. Unless a different time is set by a rule or order, the last day ends:


(i) For documents filed electronically in the Commission’s E-File System, at 11:59 p.m. in the time zone of the receiving Commission office; and


(ii) For filing by other means, when the receiving Commission office is scheduled to close.


(5) “Next day” defined. The “next day” is determined by continuing to count forward when the period is measured after an event and backward when measured before an event.


(6) “Federal holiday” defined. “Federal holiday” means:


(i) The day set aside by statute for observing New Year’s Day, Martin Luther King Jr.’s Birthday, Washington’s Birthday, Memorial Day, Juneteenth National Independence Day, Independence Day, Labor Day, Columbus Day, Veterans’ Day, Thanksgiving Day, or Christmas Day; and,


(ii) Any day declared a holiday by the President or Congress.


(7) Computation examples. (i) If a judge orders that a document is due in 40 days, count every calendar day starting the day after that order (day 1) until reaching day 40 (due date). If the receiving Commission office is closed on day 40 (such as on a Saturday, Sunday, or Federal holiday), the document would be due the next day the office is open. In other words, if day 40 falls on a Saturday, and the following Monday is a Federal holiday, the document would be due on Tuesday, the day after the holiday.


(ii) If a judge orders that a document is due 14 days before a hearing, count backwards starting the day before the hearing (day 1) until reaching day 14. If the receiving Commission office is closed on day 14 (such as on a Saturday, Sunday, or Federal holiday), the document would be due on the last day the office is open before the Saturday, Sunday, or Federal holiday. In other words, if day 14 falls on a Sunday, and the Friday before is a Federal holiday, the document would be due on Thursday, the day before the holiday.


(b) Additional time after service by U.S. Mail. When a party may or must act within a specified time after service and service is made by U.S. Mail under § 2200.7, 3 days are added after the period would otherwise expire under § 2200.4(a). Provided, however, that this provision does not apply to computing the time for filing a petition for discretionary review under § 2200.91(b).


[84 FR 14558, Apr. 10, 2019, as amended at 87 FR 8948, Feb. 17, 2022]


§ 2200.5 Extension of time.

The Commission or the Judge on their own initiative or, upon motion of a party, for good cause shown, may enlarge or shorten any time prescribed by these rules or prescribed by an order. All such motions shall be in writing and shall conform with § 2200.40, but, in exigent circumstances in a case pending before a Judge, an oral request may be made and shall be followed by a written motion filed with the Judge within such time as the Judge prescribes. A request for an extension of time should be received in advance of the date on which the pleading or document is due to be filed. However, in exigent circumstances, an extension of time may be granted even though the request was filed after the designated time for filing has expired. In such circumstances, the party requesting the extension must show, in writing, the reasons for the party’s failure to make the request before the time prescribed for the filing had expired. The motion may be acted upon before the time for response has expired.


§ 2200.6 Record address.

(a) Every pleading or document filed by any party or intervenor shall contain the name, current address, telephone number, and email address of the party or intervenor’s representative or, if there is no representative, the party or intervenor’s own name, current address, telephone number, and email address. Any change in such information shall be communicated promptly in writing to the Judge, or the Executive Secretary if no Judge has been assigned, and to all other parties and intervenors. A party or intervenor who fails to furnish such information shall be deemed to have waived its right to notice and service under these rules.


(b) Representatives, parties, and intervenors who file case documents electronically in the Commission’s E-File System pursuant to § 2200.8(c) are responsible for both maintaining a valid email address associated with the registered account and regularly monitoring that email address.


[84 FR 14558, Apr. 10, 2019, as amended at 87 FR 8948, Feb. 17, 2022]


§ 2200.7 Service, notice, and posting.

(a) When service is required. At the time of filing pleadings or other documents, the filer shall serve a copy on every other party or intervenor. Every document relating to discovery required to be served on a party shall be served on all parties and intervenors. Every order required by its terms to be served shall be served on all parties and intervenors.


(b) Service on represented parties or intervenors. Service upon a party or intervenor who has appeared through a representative shall be made only upon such representative unless the Judge orders service on the party or intervenor.


(c) How accomplished. Unless otherwise ordered, service may be accomplished by the following methods:


(1) Commission’s E-File System. For electronically-filed documents, service shall be deemed accomplished by the simultaneous service of the document by email on all other parties and intervenors in the case, together with proof of service pursuant to paragraph (d) of this section.


(2) U.S. Mail. Service shall be deemed accomplished upon depositing the item in the U.S. Mail with first-class or higher class (such as priority mail) postage pre-paid addressed to the recipient’s record address provided pursuant to § 2200.6.


(3) Commercial or other personal delivery. Service shall be deemed accomplished upon delivery to the recipient’s record address provided pursuant to § 2200.6.


(4) Facsimile transmission. Service by facsimile transmission shall be deemed accomplished upon delivery to the receiving facsimile machine. The party serving a document by facsimile is responsible for the successful transmission and legibility of documents intended to be served.


(5) Non-E-Filed Documents. Documents required to be served upon other counsel or parties but that are not filed with the Commission in the Commission’s E-File System (such as discovery documents served pursuant to § 2200.52(j)) may be served by any means agreed to by all parties in writing.


(d) Proof of service. Service shall be documented by a written certificate of service setting forth the date and manner of service. The certificate of service shall be filed with the pleading or document.


(e) Proof of posting. Where service is accomplished by posting, proof of such posting shall be filed not later than the first working day following the posting.


(f) Service on represented employees. Service and notice to employees represented by an authorized employee representative shall be deemed accomplished by serving the representative in a manner prescribed in paragraph (c) of this section.


(g) Service on unrepresented employees. In the event there are affected employees who are not represented by an authorized employee representative, the employer shall post, immediately upon receipt, the docketing notice for the notice of contest or petition for modification of the abatement period. The posting shall be at or near where the citation is required to be posted pursuant to section 9(b) of the Occupational Safety and Health Act of 1970, 29 U.S.C. 658(b), and 29 CFR 1903.16. The employer shall post:


(1) A copy of the notice of contest or petition for modification of the abatement period;


(2) A notice informing the affected employees of their right to party status; and


(3) A notice informing the affected employees of the availability of all pleadings for inspection and copying at reasonable times.


(4)(i) A notice in the following form shall be deemed to comply with this paragraph:



(Name of employer)

Your employer has been cited by the Secretary of Labor for violation of the Occupational Safety and Health Act of 1970. The citation has been contested and will be the subject of a hearing before the OCCUPATIONAL SAFETY AND HEALTH REVIEW COMMISSION. Affected employees are entitled to participate in this hearing as parties under terms and conditions established by the OCCUPATIONAL SAFETY AND HEALTH REVIEW COMMISSION in its Rules of Procedure. Notice of intent to participate must be filed no later than 14 days before the hearing. Any notice of intent to participate should be sent to: Occupational Safety and Health Review Commission, Office of the Executive Secretary, One Lafayette Centre, 1120 20th Street, NW, Suite 980, Washington, DC 20036-3457. All pleadings relevant to this matter may be inspected at: (Place reasonably convenient to employees, preferably at or near workplace.)


(ii) Where appropriate, the second sentence of the above notice will be deleted and the following sentence will be substituted:



The reasonableness of the period prescribed by the Secretary of Labor for abatement of the violation has been contested and will be the subject of a hearing before the OCCUPATIONAL SAFETY AND HEALTH REVIEW COMMISSION.


(h) Special service requirements; authorized employee representatives. The authorized employee representative, if any, shall be served by the employer with the notice set forth in paragraph (g) of this section and with a copy of the notice of contest or petition for modification of the abatement period.


(i) Notice of hearing to unrepresented employees. Immediately upon receipt, a copy of the notice of the hearing to be held before the Judge shall be served by the employer on affected employees who are not represented by an authorized employee representative by posting a copy of the notice of such hearing at or near the place where the citation is required to be posted pursuant to section 9(b) of the Occupational Safety and Health Act of 1970, 29 U.S.C. 658(b), and 29 CFR 1903.16.


(j) Notice of hearing to represented employees. Immediately upon receipt of the notice of the hearing to be held before the Judge, the employer shall serve a copy of the notice on the authorized employee representative of affected employees in the manner prescribed in paragraph (c) of this section. The employer need not serve the notice of hearing, as stated above, if on or before the date the hearing notice is received, the authorized employee representative has entered an appearance in conformance with §§ 2200.22 and 2200.23.


(k) Employee contest; service on other employees. (1) Where a notice of contest with respect to the reasonableness of the abatement period is filed under § 2200.38 by an affected employee who is not represented by an authorized employee representative and there are other affected employees who are represented by an authorized employee representative, the unrepresented affected employee shall serve the following documents on the authorized employee representative:


(i) The notice of contest with respect to the reasonableness of the abatement period; and


(ii) A copy of the Secretary’s statement of reasons, filed in conformance with § 2200.38(a).


(2) Service on the authorized employee representative shall be in the manner prescribed in paragraph (c) of this section. The unrepresented affected employee shall file proof of such service.


(l) Employee contest; Service on employer. Where a notice of contest with respect to the reasonableness of the abatement period is filed by an affected employee or an authorized employee representative, a copy of the notice of contest and response filed in support of the notice of contest shall be provided to the employer for posting in the manner prescribed in paragraph (g) of this section.


(m) Employee contest; Service on other authorized employee representatives. An authorized employee representative who files a notice of contest with respect to the reasonableness of the abatement period shall be responsible for serving any other authorized employee representative whose members are affected employees in the manner prescribed in paragraph (c) of this section.


(n) Duration of posting. Where posting is required by this section, such posting shall be maintained until the commencement of the hearing or until earlier disposition.


(o) Service of show cause orders—(1) Service on parties and intervenors using Commission’s E-File System. Service of show cause orders shall be deemed completed by service through the Commission’s E-File System on a representative who has entered an appearance for a party or intervenor under § 2200.23 or on a self-represented party or intervenor who has not been exempted from using the Commission’s E-File System. See also § 2200.101(a).


(2) Service on self-represented parties or intervenors exempted from using the Commission’s E-File System. In addition to the service methods permitted by § 2200.7(c), the Commission or the Judge shall serve a show cause order on a self-represented party or intervenor who has been exempted from using the Commission’s E-File System by certified mail or by any other method (including commercial delivery service) that provides confirmation of delivery to the addressee’s record address provided under § 2200.6.


[84 FR 14558, Apr. 10, 2019, as amended at 84 FR 53052, Oct. 4, 2019; 85 FR 65220, Oct. 15, 2020; 87 FR 8948, Feb. 17, 2022]


§ 2200.8 Filing.

(a) What to file—(1) General. All documents required to be served on a party or intervenor shall be filed either before service or within a reasonable time after service.


(2) Discovery documents. Discovery documents generated pursuant to §§ 2200.52 through 2200.56 shall not be filed with the Commission or the Judge. Filing and retention of such discovery documents shall comply with § 2200.52(i) and (j).


(b) Where to file. Prior to assignment of a case to a Judge, all documents shall be filed electronically in the Commission’s E-File System or with the Executive Secretary at One Lafayette Centre, 1120 20th Street NW, Suite 980, Washington, DC 20036-3457. After the assignment of the case to a Judge, all documents shall be filed electronically in the Commission’s E-File System or with the Judge at the address given in the notice of assignment. After the docketing of the Judge’s report, all documents shall be filed with the Executive Secretary, except as provided in § 2200.90(b)(4).


(c) Electronic filing with the Commission—(1) Mandatory e-filing. All parties and intervenors must file documents electronically in the Commission’s E-File System by following the instructions on the Commission’s website (www.oshrc.gov), unless a self-represented party or intervenor is able to claim that complying with this paragraph will place an undue burden upon that party or intervenor under paragraph (c)(2) of this section or the documents are exempt from e-filing under paragraph (c)(5) of this section. Documents may not be filed with the Commission or the Judge via email, unless allowed under paragraph (d)(1) of this section.


(2) Undue burden. Self-represented parties or intervenors may submit a written statement to the Judge requesting an exemption from the mandatory e-filing requirement on the grounds that it would place an undue burden on them to comply with the requirement. If the Judge grants an exemption, exempted self-represented parties or intervenors must file documents by postage-prepaid first class or higher class U.S. Mail, commercial delivery service, personal delivery, or facsimile transmission as described in paragraph (d) of this section. Documents may not be filed with the Commission or the Judge via email, unless allowed under paragraph (d)(1) of this section.


(3) If technical difficulties prevent the successful submission of electronically filed documents, the e-filer should refer to the instructions for electronic filing on the Commission’s website (www.oshrc.gov).


(4) Documents filed electronically in the Commission’s E-File System may contain an electronic signature of the filer which will have the same legal effect, validity, and enforceability as if signed manually. The term “electronic signature” means an electronic symbol or process attached to or logically associated with a contact or other record and executed or adopted by a person with the intent to sign the document.


(5) Confidential and privileged documents. The following documents must not be filed electronically in the Commission’s E-File System:


(i) Documents that may not be released to the public because the information is covered by a protective order or has been placed “under seal” pursuant to § 2200.52(d) and (e).


(ii) Documents submitted for in camera inspection by the Commission or the Judge, including material for which a privilege is claimed. Claims regarding privileged information must comply with § 2200.52(d).


(iii) Confidential settlement documents filed with the Judge pursuant to settlement procedures pursuant to § 2200.120.


(iv) Applications for subpoenas made ex parte pursuant to § 2200.65.


(6) Sensitive information. Unless the Commission or the Judge orders otherwise, all sensitive information in documents filed electronically in the Commission’s E-File System must be redacted pursuant to paragraph (d)(5) of this section.


(7) Date of filing. The date of filing for documents filed electronically is the day that the complete document is successfully submitted in the Commission’s E-File System pursuant to § 2200.4(a)(4)(i). Electronic filing shall be completed by following the instructions on the Commission’s website (www.oshrc.gov).


(8) Timeliness. Representatives and self-represented parties and intervenors bear the sole responsibility for ensuring that a filing is timely made.


(9) Certificate of service. Proof of service shall accompany each document filed in the Commission’s E-File System. The certificate of service shall certify simultaneous service of the document by email on all other parties and intervenors in the case. It is the responsibility of the filing party to retain records showing the date of transmission, including receipts.


(d) Documents that are not filed in the Commission’s E-File System; alternative filing methods—(1) How to file. Documents may be filed by postage-prepaid first class or higher class U.S. Mail, commercial delivery service, personal delivery, or facsimile transmission. Only documents exempt from e-filing under paragraph (c)(5) of this section may be filed by email.


(2) Number of copies. Unless otherwise ordered or stated in this part, only the original of a document shall be filed.


(3) Filing date. (i) Except for the documents listed in paragraph (d)(3)(ii) of this section, if filing is by U.S. first class mail (or higher class mail, such as priority mail), then filing is deemed completed upon depositing the material in the U.S. Mail. If filing is by any other means (e.g., personal delivery, commercial delivery service, or facsimile transmission) then filing is deemed completed upon receipt by the Commission.


(ii) Filing is completed upon receipt by the Commission for petitions for interlocutory review (§ 2200.73), petitions for discretionary review (§ 2200.91), and EAJA applications (§ 2204.301).


(iii) Representatives and self-represented parties and intervenors bear the sole responsibility for ensuring that a filing is timely made.


(4) Certificate of service. A certificate of service shall accompany each document filed. The certificate shall set forth the dates and manner of filing and service.


(5) Sensitive information. Unless the Commission or the Judge orders otherwise, in any filing with the Commission, information that is sensitive but not privileged (e.g., Social Security numbers, driver’s license numbers, passport numbers, taxpayer-identification numbers, birthdates, mother’s maiden names, names of minors, an individual’s physical personal address, financial account numbers) shall be redacted. Parties shall exercise caution when filing medical records, medical treatment records, medical diagnosis records, employment history, and individual financial information, and shall redact or exclude materials unnecessary to the case.


(6) Privileged information. Claims regarding privileged information shall comply with § 2200.52(d).


[84 FR 14558, Apr. 10, 2019; 84 FR 45654, Aug. 30, 2019, as amended at 85 FR 65220, Oct. 15, 2020; 87 FR 8948, Feb. 17, 2022]


§ 2200.9 Consolidation.

Cases may be consolidated on the motion of any party conforming to § 2200.40, on the Judge’s own motion, or on the Commission’s own motion, where there exist common parties, common questions of law or fact or in such other circumstances as justice or the administration of the Act require.


§ 2200.10 Severance.

Upon its own motion, or upon motion of any party or intervenor conforming to § 2200.40, where a showing of good cause has been made by the party or intervenor, the Commission or the Judge may order any proceeding severed with respect to some or all claims or parties.


§ 2200.11 [Reserved]

§ 2200.12 References to cases.

(a) Citing decisions by Commission and Judges—(1) Generally. Parties citing decisions by the Commission should include in the citation the name of the employer, the OSHRC docket number, the year of the decision, and a citation to a print or electronic reference source. Citations to Commission and ALJ decisions published on the Commission’s website (www.oshrc.gov) are also accepted. For example,


(i) Print:


(A) Hackensack Steel Corp., 20 BNA OSHC 1387, 1388 (No. 97-0755, 2003).


(B) Hackensack Steel Corp., 2002-2004 CCH OSHD ¶ 32,690, p. 51,558 (No. 97-0755, 2003).


(ii) Electronic:


(A) Hackensack Steel Corp., No. 97-0755, 2003 WL 22232017, at *4 (OSHRC Sept. 25, 2003).


(B) Hackensack Steel Corp., No. 97-0755, 2003 LEXIS 450392, at *2 (OSHRC Sept. 25, 2003).


(iii) Commission website (www.oshrc.gov):


(A) PDF versions of cases should be cited as follows and identify the relevant page number: Jacobs Field Servs. N. Am., No. 10-2659, at 5 (OSHRC 2015).


(B) HTML versions of cases should be cited as follows and identify the relevant paragraph number: Jacobs Field Servs. N. Am., No. 10-2659, at ¶ 9 (OSHRC 2015).


(2) Parenthetical statements. When citing the decision of a Judge, the digest of an opinion, or the opinion of a single Commissioner, a parenthetical statement identifying that the decision is non-precedential (e.g. “ALJ”) must be included. For example, Rust Engineering Co., 1984 CCH OSHD ¶ 27,023 (No.79-2090, 1984) (view of Chairman ______), vacating direction for review of 1980 CCH OSHD ¶ 24,269 (1980) (ALJ) (digest).


(b) References to court decisions. (1) Citation to court decisions should be to the official reporter whenever possible. For example:


(i) W.G. Yates & Sons Constr. Co. v. OSHRC, 459 F.3d 604, 608-09 (5th Cir. 2006).


(ii) Martin v. OSHRC (CF & I Steel Corp.), 499 U.S. 144, 150-51 (1991).


(2) Name of employer to be indicated. When a court decision is cited in which the first-listed party on each side is either the Secretary of Labor (or the name of a particular Secretary of Labor), the Commission, or a labor union, the citation should include in parenthesis the name of the employer in the Commission proceeding. For example, Donovan v. Allied Industrial Workers (Archer Daniels Midland Co.), 760 F.2d 783 (7th Cir. 1985); Donovan v. OSHRC (Mobil Oil Corp.), 713 F. 2d 918 (2d Cir. 1983).


Subpart B—Parties and Representatives

§ 2200.20 Party status.

(a) Affected employees. (1) Affected employees and authorized employee representatives may elect party status concerning any matter in which the Act confers a right to participate. The election shall be accomplished by filing a written notice of election at least 14 days before the hearing. A notice of election filed less than 14 days prior to the hearing is ineffective unless good cause is shown for not timely filing the notice.


(2) A notice of election shall be served on all other parties in accordance with § 2200.7.


(b) Employees no longer employed by cited employer. An employee of a cited employer who was exposed to or had access to the hazard arising out of the allegedly violative circumstances, conditions, practices, or operations and who is no longer employed by the cited employer is permitted to participate as a party.


(c) Employee contest. (1) Where a notice of contest is filed by an employee or by an authorized employee representative with respect to the reasonableness of the period for abatement of a violation, the employer charged with the responsibility of abating the violation may elect party status by a notice filed at least 14 days before the hearing.


(2) A notice of election shall be served on all other parties in accordance with § 2200.7.


§ 2200.21 Intervention; appearance by non-parties.

(a) When allowed. A petition for leave to intervene may be filed at any time prior to 14 days before commencement of the hearing. A petition filed less than 14 days prior to the commencement of the hearing will be denied unless good cause is shown for not timely filing the petition. A petition shall be served on all parties in accordance with § 2200.7.


(b) Requirements of petition. (1) The petition shall set forth the interest of the petitioner in the proceeding and show that the participation of the petitioner will assist in the determination of the issues in question and that the intervention will not unduly delay the proceeding.


(2) If the petitioner is an employee who is not employed by the cited employer but who performed work at the cited worksite, the petition, in addition to the requirements of paragraph (b)(1) of this section, shall set forth material facts sufficient to demonstrate that the petitioner was exposed to or has access to the hazard arising out of the allegedly violative circumstances, conditions, practices, or operations.


(c) Ruling on petition. (1) For petitions filed by an employee, as defined in paragraph (b)(2) of this section, the Commission or the Judge shall grant the petition for intervention.


(2) For all other petitions, the Commission or the Judge may grant a petition for intervention that meets the requirements of paragraph (b)(1) of this section.


(3) An order granting a petition shall specify the extent and terms of an intervenor’s participation in the proceedings.


§ 2200.22 Representation of parties and intervenors.

(a) Representation. Any party or intervenor may appear in person, through an attorney, or through any non-attorney representative. A representative must file an appearance in accordance with § 2200.23. In the absence of an appearance by a representative, a party or intervenor will be deemed to appear for itself. A corporation or unincorporated association may be represented by an authorized officer or agent.


(b) Affected employees in collective bargaining unit. Where an authorized employee representative (see § 2200.1(g)) elects to participate as a party, affected employees who are members of the collective bargaining unit may not separately elect party status. If the authorized employee representative does not elect party status, affected employees who are members of the collective bargaining unit may elect party status in the same manner as affected employees who are not members of the collective bargaining unit. See paragraph (c) of this section.


(c) Affected employees not in collective bargaining unit. Affected employees who are not members of a collective bargaining unit may elect party status under § 2200.20(a). If more than one employee so elects, the Judge shall provide for them to be treated as one party.


(d) Control of proceeding. A representative of a party or intervenor shall be deemed to control all matters respecting the interest of such party or intervenor in the proceeding.


§ 2200.23 Appearances and withdrawals.

(a) Entry of appearance—(1) General. A representative of a party or intervenor shall enter an appearance by signing the first document filed on behalf of the party or intervenor in accordance with paragraph (a)(2) of this section or subsequently by filing an entry of appearance in accordance with paragraph (a)(3) of this section.


(2) Appearance in first document or pleading. If the first document filed on behalf of a party or intervenor is signed by a representative, the representative shall be recognized as representing that party. No separate entry of appearance by the representative is necessary, provided the document contains the information required by § 2200.6.


(3) Subsequent appearance. Where a representative has not previously appeared on behalf of a party or intervenor, the representative shall file an entry of appearance with the Executive Secretary, or Judge if the case has been assigned. The entry of appearance shall be signed by the representative and contain the information required by § 2200.6.


(b) Withdrawal of counsel. Any counsel or representatives of record desiring to withdraw their appearance, or any parties desiring to withdraw the appearance of their counsel or representatives of record, must file a motion conforming with § 2200.40 with the Commission or the Judge requesting leave to withdraw, showing that prior notice of the motion has been given by the counsel or representative or party to the client or counsel or representative, as the case may be, and providing current contact information for the client, including street address, email address, and phone number. The motion of counsel to withdraw may, in the discretion of the Commission or the Judge, be denied where it is necessary to avoid undue delay or prejudice to the rights of a party or intervenor.


§ 2200.24 Brief of an amicus curiae.

The brief of an amicus curiae may be filed only by leave of the Commission or the Judge. The brief may be conditionally filed with the motion for leave conforming to § 2200.40. A motion for leave shall identify the interest of the applicant and shall state the reasons why a brief of an amicus curiae is desirable. Any amicus curiae shall file its brief within the time allowed the party whose position the amicus will support unless the Commission or the Judge, for good cause shown, grants leave for later filing. In that event, the Commission or the Judge may specify within what period an opposing party may answer. The brief of an amicus curiae shall conform to § 2200.74 or § 2200.93.


Subpart C—Pleadings and Motions

§ 2200.30 General rules.

(a) Format. Pleadings and other documents (other than exhibits) shall be typewritten, double spaced, with typeface of text being no smaller than 12-point and typeface of footnotes being no smaller than 11-point, on letter size opaque paper (8
1/2 inches by 11 inches). All margins shall be 1
1/2 inches. Pleadings and other documents shall be fastened without the use of staples at the upper left corner.


(b) Clarity. Each allegation or response of a pleading or motion shall be simple, concise, and direct.


(c) Separation of claims. Each allegation or response shall be made in separate numbered paragraphs. Each paragraph shall be limited as far as practicable to a statement of a single set of circumstances.


(d) Adoption by reference. Statements in a pleading may be adopted by reference in a different part of the same pleading or in another pleading or in any motion. A copy of any written instrument which is an exhibit to a pleading is a part of the pleading for all purposes.


(e) Alternative pleading. A party may set forth two or more statements of a claim or defense alternatively or hypothetically. When two or more statements are made in the alternative and one of them would be sufficient if made independently, the pleading is not made insufficient by the insufficiency of one or more of the alternative statements. A party may state as many separate claims or defenses as it has regardless of consistency. All statements shall be made subject to the signature requirements of § 2200.32.


(f) Form of pleadings, motions, and other documents. Any pleading, motion, or other document shall contain a caption complying with § 2200.31 and a signature complying with § 2200.32. The form and content of motions shall conform with § 2200.40.


(g) Burden of persuasion. The rules of pleading established by this subpart are not determinative in deciding which party bears the burden of persuasion on an issue. By pleading a matter affirmatively, a party does not waive its right to argue that the burden of persuasion on the matter is on another party.


(h) Enforcement of pleading rules. The Commission or the Judge may refuse for filing any pleading or motion that does not comply with the requirements of this subpart.


[84 FR 14558, Apr. 10, 2019; 84 FR 45654, Aug. 30, 2019]


§ 2200.31 Caption; titles of cases.

(a) Notice of contest cases. Cases initiated by a notice of contest shall be titled:



Secretary of Labor,

Complainant,

v.

(Name of Employer),

Respondent.

(b) Petitions for modification of abatement period. Cases initiated by a petition for modification of the abatement period shall be titled:



(Name of employer),

Petitioner,

v.

Secretary of Labor,

Respondent.

(c) Location of title. The titles listed in paragraphs (a) and (b) of this section shall appear at the left upper portion of the initial page of any pleading or document (other than exhibits) filed.


(d) Docket number. The initial page of any pleading or document (other than exhibits) shall show, at the upper right of the page, opposite the title, the docket number, if known, assigned by the Commission.


§ 2200.32 Signing of pleadings and motions.

Pleadings and motions shall be signed by the filing party or by the party’s representative. The signature of a representative constitutes a representation by the representative that the representative is authorized to represent the party or parties on whose behalf the pleading is filed. The signature of a representative or party also constitutes a certificate by the representative or party that the representative or party has read the pleading, motion, or other document, that to the best of the representative’s or party’s knowledge, information, and belief, formed after reasonable inquiry, it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law, and that it is not included for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation. If a pleading, motion, or other document is signed in violation of this rule, such signing party or its representative shall be subject to the sanctions set forth in § 2200.101 or § 2200.104. A signature by a party representative constitutes a representation by the representative that the representative understands that the rules and orders of the Commission and its Judges apply equally to attorney and non-attorney representatives.


[84 FR 14558, Apr. 10, 2019, as amended at 87 FR 8949, Feb. 17, 2022]


§ 2200.33 Notices of contest.

Within 15 working days after receipt of any of the following notices, the Secretary shall notify the Commission of the receipt in writing and shall promptly furnish to the Executive Secretary of the Commission the original of any documents or records filed by the contesting party and copies of all other documents or records relevant to the contest:


(a) Notification that the employer intends to contest a citation or proposed penalty under section 10(a) of the Act, 29 U.S.C. 659(a); or


(b) Notification that the employer wishes to contest a notice of a failure to abate or a proposed penalty under section 10(b) of the Act, 29 U.S.C. 659(b); or


(c) A notice of contest filed by an employee or representative of employees with respect to the reasonableness of the abatement period under section 10(c) of the Act, 29 U.S.C. 659(c).



Note 1 to § 2200.33:

Failure to meet the 15-working day deadline to file a notice of contest results in the citation or notification of failure to abate becoming a final order of the Commission. Under extraordinary circumstances, the cited employer, an affected employee, or an authorized employee representative may seek relief from the final order pursuant to Federal Rule of Civil Procedure 60, by promptly filing a request for such relief with the Commission’s Executive Secretary, One Lafayette Centre, 1120 20th Street NW, Suite 980, Washington, DC 20036-3457. See Brancifort Builders, Inc., 9 BNA OSHC 2113, 2116-17 (1981).


§ 2200.34 Employer contests.

(a) Complaint. (1) The Secretary shall file a complaint with the Commission no later than 21 days after receipt of the notice of contest.


(2) The complaint shall set forth all alleged violations and proposed penalties which are contested, stating with particularity:


(i) The basis for jurisdiction;


(ii) The time, location, place, and circumstances of each such alleged violation; and


(iii) The considerations upon which the period for abatement and the proposed penalty of each such alleged violation are based.


(3) Where the Secretary seeks in the complaint to amend the citation or proposed penalty, the Secretary shall set forth the reasons for amendment and shall state with particularity the change sought.


(b) Answer. (1) Within 21 days after service of the complaint, the party against whom the complaint was issued shall file an answer with the Commission.


(2) The answer shall contain a short and plain statement denying those allegations in the complaint which the party intends to contest. Any allegation not denied shall be deemed admitted.


(3) The answer shall include all affirmative defenses being asserted. Such affirmative defenses include, but are not limited to, “infeasibility,” “unpreventable employee misconduct,” and “greater hazard.”


(4) The failure to raise an affirmative defense in the answer may result in the party being prohibited from raising the defense at a later stage in the proceeding, unless the Judge finds that the party has asserted the defense as soon as practicable.


(c) Motions filed in lieu of an answer. A motion filed in lieu of an answer pursuant to this subpart shall be filed no later than 21 days after service of the complaint. The form and content of the motion shall comply with § 2200.40.


§ 2200.35 Disclosure of corporate parents, subsidiaries, and affiliates.

(a) General. All answers, petitions for modification of abatement period, or other initial pleadings filed under these rules by a corporation shall be accompanied by a separate declaration listing all parents, subsidiaries, and affiliates of that corporation or stating that the corporation has no parents, subsidiaries, or affiliates, whichever is applicable.


(b) Failure to disclose. The Commission or the Judge in its discretion may refuse to accept for filing an answer or other initial pleading that lacks the disclosure declaration required by this paragraph. A party that fails to file an adequate declaration may be held in default after being given an opportunity to show cause why it should not be held in default. All show cause orders issued by the Commission or the Judge shall be served in a manner prescribed in § 2200.7(o).


(c) Continuing duty to disclose. A party subject to the disclosure requirement of this paragraph has a continuing duty to notify the Commission or the Judge of any change in the information on the disclosure declaration until the Commission issues a final order disposing of the proceeding.


§ 2200.36 [Reserved]

§ 2200.37 Petitions for modification of the abatement period.

(a) Grounds for modifying abatement date. An employer may file a petition for modification of abatement date when such employer has made a good faith effort to comply with the abatement requirements of a citation, but such abatement has not been completed because of factors beyond the employer’s reasonable control.


(b) Contents of petition. A petition for modification of abatement date shall be in writing and shall include the following information:


(1) All steps taken by the employer, and the dates of such action, in an effort to achieve compliance during the prescribed abatement period.


(2) The specific additional abatement time necessary in order to achieve compliance.


(3) The reasons such additional time is necessary, including the unavailability of professional or technical personnel or of materials and equipment, or because necessary construction or alteration of facilities cannot be completed by the original abatement date.


(4) All available interim steps being taken to safeguard the employees against the cited hazard during the abatement period.


(c) When and where filed; posting requirement; responses to petition. A petition for modification of abatement date shall be filed with the Area Director of the United States Department of Labor who issued the citation no later than the close of the next working day following the date on which abatement was originally required. A later-filed petition shall be accompanied by the employer’s statement of exceptional circumstances explaining the delay.


(1) A copy of such petition shall be posted in a conspicuous place where all affected employees will have notice of the petition or near each location where the violation occurred. The petition shall remain posted for a period of 10 working days.


(2) Affected employees or the representatives may file an objection in writing to such petition with the aforesaid Area Director. Failure to file such objection within 10 working days of the date of posting of such petition shall constitute a waiver of any further right to object to said petition.


(3) The Secretary or the Secretary’s duly authorized agent shall have the authority to approve any uncontested petition for modification of abatement date filed pursuant to paragraphs (b) and (c) of this section. Such uncontested petitions shall become final orders pursuant to sections 10(a) and (c) of the Act, 29 U.S.C. 659(a) and (c).


(4) The Secretary or the Secretary’s authorized representative shall not exercise the Secretary’s approval power until the expiration of 15 working days from the date the petition was posted pursuant to paragraphs (c)(1) and (2) of this section by the employer.


(d) Contested petitions. Where any petition is objected to by the Secretary or affected employees, such petition shall be processed as follows:


(1) The Secretary shall forward the petition, citation, and any objections to the Commission within 10 working days after the expiration of the 15 working day period set out in paragraph (c)(4) of this section.


(2) The Commission shall docket and process such petitions as expedited proceedings as provided for in § 2200.103 of this Part.


(3) An employer petitioning for a modification of the abatement period shall have the burden of proving in accordance with the requirements of section 10(c) of the Act, 29 U.S.C. 659(c), that such employer has made a good faith effort to comply with the abatement requirements of the citation and that abatement has not been completed because of factors beyond the employer’s reasonable control.


(4) Where the petitioner is a corporation, it shall file a separate declaration listing all parents, subsidiaries, and affiliates of that corporation or stating that the corporation has no parents, subsidiaries, or affiliates, whichever is applicable, within 10 working days after service of the Commission docketing notice of the petition for modification of the abatement date. Service of the filed declaration on the other parties and intervenors shall be accomplished in a manner prescribed in § 2200.7(c). The requirements set forth in § 2200.35(b) through (c) shall apply.


(5) Each objecting party shall file a response setting forth the reasons for opposing the abatement date requested in the petition, within 10 working days after service of the Commission docketing notice of the petition for modification of the abatement date. Service of the response on the other parties and intervenors shall be accomplished in a manner prescribed in § 2200.7(c).


[84 FR 14558, Apr. 10, 2019; 84 FR 53053, Oct. 4, 2019; as amended at 87 FR 8949, Feb. 17, 2022]


§ 2200.38 Employee contests.

(a) Secretary’s statement of reasons. Where an affected employee or authorized employee representative files a notice of contest with respect to the abatement period, the Secretary shall, within 14 days from receipt of the notice of contest, file a clear and concise statement of the reasons the abatement period prescribed by the Secretary is not unreasonable.


(b) Response to Secretary’s statement. Not later than 14 days after service of the Secretary’s statement, referred to in paragraph (a) of this section, the contesting affected employee or authorized employee representative shall file a response. Service of the filed statement on the other parties and intervenors shall be accomplished in a manner prescribed in § 2200.7(c).


(c) Expedited proceedings. All contests under this section shall be handled as expedited proceedings as provided for in § 2200.103.


§ 2200.39 Statement of position.

At any time prior to the commencement of the hearing before the Judge, any person entitled to appear as a party, or any person who has been granted leave to intervene, may file a statement of position with respect to any or all issues to be heard. The Judge may order the filing of a statement of position.


§ 2200.40 Motions and requests.

(a) How to make. An application or request for an order must be made by written motion. A motion shall not be included in another pleading or document, such as a brief or petition for discretionary review, but shall be made in a separate document. In exigent circumstances in cases pending before a Judge, an oral motion may be made during an off-the-record telephone conference if the motion is subsequently reduced to writing and filed within such time as the judge prescribes.


(b) Form of motions. All motions shall contain a caption complying with § 2200.31 and a signature complying with § 2200.32. Requests for orders that are presented in any other form, such as by a business letter or by an email, shall not be considered or granted.


(c) Content of motions. A motion shall contain a clear and plain statement of the relief sought and state with particularity the grounds for seeking the order. Written memoranda, briefs, affidavits, or other relevant material or documents may be filed in support of the motion or a response.


(d) Duty to confer. Prior to filing a motion, the moving party shall confer or make reasonable efforts to confer with all other parties and shall state in the motion the efforts undertaken to confer. The motion shall also state if any other party opposes or does not oppose the motion.


(e) Proposed order for procedural motions. All procedural motions shall be accompanied by a proposed order that would grant the relief requested in the motion. A procedural motion may be ruled upon prior to the expiration of the time for response.


(f) Oral motions. Oral motions may be made during a hearing and shall be included in the transcript, if a transcript is being made.


(g) When to make. (1) A motion filed in lieu of an answer pursuant to § 2200.34(c) shall be filed no later than 21 days after service of the complaint.


(2) Motions shall be made as soon as the grounds for the motion are known. A party is not required to raise by motion any matter that the party has previously included in any pleading as defined in § 2200.1(n), unless the party seeks a ruling on the previously pleaded matter prior to the hearing on the merits.


(3) A motion to postpone a hearing shall comply with § 2200.62.


(h) Responses. Any party or intervenor upon whom a motion has been served shall file a response within 14 days from service of the motion.


(i) Reconsideration. A party adversely affected by a ruling on any motion may file a motion for reconsideration within 7 days of service of the ruling.


(j) Summary judgment motions. The provisions of Federal Rule of Civil Procedure 56 apply to motions for summary judgment.


§ 2200.41 [Reserved]

Subpart D—Prehearing Procedures and Discovery

§ 2200.50 [Reserved]

§ 2200.51 Prehearing conferences and orders.

(a) Scheduling conference. (1) The Judge may, upon the Judge’s discretion, consult with the attorneys, non-attorney party representatives, and any self-represented parties, by a scheduling conference, telephone, mail, or other suitable means, and within 30 days after the filing of the answer, enter a scheduling order that limits the time:


(i) To join other parties and to amend the pleadings;


(ii) To file and hear motions; and


(iii) To complete discovery.


(2) The scheduling order also may include:


(i) The date or dates for conferences before hearing, a final prehearing conference, and hearing; and


(ii) Any other matters appropriate to the circumstances of the case.


(b) Prehearing conference. In addition to the prehearing procedures set forth in Federal Rule of Civil Procedure 16, the Judge may, upon the Judge’s own initiative or on the motion of a party, direct the parties to confer among themselves to consider settlement, stipulation of facts, or any other matter that may expedite the hearing.


(c) Compliance. Parties must fully prepare for a useful discussion of all procedural and substantive issues involved in prehearing conferences and shall participate in such conferences in good faith. Parties failing to do so may be subject to sanctions under §§ 2200.101 and 2200.104.


§ 2200.52 General provisions governing discovery.

(a) General—(1) Methods and limitations. In conformity with these rules, any party may, without leave of the Commission or the Judge, obtain discovery by one or more of the following methods:


(i) Production of documents or things or permission to enter upon land or other property for inspection and other purposes to the extent provided in § 2200.53;


(ii) Requests for admission to the extent provided in § 2200.54; and


(iii) Interrogatories to the extent provided in § 2200.55.


(iv) Discovery is not available under these rules through depositions except to the extent provided in § 2200.56.


(v) In the absence of a specific provision, discovery procedures shall be in accordance with the Federal Rules of Civil Procedure, except that the provisions of Federal Rule of Civil Procedure 26(a) do not apply to Commission proceedings. This exception does not preclude any prehearing disclosures (including disclosure of expert testimony and written reports) directed in a scheduling order entered under § 2200.51.


(2) Time for discovery. A party may initiate all forms of discovery in conformity with these Rules at any time after the filing of the first responsive pleading or motion that delays the filing of an answer, such as a motion to dismiss. Discovery shall be initiated early enough to permit completion of discovery no later than 14 days prior to the date set for hearing, unless the Judge orders otherwise.


(3) Service of discovery documents. Every document relating to discovery required to be served on a party shall be served on all parties.


(4) Stipulations about discovery procedures. Unless the Commission or the Judge orders otherwise, the parties may stipulate that:


(i) A deposition may be taken before any person, at any time or place, on any notice, and in the manner specified—in which event it may be used in the same way as any other deposition; and


(ii) Other procedures governing or limiting discovery may be modified—but a stipulation extending the time for any form of discovery must be approved by the Commission or the Judge if it would interfere with the time set forth for completing discovery, for hearing a motion, or for hearing.


(b) Scope of discovery. The information or response sought through discovery may concern any matter that is not privileged and that is relevant to the subject matter involved in the pending case and proportional to the needs of the case, considering the importance of the issues at stake, the parties’ relative access to relevant information, the parties’ resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit. Information within this scope of discovery need not be admissible in evidence to be discoverable.


(c) Limitations. The frequency or extent of the discovery methods provided by these rules may be limited by the Commission or the Judge if it is determined that:


(1) The discovery sought is unreasonably cumulative or duplicative, or it is obtainable from some other source that is more convenient, less burdensome, or less expensive;


(2) The party seeking discovery has had ample opportunity to obtain the information sought by discovery in the action; or


(3) The proposed discovery is outside the scope permitted by paragraph (b) of this section.


(d) Privilege—(1) Claims of privilege. The initial claim of privilege shall specify the privilege claimed and the general nature of the material for which the privilege is claimed. In response to an order from the Commission or the Judge, or in response to a motion to compel, the claim shall: Identify the information that would be disclosed; set forth the privilege that is claimed; and allege the facts showing that the information is privileged. The claim shall be supported by affidavits, depositions, or testimony and shall specify the relief sought. The claim may be accompanied by a motion for a protective order or by a motion that the allegedly privileged information be received and the claim ruled upon in camera, that is, with the record and hearing room closed to the public, or ex parte, that is, without the participation of parties and their representatives. The Judge may enter an order and impose terms and conditions on the Judge’s examination of the claim as justice may require, including an order designed to ensure that the allegedly privileged information not be disclosed until after the examination is completed.


(2) Upholding or rejecting claims of privilege. If the Judge upholds the claim of privilege, the Judge may order and impose terms and conditions as justice may require, including a protective order. If the Judge overrules the claim, the person claiming the privilege may obtain as of right an order sealing from the public those portions of the record containing the allegedly privileged information pending interlocutory or final review of the ruling, or final disposition of the case, by the Commission. Interlocutory review of such an order shall be given priority consideration by the Commission.


(3) Resolving claims of privilege outside of discovery proceedings. A Judge may utilize the procedures set forth in paragraphs (d) and (e) of this section outside of discovery proceedings, including during the hearing.


(e) Protective orders. In connection with any discovery procedures and where a showing of good cause has been made, the Commission or the Judge may make any order including, but not limited to, one or more of the following:


(1) That the discovery not be had;


(2) That the discovery may be had only on specified terms and conditions, including a designation of the time or place;


(3) That the discovery may be had only by a method of discovery other than that selected by the party seeking discovery;


(4) That certain matters not be inquired into, or that the scope of the discovery be limited to certain matters;


(5) That discovery be conducted with no one present except persons designated by the Commission or the Judge;


(6) That a deposition after being sealed be opened only by order of the Commission or the Judge;


(7) That a trade secret or other confidential research, development, or commercial information not be disclosed or be disclosed only in a designated way;


(8) That the parties simultaneously file specified documents or information enclosed in sealed envelopes to be opened as directed by the Commission or the Judge.


(f) Failure to cooperate; motions to compel; sanctions—(1) Motions to compel discovery. A party may file a motion conforming to § 2200.40 for an order compelling discovery when another party refuses or obstructs discovery. In considering a motion to compel, the Judge shall treat an evasive or incomplete answer as a failure to answer.


(2) Sanctions. If a party fails to comply with an order compelling discovery, the Judge may enter an order to redress the failure. Such order may issue upon the initiative of a Judge, after affording an opportunity to show cause why the order should not be entered, or upon the motion of a party conforming to § 2200.40. The order may include any sanction stated in Federal Rule of Civil Procedure 37, including the following:


(i) An order that designated facts shall be taken to be established for purposes of the case in accordance with the claim of the party obtaining that order;


(ii) An order refusing to permit the disobedient party to support or to oppose designated claims or defenses or prohibiting it from introducing designated matters in evidence;


(iii) An order striking pleadings or parts of pleadings or staying further proceedings until the order is obeyed; and


(iv) An order dismissing the action or proceeding or any part of the action or proceeding or rendering a judgment by default against the disobedient party.


(g) Unreasonable delays. None of the discovery procedures set forth in these rules shall be used in a manner or at a time which shall delay or impede the progress of the case toward hearing status or the hearing of the case on the date for which it is scheduled, unless, in the interests of justice, the Judge shall order otherwise. Unreasonable delays in utilizing discovery procedures may result in termination of the party’s right to conduct discovery.


(h) Show cause orders. All show cause orders issued by the Commission or the Judge under paragraph (f) of this section shall be served in a manner prescribed in § 2200.7(o).


(i) Supplementation of responses. A party that has responded to a request for discovery with a response that was complete when made is under no duty to supplement the response to include information subsequently acquired, except as follows:


(1) A party is under a duty to promptly supplement the response with respect to any question directly addressed to:


(i) The identity and location of persons having knowledge of discoverable matters; and


(ii) The identity of each person expected to be called as an expert witness at the hearing, the subject matter on which the person is expected to testify, and the substance of the person’s testimony.


(2) A party is under a duty to promptly amend a prior response if the party obtains information upon the basis of which:


(i) The party knows that the response was incorrect when made; or


(ii) The party knows that the response though correct when made is no longer true and the circumstances are such that a failure to amend the response is in substance a knowing concealment.


(3) A duty to supplement responses may be imposed by order of the court, agreement of the parties, or at any time prior to the hearing through new requests for supplementation of prior responses.


(j) Filing of discovery. Requests for production or inspection under § 2200.53, requests for admission under § 2200.54 and responses to requests for admission, interrogatories under § 2200.55 and the answers to interrogatories, and depositions under § 2200.56 shall be served upon other counsel or parties, but shall not be filed with the Commission or the Judge. The party responsible for service of the discovery material shall retain the original and become the custodian.


(k) Relief from discovery requests. If relief is sought under § 2200.101 or § 2200.52(e), (f), or (g) concerning any interrogatories, requests for production or inspection, requests for admissions, answers to interrogatories, or responses to requests for admissions, copies of the portions of the interrogatories, requests, answers, or responses in dispute shall be filed with the Commission or the Judge contemporaneously with any motion filed under § 2200.101 or § 2200.52(e), (f), or (g).


(l) Use at hearing. If interrogatories, requests, answers, responses, or depositions are to be used at the hearing or are necessary to a prehearing motion which might result in a final order on any claim, the portions to be used shall be filed with the Commission or the Judge at the outset of the hearing or at the filing of the motion insofar as their use can be reasonably anticipated. Section 2200.56(f) prescribes additional procedures pertaining to the use of depositions at a hearing.


(m) Use on review or appeal. When documentation of discovery not previously in the record is needed for review or appeal purposes, upon an application and order of the Commission or the Judge, the necessary discovery documents shall be filed with the Executive Secretary of the Commission.


§ 2200.53 Production of documents and things.

(a) Scope. At any time after the filing of the first responsive pleading or motion that delays the filing of an answer, such as a motion to dismiss, any party may serve on any other party a request to:


(1) Produce and permit the party making the request, or a person acting on the party’s behalf, to inspect and copy any designated documents, or to inspect and copy, test, or sample any tangible things which are in the possession, custody, or control of the party upon whom the request is served;


(2) Permit entry upon designated land or other property in the possession or control of the party upon whom the request is served for the purpose of inspection and measuring, surveying, photographing, testing, or sampling the property or any designated object or operation on the property.


(b) Procedure. The request shall set forth the items to be inspected, either by individual item or by category, and describe each item and category with reasonable particularity. It shall specify a reasonable time, place, and manner of making the inspection and performing related acts. The party upon whom the request is served shall serve a written response within 30 days after service of the request, unless the requesting party allows a longer time. The Commission or the Judge may allow a shorter time or a longer time, should the requesting party deny an extension. The response shall state, with respect to each item or category, that inspection and related activities will be permitted as requested, unless the request is objected to in whole or in part, in which event the reasons for objection shall be stated. If objection is made to part of an item or category, that part shall be specified. To obtain a ruling on an objection by the responding party, the requesting party shall file a motion conforming to § 2200.40 with the Judge and shall annex its request to the motion, together with the response and objections, if any.


§ 2200.54 Request for admissions.

(a) Scope and procedure—(1) Scope. Any time after the filing of the first responsive pleading or motion that delays the filing of an answer, such as a motion to dismiss, a party may serve on any other party a written request to admit, for purposes of the pending action only, the truth of any matters within the scope of § 2200.52(b) relating to:


(i) Facts, the application of law to fact, or opinions about either; and


(ii) The genuineness of any described documents.


(2) Form; copy of a document. Each matter must be separately stated. The number of requested admissions shall not exceed 25, including subparts, except upon the agreement of the parties or by order of the Commission or the Judge. A request to admit the genuineness of a document must be accompanied by a copy of the document unless it is, or has been, otherwise furnished or made available for inspection and copying.


(3) Time to respond; effect of not responding. A matter is admitted unless, within 30 days after being served, the party to whom the request is directed serves on the requesting party a written answer or objection addressed to the matter and signed by the party or its representative. A shorter or longer time for responding may be provided by written stipulation of the parties or by order of the Commission or the Judge.


(4) Answer. If a matter is not admitted, the answer must specifically deny it or state in detail why the answering party cannot truthfully admit or deny it. A denial must fairly respond to the substance of the matter; and when good faith requires that a party qualify an answer or deny only a part of a matter, the answer must specify the part admitted and qualify or deny the rest. The answering party may assert lack of knowledge or information as a reason for failing to admit or deny only if the party states that it has made reasonable inquiry and that the information it knows or can readily obtain is insufficient to enable it to admit or deny.


(5) Objections. The grounds for objecting to a request must be stated. A party must not object solely on the ground that the request presents a genuine issue for hearing.


(6) Motion regarding the sufficiency of an answer or objection. The requesting party may move to determine the sufficiency of an answer or objection. Unless an objection is sustained, the Commission or the Judge must order that an answer be served. On finding that an answer does not comply with this rule, the Commission or the Judge may order either that the matter is admitted or that an amended answer be served. The Commission or the Judge may defer the final decision until a prehearing conference or a specified time before hearing.


(b) Effect of admission; withdrawal or modification. A matter admitted under paragraph (a) of this section is conclusively established unless the Commission or the Judge on motion permits the admission to be withdrawn or amended. The Commission or the Judge may permit withdrawal or modification if it would promote the presentation of the merits of the case and if the Commission or the Judge is not persuaded that it would prejudice the requesting party in maintaining or defending the case on the merits. An admission under paragraph (a) of this section is not an admission for any other purpose and cannot be used against the party in any other proceeding.


§ 2200.55 Interrogatories.

(a) General. At any time after the filing of the first responsive pleading or motion that delays the filing of an answer, such as a motion to dismiss, any party may serve interrogatories upon any other party. The number of interrogatories shall not exceed 25 questions, including subparts, except upon the agreement of the parties or by order of the Commission or the Judge. The party seeking to serve more than 25 questions, including subparts, shall have the burden of persuasion to establish that the complexity of the case or the number of citation items necessitates a greater number of interrogatories.


(b) Answers. All answers shall be made in good faith and as completely as the answering party’s information will permit. The answering party is required to make reasonable inquiry and ascertain readily obtainable information. An answering party may not give lack of information or knowledge as an answer or as a reason for failure to answer, unless the answering party states that it has made reasonable inquiry and that information known or readily obtainable by it is insufficient to enable it to answer the substance of the interrogatory.


(c) Procedure. Each interrogatory shall be answered separately and fully under oath or affirmation. If the interrogatory is objected to, the objection shall be stated in lieu of the answer. The answers are to be signed by the person making them and the objections shall be signed by the party or its counsel. The party on whom the interrogatories have been served shall serve a copy of its answers or objections upon the propounding party within 30 days after the service of the interrogatories. The Judge may allow a shorter or longer time. The burden shall be on the party submitting the interrogatories to file a motion conforming to § 2200.40 for an order with respect to any objection or other failure to answer an interrogatory.


§ 2200.56 Depositions.

(a) General. Depositions of parties, intervenors, or witnesses shall be allowed only by agreement of all the parties or on order of the Commission or the Judge following the filing of a motion of a party stating good and just reasons. All depositions shall be before an officer authorized to administer oaths and affirmations at the place of examination. The deposition shall be taken in accordance with the Federal Rules of Civil Procedure, particularly Federal Rule of Civil Procedure 30.


(b) When to file. A motion to take depositions may be filed after the filing of the first responsive pleading or motion that delays the filing of an answer, such as a motion to dismiss.


(c) Notice of taking. Any depositions allowed by the Commission or the Judge may be taken after 14 days’ written notice to the other party or parties. The 14-day notice requirement may be waived by the parties pursuant to § 2200.52(a)(4)(i).


(d) Method of recording and expenses. The party that notices the deposition must state in the notice the method for recording the testimony. Unless the Commission or the Judge orders otherwise, testimony may be recorded by audio, audiovisual, or stenographic means. Witnesses whose depositions are taken and the person recording the deposition shall each be paid the same fees that are paid for like services in the federal courts. Any party may arrange to transcribe a deposition. The party noticing the deposition shall pay the recording costs, any witness fees, and mileage expense. Deposition subpoenas shall comply with § 2200.65.


(e) Use of depositions. Depositions taken under this rule may be used for discovery, to contradict or impeach the testimony of a deponent as a witness, or for any other purpose permitted by the Federal Rules of Evidence and the Federal Rules of Civil Procedure, particularly Federal Rule of Civil Procedure 32. An audio or audiovisual deposition offered into evidence in whole or in part must be accompanied by a transcription of the deposition. All transcription costs must be borne by the party offering the deposition into evidence.


(f) Excerpts from depositions to be offered at hearing. Except when used for purposes of impeachment, at least 7 days prior to the hearing, the parties or counsel shall furnish to the Judge and all opposing parties or counsel the transcribed excerpts from depositions (by page and line number) which they expect to introduce at the hearing. Four working days later, the adverse party or counsel for the adverse party shall furnish to the Judge and all opposing parties or counsel additional transcribed excerpts from the depositions (by page and line number) which they expect to be read pursuant to Federal Rules of Civil Procedure 32(a)(4), as well as any objections (by page and line number) to opposing party’s or counsel’s depositions. With reasonable notice to the Judge and all parties or counsel, other excerpts may be read.


§ 2200.57 [Reserved]

Subpart E—Hearings

§ 2200.60 Notice of hearing; location.

Except by agreement of the parties, or in an expedited proceeding under § 2200.103, when a hearing is first set, the Judge shall give the parties and intervenors notice of the time, place, and nature of the hearing at least 30 days in advance of the hearing. If a hearing is being rescheduled, or if exigent circumstances are present, at least 10 days’ notice shall be given. The Judge will designate a place and time of hearing that involves as little inconvenience and expense to the parties as is practicable.


§ 2200.61 Submission without hearing.

(a) A case may be fully stipulated by the parties and submitted to the Commission or the Judge for a decision at any time. The stipulation of facts shall be in writing and signed by the parties or their representatives. The submission of a case under this rule does not alter the burden of proof, the requirements otherwise applicable with respect to adducing proof, or the effect of failure of proof.


(b) Motions for summary judgment are governed by § 2200.40(j).


§ 2200.62 Postponement of hearing.

(a) Motion to postpone. A hearing may be postponed by the Judge on the Judge’s own initiative or for good cause shown upon the motion of a party. A motion for postponement shall state the position of the other parties, either by a joint motion or by a representation of the moving party. The filing of a motion for postponement does not automatically postpone a hearing. The form and content of such motions shall comply with § 2200.40.


(b) Grounds for postponement. A motion for postponement grounded on conflicting engagements of counsel or employment of new counsel shall be promptly filed.


(c) When motion must be received. A motion to postpone a hearing must be received at least 10 days prior to the hearing. A motion for postponement received less than 10 days prior to the hearing will generally be denied unless good cause is shown for late filing.


(d) Postponement in excess of 60 days. No postponement in excess of 60 days shall be granted without the concurrence of the Chief Administrative Law Judge. The original of any motion seeking a postponement in excess of 60 days shall be filed with the Judge and a copy sent to the Chief Administrative Law Judge.


§ 2200.63 Stay of proceedings.

(a) Motion for stay. Stays are not favored. A party seeking a stay of a case assigned to a Judge shall file a motion for stay conforming to § 2200.40 with the Judge and send a copy to the Chief Administrative Law Judge. A motion for a stay shall state the position of the other parties, either by a joint motion or by the representation of the moving party. The motion shall set forth the reasons a stay is sought and the length of the stay requested.


(b) Ruling on motion to stay. The Judge, with the concurrence of the Chief Administrative Law Judge, may grant any motion for stay for the period requested or for such period as is deemed appropriate.


(c) Periodic reports required. The parties in a stayed proceeding shall be required to submit periodic reports on such terms and conditions as the Judge may direct. The length of time between the reports shall be no longer than 90 days unless the Judge otherwise orders.


§ 2200.64 Failure to appear.

(a) Attendance at hearing. The failure of a party to appear in person or by a duly authorized representative at the hearing constitutes a waiver of the right to a hearing. A failure of the Secretary to appear constitutes abandonment of the case. A failure of the Respondent to appear is deemed an admission of the facts alleged and consent to the relief sought in the Complaint (or, in Simplified Proceedings, the citation and notification of proposed penalty). The Judge may default the non-appearing party without further proceeding or notice.


(b) Requests for reinstatement. Requests for reinstatement must be made, in the absence of extraordinary circumstances, within 7 days after the scheduled hearing date. See § 2200.90(c).


(c) Rescheduling hearing. The Commission or the Judge, upon a showing of good cause, may excuse such failure to appear. In such event, the hearing will be rescheduled as expeditiously as possible from the issuance of the Judge’s order.


[84 FR 14558, Apr. 10, 2019; 84 FR 53053, Oct. 4, 2019]


§ 2200.65 Issuance of subpoenas; petitions to revoke or modify subpoenas; payment of witness fees and mileage; right to inspect or copy data.

(a) Issuance of subpoenas. On behalf of the Commission or any Commission member, the Judge shall, on the application of any party, issue to the applying party subpoenas requiring the attendance and testimony of witnesses and/or the production of any evidence, including, but not limited to, relevant books, records, correspondence, or documents, in the witness’ possession or under the witness’ control, at a deposition or at a hearing before the Commission or the Judge. The party to whom the subpoena is issued shall be responsible for its service. Applications for subpoenas, if filed prior to the assignment of the case to a Judge, shall be filed with the Executive Secretary at One Lafayette Centre, 1120 20th Street NW, Suite 980, Washington, DC 20036-3457. After the case has been assigned to a Judge, applications shall be filed with the Judge. Applications for subpoena(s) may be made ex parte. The subpoena shall show on its face the name and address of the party at whose request the subpoena was issued.


(b) Service of subpoenas. A subpoena may be served by any person who is not a party and is not less than 18 years of age. Service of a subpoena upon the person it names may be made by service on the person named, by certified mail return receipt requested, or by leaving a copy at the person’s principal place of business or at the person’s residence with a person of suitable age and discretion who resides there. A subpoena may be served at any place in the United States or any Territory or possession of the United States. A subpoena may command a person to attend and produce documents or tangible things, from any place in the United States or any Territory or possession of the United States, at any designated place of hearing or deposition.


(c) Revocation or modification of subpoenas. Any person served with a subpoena, whether requiring attendance and testimony (ad testificandum) or for the production of evidence (duces tecum), shall, within 5 days after the date of service of the subpoena, move in writing to revoke or modify the subpoena if the person does not intend to comply. All motions to revoke or modify shall be served on the party at whose request the subpoena was issued. The Commission or the Judge shall revoke or modify the subpoena if in its opinion the evidence whose production is required does not relate to any matter under investigation or in question in the proceedings or the subpoena does not describe with sufficient particularity the evidence to be produced, or if for any other reason sufficient in law the subpoena is otherwise invalid. The Commission or the Judge shall make a simple statement of procedural or other grounds for the ruling on the motion to revoke, modify, or affirm. The motion to revoke or modify, any answer filed, and any ruling on the motion shall become part of the record.


(d) Rights of persons compelled to submit data or other information in documents. Persons compelled to submit data or other information at a public proceeding are entitled to retain documents they submitted that contain the data or information, or to procure a copy of such documents upon their payment of lawfully prescribed costs. If such persons submit the data or other information by testimony, they are entitled to a copy of the transcript of their testimony upon their payment of the lawfully prescribed costs.


(e) Witness fees and mileage. Witnesses summoned to appear for a deposition or to appear before the Commission or the Judge shall be paid the same witness fees and mileage expense that are paid witnesses in the federal courts. Witness fees and mileage expense shall be paid by the party at whose instance the witness appears.


(f) Failure to comply with subpoena. Upon the failure of any person to comply with the subpoena issued upon the request of a party, the Commission by its counsel shall recommend to the U.S. Department of Justice that proceedings be initiated in the appropriate district court for the enforcement of the subpoena, if in the Commission’s judgment the enforcement of the subpoena would be consistent with law and with policies of the Act. In such instances, neither the Commission nor its counsel shall be deemed to have assumed responsibility for the effective prosecution of the subpoena before the court.


§ 2200.66 Transcript of testimony.

(a) Hearings. Hearings shall be transcribed verbatim. A copy of the transcript of testimony taken at the hearing, duly certified by the reporter, shall be filed with the Judge before whom the matter was heard.


(b) Payment for transcript. The Commission shall bear all expenses for court reporters’ fees and for copies of the hearing transcript received by it. Each party is responsible for securing and paying for its copy of the transcript.


(c) Correction of errors. Error in the transcript of the hearing may be corrected by the Judge on the Judge’s own motion, on joint motion by the parties, or on motion by any party. The motion shall conform to § 2200.40 and shall state the error in the transcript and the correction to be made. The official transcript shall reflect the corrections.


§ 2200.67 Duties and powers of Judges.

It shall be the duty of the Judge to conduct a fair and impartial hearing, to assure that the facts are fully elicited, to adjudicate all issues and avoid delay. The Judge shall have authority with respect to cases assigned to the Judge, between the time the Judge is designated and the time the Judge issues a decision, subject to the rules and regulations of the Commission, to:


(a) Administer oaths and affirmations;


(b) Issue authorized subpoenas and rule on petitions to modify, revoke, or affirm, in accordance with § 2200.65;


(c) Rule on claims of privilege and claims that information is protected and issue protective orders, in accordance with § 2200.52(d) and (e).


(d) Rule upon offers of proof and receive relevant evidence;


(e) Take or cause depositions to be taken whenever the needs of justice would be served;


(f) Regulate the course of the hearing and, if appropriate or necessary, exclude persons or counsel from the hearing for contemptuous conduct and strike all related testimony of witnesses refusing to answer any proper questions;


(g) Hold conferences for the settlement or simplification of the issues;


(h) Dispose of procedural requests or similar matters, including motions referred to the Judge by the Commission and motions to amend pleadings; also to dismiss complaints, or portions of complaints, and to order hearings reopened or, upon motion, consolidated prior to issuance of a decision;


(i) Make decisions that conform to 5 U.S.C. 557 of the Administrative Procedure Act;


(j) Call and examine witnesses and to introduce into the record documentary or other evidence;


(k) Approve or appoint an interpreter;


(l) Request the parties to state their respective positions concerning any issue in the case or theory in support of their position;


(m) Adjourn the hearing as the needs of justice and good administration require;


(n) Take any other action necessary under the foregoing and authorized by the published rules and regulations of the Commission.


[84 FR 14558, Apr. 10, 2019; 84 FR 45654, Aug. 30, 2019]


§ 2200.68 Recusal of the Judge.

(a) Discretionary recusal. A Judge may recuse themself from a proceeding whenever the Judge deems it appropriate.


(b) Mandatory recusal. A Judge shall recuse themself under circumstances that would require disqualification of a Federal judge under Canon 3(C) of the Code of Conduct for United States Judges, except that the required recusal may be set aside under the conditions specified by Canon 3(D).


(c) Request for recusal. Any party may request that the Judge, at any time following the Judge’s designation and before the filing of a decision, be recused under paragraph (a) or (b) of this section or both by filing with the Judge, promptly upon the discovery of the alleged facts, an affidavit setting forth in detail the matters alleged to constitute grounds for recusal.


(d) Ruling on request. If the Judge finds that a request for recusal has been filed with due diligence and that the material filed in support of the request establishes that recusal either is appropriate under paragraph (a) of this section or is required under paragraph (b) of this section, the Judge shall recuse themself from the proceeding. If the Judge denies a request for recusal, the Judge shall issue a ruling on the record, stating the grounds for denying the request, and shall proceed with the hearing, or, if the hearing has closed, proceed with the issuance of a decision under the provisions of § 2200.90.


[84 FR 14558, Apr. 10, 2019, as amended at 87 FR 8949, Feb. 17, 2022]


§ 2200.69 Examination of witnesses.

Witnesses shall be examined orally under oath or affirmation. Opposing parties have the right to cross-examine any witness whose testimony is introduced by an adverse party. All parties shall have the right to cross-examine any witness called by the Judge pursuant to § 2200.67(j).


§ 2200.70 Exhibits.

(a) Marking exhibits. All exhibits offered in evidence by a party shall be marked for identification before or during the hearing. Exhibits shall be marked with the case docket number, with a designation identifying the party or intervenor offering the exhibit, and numbered consecutively.


(b) Removal or substitution of exhibits in evidence. Unless the Judge finds it impractical, a copy of each exhibit shall be given to the other parties and intervenors. A party may remove an exhibit from the official record during the hearing or at the conclusion of the hearing only upon permission of the Judge. The Judge, in the Judge’s discretion, may permit the substitution of a duplicate for any original document offered into evidence.


(c) Reasons for denial of admitting exhibit. A Judge may, in the Judge’s discretion, deny the admission of any exhibit because of its excessive size, weight, or other characteristic that prohibits its convenient transportation and storage. A party may offer into evidence photographs, models, or other representations of any such exhibit.


(d) Rejected exhibits. All exhibits offered but denied admission into evidence, except exhibits referred to in paragraph (c) of this section, shall be placed in a separate file designated for rejected exhibits.


(e) Return of physical exhibits. A party may on motion request the return of a physical exhibit within 30 days after expiration of the time for filing a petition for review of a Commission final order in a United States Court of Appeals under section 11 of the Act, 29 U.S.C. 660, or within 30 days after completion of any proceedings initiated in a Court of Appeals. The motion shall be addressed to the Executive Secretary and provide supporting reasons. The exhibit shall be returned if the Executive Secretary determines that it is no longer necessary for use in any Commission proceeding.


(f) Request for custody of physical exhibit. Any person may on motion to the Executive Secretary request custody of a physical exhibit for use in any court or tribunal. The motion shall state the reasons for the request and the duration of custody requested. If the exhibit has been admitted in a pending Commission case, the motion shall be served on all parties to the proceeding. Any person granted custody of an exhibit shall inform the Executive Secretary of the status every 6 months (e.g., 6 months after January 15 would be July 15) of the person’s continuing need for the exhibit and return the exhibit after completion of the proceeding.


(g) Disposal of physical exhibit. Any physical exhibit may be disposed of by the Commission’s Executive Secretary subject to the requirements of the National Archives and Records Administration.


[84 FR 14558, Apr. 10, 2019, as amended at 87 FR 8949, Feb. 17, 2022]


§ 2200.71 Rules of evidence.

The Federal Rules of Evidence are applicable.


§ 2200.72 Objections.

(a) Statement of objection. Any objection with respect to the conduct of the hearing, including any objection to the introduction of evidence or a ruling by the Judge, may be stated orally or in writing, accompanied by a short statement of the grounds for the objection, and shall be included in the record. No such objection shall be deemed waived by further participation in the hearing.


(b) Offer of proof. Whenever evidence is excluded from the record, the party offering such evidence may make an offer of proof, which shall be included in the record of the proceeding.


(c) Once the Judge rules definitively on the record—either before or at the hearing—a party need not renew an objection or offer of proof to preserve a claim of error for appeal.


§ 2200.73 Interlocutory review.

(a) General. Interlocutory review of a Judge’s ruling is discretionary with the Commission. A petition for interlocutory review may be granted only where the petition asserts and the Commission finds:


(1) That the review involves an important question of law or policy that controls the outcome of the case, and that immediate review of the ruling will materially expedite the final disposition of the proceedings or subsequent review by the Commission may provide an inadequate remedy; or


(2) That the ruling will result in a disclosure, before the Commission may review the Judge’s report, of information that is alleged to be privileged.


(b) Petition for interlocutory review. Within 7 days following the service of a Judge’s ruling from which review is sought, a party may file a petition for interlocutory review with the Commission. Responses to the petition, if any, shall be filed within 7 days following service of the petition. Service of the filed petition on the other parties and intervenors shall be accomplished in a manner prescribed in § 2200.7(c). A copy of the petition and responses shall be filed with the Judge. The petition is denied unless granted within 30 days of the date of receipt by the Commission’s Executive Secretary. A corporate party that files a petition for interlocutory review or a response to such a petition under this section shall file with the Commission a copy of its declaration of corporate parents, subsidiaries, and affiliates previously filed with the Judge under the requirements of § 2200.35 or § 2200.37(d)(4). In its discretion the Commission may refuse to accept for filing a petition or response that fails to comply with this disclosure requirement. A corporate party filing the declaration required by this paragraph shall have a continuing duty to advise the Executive Secretary of any changes to its declaration until the petition is deemed denied or a decision is issued on the merits.


(c) Denial without prejudice. The Commission’s decision not to grant a petition for interlocutory review shall not preclude a party from raising an objection to the Judge’s interlocutory ruling in a petition for discretionary review.


(d) Stay—(1) Trade secret matters. The filing of a petition for interlocutory review of a Judge’s ruling concerning an alleged trade secret shall stay the effect of the ruling until the petition is deemed denied or ruled upon.


(2) Other cases. In all other cases, the filing or granting of a petition for interlocutory review shall not stay a proceeding or the effect of a ruling unless otherwise ordered.


(e) Judge’s comments. The Judge may be requested to provide the Commission with written views on whether the petition is meritorious. When the written comments are filed with the Commission, the Judge shall serve the comments on all parties in a manner prescribed in § 2200.7(c).


(f) Briefs. Notice shall be given to the parties if the Commission decides to request briefs on the issues raised by an interlocutory review. See § 2200.93—Briefs before the Commission.


(g) When filing effective. A petition for interlocutory review is deemed to be filed only when received by the Commission, as specified in § 2200.8(d)(3)(ii).


[84 FR 14558, Apr. 10, 2019; 84 FR 53053, Oct. 4, 2019]


§ 2200.74 Filing of briefs and proposed findings with the Judge; oral argument at the hearing.

(a) General. A party is entitled to a reasonable period at the close of the hearing for oral argument, which shall be included in the transcript of the hearing. Any party shall be entitled, upon request made before the close of hearing, to file a brief, proposed findings of fact and conclusions of law, or both, with the Judge. In lieu of briefs, the Judge may permit or direct the parties to file memoranda or statements of authority.


(b) Time. Briefs shall be filed simultaneously on a date established by the Judge. A motion for extension of time for filing any brief shall be made at least 3 working days prior to the due date and shall recite that the moving party has conferred with the other parties on the motion. Reply briefs shall not be allowed except by order of the Judge.


(c) Untimely briefs. Untimely briefs will not be accepted unless accompanied by a motion setting forth good cause for the delay. The form and content of motions shall comply with § 2200.40.


Subpart F—Posthearing Procedures

§ 2200.90 Decisions and reports of Judges.

(a) Judge’s decision—(1) Contents of Judge’s decision. The Judge shall prepare a decision that conforms to 5 U.S.C. 557 of the Administrative Procedure Act and constitutes the final disposition of the proceedings. The decision shall be in writing and shall include findings of fact, conclusions of law, and the reasons or bases for them, on all the material issues of fact, law, or discretion presented on the record. The decision shall include an order affirming, modifying, or vacating each contested citation item and each proposed penalty or directing other appropriate relief. A decision finally disposing of a petition for modification of the abatement period shall contain an order affirming or modifying the abatement period.


(2) Service of the Judge’s decision. The Judge shall serve a copy of the decision on each party in a manner prescribed in § 2200.7(c).


(b) Judge’s report—(1) Contents of Judge’s report. The Judge’s report shall consist of the entire record, including the Judge’s decision.


(2) Filing of Judge’s report. On the eleventh day after service of the decision on the parties, the Judge shall file the report with the Executive Secretary for docketing.


(3) Docketing of Judge’s report by Executive Secretary. Promptly upon filing of the Judge’s report, the Executive Secretary shall docket the report and notify all parties of the docketing date. The date of docketing of the Judge’s report is the date that the Judge’s report is made for purposes of section 12(j) of the Act, 29 U.S.C. 661(j).


(4) Correction of errors in Judge’s report. (i) Until the Judge’s report has been directed for review or, in the absence of a direction for review, until the decision has become a final order as described in paragraph (f) of this section, the Judge may correct clerical errors arising through oversight or inadvertence in decisions, orders, or other parts of the record under Federal Rule of Civil Procedure 60(a). If a Judge’s report has been directed for review, the decision may be corrected during the pendency of review with leave of the Commission.


(ii) After a Judge’s decision has become a final order as described in paragraph (f) of this section, the Commission or the Judge may correct a clerical mistake or a mistake arising from oversight or omission under Federal Rule of Civil Procedure 60(a).


(c) Relief from default. Until the Judge’s report has been docketed by the Executive Secretary, the Judge may relieve a party of default or grant reinstatement under § 2200.101(b), § 2200.52(f)(2), or § 2200.64(b).


(d) Filing documents after the docketing date. Except for documents filed under paragraph (b)(4)(i) of this section, which shall be filed with the Judge, on or after the date of docketing of the Judge’s report all documents shall be filed with the Executive Secretary.


(e) Settlement. Settlement documents shall be filed in the manner prescribed in § 2200.100(c).


(f) Judge’s decision final unless review directed. If no Commissioner directs review of a report on or before the thirtieth day following the date of docketing of the Judge’s report, the decision of the Judge shall become a final order of the Commission.


[84 FR 14558, Apr. 10, 2019; 84 FR 53053, Oct. 4, 2019]


§ 2200.91 Discretionary review; petitions for discretionary review; statements in opposition to petitions.

(a) Review discretionary. Review by the Commission is not a right. A Commissioner may, as a matter of discretion, direct review on the Commissioner’s own motion or on the petition of a party.


(b) Petitions for discretionary review. A party adversely affected or aggrieved by the decision of the Judge may seek review by the Commission by filing a petition for discretionary review with the Executive Secretary at any time following the service of the Judge’s decision on the parties but no later than 20 days after the date of docketing of the Judge’s report. Service of the filed petition on the other parties and intervenors shall be accomplished in a manner prescribed in § 2200.7(c). The earlier a petition is filed, the more consideration it can be given. A petition for discretionary review may be conditional, and it may state that review is sought only if a Commissioner were to direct review on the petition of an opposing party.


(c) Cross-petitions for discretionary review. Where a petition for discretionary review has been filed by one party, any other party adversely affected or aggrieved by the decision of the Judge may seek review by the Commission by filing a cross-petition for discretionary review. The cross-petition may be conditional. See paragraph (b) of this section. A cross-petition shall be filed directly with the Executive Secretary within 27 days after the date of docketing of the Judge’s report. The earlier a cross-petition is filed, the more consideration it can be given.


(d) Contents of the petition. No particular form is required for a petition for discretionary review. A petition should state why review should be directed, including: Whether the Judge’s decision raises an important question of law, policy, or discretion; whether review by the Commission will resolve a question about which the Commission’s Judges have rendered differing opinions; whether the Judge’s decision is contrary to law or Commission precedent; whether a finding of material fact is not supported by a preponderance of the evidence; whether a prejudicial error of procedure or an abuse of discretion was committed. A petition should concisely state the portions of the decision for which review is sought and should refer to the citations and citation items (for example, citation 3, item 4a) for which review is sought. A petition shall not incorporate by reference a brief or legal memorandum. Brevity and the inclusion of precise references to the record and legal authorities will facilitate prompt review of the petition.


(e) When filing effective. A petition for discretionary review is filed when received by the Commission, as specified in § 2200.8(d)(3)(ii).


(f) Prerequisite to judicial review; effect of filing. A petition for review under this section is, under 5 U.S.C. 704, a prerequisite to the seeking of judicial review of the final agency action. The effect of filing a petition for review is to stay the decision of the Judge.


(g) Statements in opposition to petition. Statements in opposition to petitions for discretionary review may be filed in the manner specified in this section for the filing of petitions for discretionary review. Statements in opposition shall concisely state why the Judge’s decision should not be reviewed with respect to each portion of the petition to which it is addressed.


[84 FR 14558, Apr. 10, 2019; 84 FR 53053, Oct. 4, 2019]


§ 2200.92 Review by the Commission.

(a) Jurisdiction of the Commission; issues on review. Unless the Commission orders otherwise, a direction for review establishes jurisdiction in the Commission to review the entire case. The issues to be decided on review are within the discretion of the Commission.


(b) Review on a Commissioner’s motion; issues on review. At any time within 30 days after the docketing date of the Judge’s report, a Commissioner may, on the Commissioner’s own motion, direct that a Judge’s decision be reviewed. Factors that may be considered in deciding whether to direct review absent a petition include, but are not limited to, whether the case raises novel questions of law or policy or involves a conflict between Administrative Law Judges’ decisions. When a Commissioner directs review on the Commissioner’s own motion, the issues ordinarily will be those specified in the direction for review or any later order.


(c) Issues not raised before Judge. The Commission will ordinarily not review issues that the Judge did not have the opportunity to pass upon. In exercising discretion to review issues that the Judge did not have the opportunity to pass upon, the Commission may consider such factors as whether there was good cause for not raising the issue before the Judge, the degree to which the issue is factual, the degree to which proceedings will be disrupted or delayed by raising the issue on review, whether the ability of an adverse party to press a claim or defense would be impaired, and whether considering the new issue would avoid injustice or ensure that judgment will be rendered in accordance with the law and facts.


§ 2200.93 Briefs before the Commission.

(a) Requests for briefs. The Commission ordinarily will request the parties to file briefs on issues before the Commission. After briefs are requested, a party may, instead of filing a brief, file a letter setting forth its arguments or a letter stating that it will rely on its petition for discretionary review or previous brief. A party not intending to file a brief shall notify the Commission in writing within the applicable time for filing briefs and shall serve a copy on all other parties. The provisions of this section apply to the filing of briefs and letters filed in lieu of briefs.


(b) Filing briefs. Unless the briefing notice states otherwise:


(1) Time for filing briefs. The party required to file the first brief shall do so within 40 days after the date of the briefing notice. All other parties shall file their briefs within 30 days after the first brief is served. Any reply brief permitted by these rules or by order shall be filed within 15 days after the second brief is served.


(2) Sequence of filing. (i) If one petition for discretionary or interlocutory review has been filed, the petitioning party shall file the first brief.


(ii) If more than one petition has been filed, the party whose petition was filed first shall file the first brief.


(iii) If no petition has been filed, the parties shall file simultaneous briefs.


(3) Reply briefs. The party that filed the first brief may file a reply brief, or, if briefs are to be filed simultaneously, both parties may file a reply brief. Additional briefs are otherwise not allowed except by leave of the Commission.


(c) Motion for extension of time for filing brief. An extension of time to file a brief will ordinarily not be granted except for good cause shown. A motion for extension of time to file a brief shall be filed at the Commission no later than 5 days prior to the expiration of the time limit prescribed in paragraph (b) of this section, shall comply with § 2200.40, and shall include the following information: when the brief is due, the number and duration of extensions of time that have been granted to each party, the length of extension being requested, the specific reason for the extension being requested, and an assurance that the brief will be filed within the time extension requested.


(d) Consequences of failure to timely file brief. The Commission may decline to accept a brief that is not timely filed. If a petitioning party fails to respond to a briefing notice or expresses no interest in review, the Commission may vacate the direction for review, or it may decide the case without that party’s brief. If the non-petitioning party fails to respond to a briefing notice or expresses no interest in review, the Commission may decide the case without that party’s brief. If a case was directed for review upon a Commissioner’s own motion, and any party fails to respond to the briefing notice, the Commission may either vacate the direction for review or decide the case without briefs.


(e) Length of brief. Except by permission of the Commission, a main brief, including briefs and legal memoranda it incorporates by reference, shall contain no more than 35 pages of text. A reply brief, including briefs and legal memoranda it incorporates by reference, shall contain no more than 20 pages of text.


(f) Format. Briefs shall be typewritten, double spaced, with typeface of text being no smaller than 12-point and typeface of footnotes being no smaller than 11-point, on letter size opaque paper (8
1/2 inches by 11 inches). All margins shall be 1
1/2 inches.


(g) Table of contents. A brief in excess of 15 pages shall include a table of contents.


(h) Failure to meet requirements. The Commission may return briefs that do not meet the requirements of paragraphs (e) and (f) of this section.


(i) Brief of an amicus curiae. The Commission may allow a brief of an amicus curiae pursuant to the criteria and time period set forth in § 2200.24. Any brief of an amicus curiae must meet the requirements of paragraphs (b) through (h) of this section. No reply brief of an amicus curiae will be received.


[84 FR 14558, Apr. 10, 2019; 84 FR 53053, Oct. 4, 2019]


§ 2200.94 [Reserved]

§ 2200.95 Oral argument before the Commission.

(a) When ordered. Upon motion of any party or upon its own motion, the Commission may order oral argument. Parties requesting oral argument must demonstrate why oral argument would facilitate resolution of the issues before the Commission. Normally, motions for oral argument shall not be considered until after all briefs have been filed.


(b) Notice of argument. The Executive Secretary shall advise all parties whether oral argument is to be heard. Within a reasonable time before the oral argument is scheduled, the Executive Secretary shall inform the parties of the time and place therefor, the issues to be heard, and the time allotted to the parties.


(c) Postponement. (1) Except under extraordinary circumstances, a request for postponement must be filed at least 10 days before oral argument is scheduled.


(2) The Executive Secretary shall notify the parties of a postponement in a manner best calculated to avoid unnecessary travel or inconvenience to the parties. The Executive Secretary shall inform all parties of the new time and place for the oral argument.


(d) Order and content of argument. (1) Counsel shall be afforded such time for oral argument as the Commission may provide by order. Requests for enlargement of time may be made by motion filed reasonably in advance of the date fixed for the argument.


(2) The petitioning party shall argue first. If the case is before the Commission on cross-petitions, the Commission will inform the parties in advance of the order of appearance.


(3) Counsel may reserve a portion of the time allowed for rebuttal but in opening argument shall present the case fairly and completely and shall not reserve points of substance for presentation during rebuttal.


(4) Oral argument should undertake to emphasize and clarify the written arguments appearing in the briefs. The Commission will look with disfavor on any oral argument that is read from a previously filed document.


(5) At any time, the Commission may terminate a party’s argument or interrupt the party’s presentation for questioning by the Commissioners.


(e) Failure to appear. Should either party fail to appear for oral argument, the party present may be allowed to proceed with its argument.


(f) Consolidated cases. Where two or more consolidated cases are scheduled for oral argument, the consolidated cases shall be considered as one case for the purpose of allotting time to the parties unless the Commission otherwise directs.


(g) Multiple counsel. Where more than one counsel argues for a party to the case or for multiple parties on the same side in the case, it is counsels’ responsibility to agree upon a fair division of the total time allotted. In the event of a failure to agree, the Commission will allocate the time. The Commission may, in its discretion, limit the number of counsel heard for each party or side in the argument. No later than 5 days prior to the date of scheduled argument, the Commission must be notified of the names of the counsel who will argue.


(h) Exhibits/visual aids. (1) The parties may use exhibits introduced into evidence at the hearing. If a party wishes to use a visual aid not part of the record, written notice of the proposed use shall be given to opposing counsel 15 days prior to the argument. Objections, if any, shall be in writing, served on all adverse parties, and filed not fewer than 7 days before the argument.


(2) No visual aid shall introduce or rely upon facts or evidence not already part of the record.


(3) If visual aids or exhibits other than documents are to be used at the argument, counsel shall arrange with the Executive Secretary to have them placed in the hearing room on the date of the argument before the Commission convenes.


(4) Parties using visual aids not introduced into evidence shall have them removed from the hearing room unless the Commission directs otherwise. If such visual aids are not reclaimed by the party within a reasonable time after notice is given by the Executive Secretary, such visual aids shall be disposed of at the discretion of the Executive Secretary.


(i) Recording oral argument. (1) Unless the Commission directs otherwise, oral arguments shall be electronically recorded and made part of the record. Any other sound recording in the hearing room is prohibited. Oral arguments shall also be transcribed verbatim. A copy of the transcript of the oral argument taken by a qualified court reporter, shall be filed with the Commission. The Commission shall bear all expenses for court reporters’ fees and for copies of the hearing transcript received by it.


(2) Persons desiring to listen to the recordings shall make appropriate arrangements with the Executive Secretary. Any party desiring a written copy of the transcript is responsible for securing and paying for its copy.


(3) Error in the transcript of the oral argument may be corrected by the Commission on its own motion, on joint motion by the parties, or on motion by any party. The motion shall state the error in the transcript and the correction to be made. The official transcript shall reflect the corrections.


(j) Failure to file brief. A party that fails to file a brief shall not be heard at the time of oral argument except by permission of the Commission.


(k) Participation in oral argument by amicus curiae. (1) An amicus curiae will not be permitted to participate in the oral argument without leave of the Commission upon proper motion. Participation generally will be limited to a portion of the time allotted to the party in whose interest the amicus curiae seeks to participate. In extraordinary circumstances, the amicus curiae may be allotted its own time for oral argument.


(2) A motion by amicus curiae seeking leave to participate in oral argument shall be filed no later than 14 days prior to the date oral argument is scheduled.


(3) The motion of an amicus curiae for leave to participate at oral argument shall identify the interest of the applicant and shall state the reason(s) why its participation at oral argument is desirable.


(4) Motions in opposition to the motion of an amicus curiae for leave to participate in the oral argument must be filed within 10 days of the date of the motion.


§ 2200.96 Commission receipt of copies of petitions for judicial review of Commission orders when petitions for review are filed in two or more courts of appeals with respect to the same order.

The Commission officer and office designated to receive, pursuant to 28 U.S.C. 2112(a)(1), copies of petitions for review of Commission orders, from the persons instituting the review proceedings in a court of appeals, are the Executive Secretary and the Office of the Executive Secretary at the Commission’s Office, One Lafayette Centre, 1120 20th Street NW, Suite 980, Washington, DC 20036-3457. The petition shall state that it is being submitted to the Commission pursuant to 28 U.S.C. 2112 by the persons or person who filed the petition in the court of appeals and shall be stamped by the court with the date of filing. (28 U.S.C. 2112(a) contains certain applicable requirements.)


Subpart G—Miscellaneous Provisions

§ 2200.100 Settlement.

(a) Policy. Settlement is permitted and encouraged by the Commission at any stage of the proceedings.


(b) Requirements—(1) Notification of Settlement. If the parties have agreed to a partial or full settlement, they shall so notify the Judge in a written joint submission (titled “Notification of Settlement” or “Notification of Partial Settlement,” as appropriate), in which the parties shall:


(i) List the contested items that have been settled and, if only a partial settlement agreement has been reached, also list the contested items that remain to be decided;


(ii) If posting of the settlement agreement is required by § 2200.7(g), certify that the parties’ settlement agreement has been posted in the manner prescribed by that rule and certify the date of posting;


(iii) If party status has been elected under § 2200.20, certify that the party has been afforded an opportunity to provide input on all matters pertaining to the settlement before the agreement is finalized; and


(iv) If the settlement agreement includes the withdrawal of a notice of contest, citation, notification of proposed penalty, or petition for modification of abatement period, state whether such withdrawal is with prejudice.


(2) The parties shall not incorporate the settlement agreement in, or append it to, the joint submission required in paragraph (b)(1) of this section or substitute the settlement agreement for the required joint submission.


(3) Issuance of order terminating proceeding. If the requirements of paragraphs (b)(1) and (2) of this section have been met with respect to all contested citation items and no affected employees who have elected party status have raised an objection to the reasonableness of any abatement period, the Judge shall issue an Order acknowledging that the parties have resolved all contested citation items and agreed to terminate the proceeding before the Commission.


(c) Filing; service and notice. A Notification of Settlement submitted after a Judge’s report has been issued shall be filed with the Executive Secretary. Proof of service shall be filed with the Notification of Settlement, showing service upon all parties and authorized employee representatives in the manner prescribed by § 2200.7(c) and (d) and the posting of notice to non-party affected employees in the manner prescribed by § 2200.7(g). The parties shall also file a draft order terminating the proceedings for adoption by the Judge or, if the Judge’s report has been issued, by the Commission. If the time has not expired under these rules for electing party status, an order acknowledging the termination of the proceedings before the Commission because of the settlement shall not be issued until at least 14 days after service or posting to consider any affected employee’s or authorized employee representative’s objection to the reasonableness of any abatement time. The affected employee or authorized employee representative shall file any such objection within this time. If such objection is filed, the Commission or the Judge shall provide an opportunity for the affected employees or authorized employee representative to be heard and present evidence on the objection, which shall be limited to the reasonableness of the abatement period.


[84 FR 14558, Apr. 10, 2019, as amended at 85 FR 65220, Oct. 15, 2020]


§ 2200.101 Failure to obey rules.

(a) Sanctions. When any party has failed to plead or otherwise proceed as provided by these rules or as required by the Commission or the Judge, the party may be declared to be in default either on the initiative of the Commission or the Judge, after having been afforded an opportunity to show cause why the party should not be declared to be in default, or on the motion of a party. Subsequently, the Commission or the Judge, in their discretion, may enter a decision against the defaulting party or strike any pleading or document not filed in accordance with these rules.


(b) Motion to set aside sanctions. For reasons deemed sufficient by the Commission or the Judge and upon motion conforming to § 2200.40 expeditiously made, the Commission or the Judge may set aside a sanction imposed under paragraph (a) of this section. See § 2200.90(c).


(c) Discovery sanctions and failure to appear. This section does not apply to sanctions for failure to comply with orders compelling discovery, which are governed by § 2200.52(f), or to a default for failure to appear, which is governed by § 2200.64(a).


(d) Show cause orders. All show cause orders issued by the Commission or the Judge under paragraph (a) of this section shall be served in a manner prescribed in § 2200.7(o).


§ 2200.102 Withdrawal.

A party may withdraw its notice of contest, citation, notification of proposed penalty, or petition for modification of abatement period at any stage of a proceeding. The notice of withdrawal shall be served in accordance with § 2200.7(c) upon all parties and authorized employee representatives that are eligible to elect, but have not elected, party status. It shall also be posted in the manner prescribed in § 2200.7(g) for the benefit of any affected employees not represented by an authorized employee representative who are eligible to elect, but have not elected, party status. Proof of service shall accompany the notice of withdrawal in accordance with § 2200.7(d).


§ 2200.103 Expedited proceeding.

(a) When ordered. Upon application of any party or intervenor or upon its own motion, the Commission may order an expedited proceeding. When an expedited proceeding is ordered by the Commission, the Executive Secretary shall notify all parties and intervenors.


(b) Automatic expedition. Cases initiated by employee contests and petitions for modification of abatement period shall be expedited. See §§ 2200.37(d)(2) and 2200.38(c).


(c) Effect of ordering expedited proceeding. When an expedited proceeding is required by these rules or ordered by the Commission, it shall take precedence on the docket of the Judge to whom it is assigned, or on the Commission’s review docket, as applicable, over all other classes of cases, and shall be set for hearing or for the submission of briefs at the earliest practicable date.


(d) Time sequence set by Judge. The assigned Judge shall make rulings with respect to time for filing of pleadings and with respect to all other matters, without reference to times set forth in these rules, and shall do all other things appropriate to complete the proceeding in the minimum time consistent with fairness.


§ 2200.104 Standards of conduct.

(a) General. All representatives appearing before the Commission and its Judges shall comply with the letter and spirit of the Model Rules of Professional Conduct of the American Bar Association.


(b) Misbehavior before a Judge—(1) Exclusion from a proceeding. A Judge may exclude from participation in a proceeding any person, including a party or its representative, who engages in disruptive behavior, refuses to comply with orders or rules of procedure, continuously uses dilatory tactics, refuses to adhere to standards of orderly or ethical conduct, or fails to act in good faith. The cause for the exclusion shall be stated in writing or may be stated in the record if the exclusion occurs during the course of the hearing. Where the person removed is a party’s attorney or other representative, the Judge shall suspend the proceeding for a reasonable time for the purpose of enabling the party to obtain another attorney or other representative.


(2) Appeal rights if excluded. Any attorney or other representative excluded from a proceeding by a Judge may, within 7 days of the exclusion, appeal to the Commission for reinstatement. No proceeding shall be delayed or suspended pending disposition of the appeal.


(c) Disciplinary action by the Commission. If an attorney or other representative practicing before the Commission engages in unethical or unprofessional conduct or fails to comply with any rule or order of the Commission or its Judges, the Commission may, after reasonable notice and an opportunity to show cause to the contrary, and after hearing, if requested, take any appropriate disciplinary action, including suspension or disbarment from practice before the Commission.


(d) Show cause orders. All show cause orders issued by the Commission under paragraph (c) of this section shall be served in a manner prescribed in § 2200.7(o).


§ 2200.105 Ex parte communication.

(a) General. Except as permitted by § 2200.120 or as otherwise authorized by law, there shall be no ex parte communication with respect to the merits of any case not concluded, between any Commissioner, Judge, employee, or agent of the Commission who is employed in the decisional process and any of the parties or intervenors, representatives, or other interested persons.


(b) Disciplinary action. In the event an ex parte communication occurs, the Commission or the Judge may make such orders or take such actions as fairness requires. The exclusion of a person by a Judge from a proceeding shall be governed by § 2200.104(b). Any disciplinary action by the Commission, including suspension or disbarment, shall be governed by § 2200.104(c).


(c) Placement on public record. All ex parte communications in violation of this section shall be placed on the public record of the proceeding.


§ 2200.106 Amendment to rules.

The Commission may at any time upon its own motion or initiative, or upon written suggestion of any interested person setting forth reasonable grounds therefor, amend or revoke any of the rules contained in this Part. The Commission invites suggestions from interested parties to amend or revoke rules of procedure. Such suggestions should be sent by email to [email protected] or addressed to the Executive Secretary of the Commission at One Lafayette Centre, 1120 20th Street NW, Suite 980, Washington, DC 20036-3457.


§ 2200.107 Special circumstances; waiver of rules.

In special circumstances not contemplated by the provisions of these rules and for good cause shown, the Commission or the Judge may, upon application by any party or intervenor or on their own motion, after 3 working days’ notice to all parties and intervenors, waive any rule or make such orders as justice or the administration of the Act requires.


§ 2200.108 Official Seal of the Occupational Safety and Health Review Commission.

The seal of the Commission shall consist of: A gold eagle outspread, head facing dexter, a shield with 13 vertical stripes superimposed on its breast, holding an olive branch in its claws, the whole superimposed over a plain solid white Greek cross with a green background, encircled by a white band edged in black and inscribed “Occupational Safety and Health Review Commission” in black letters.


Subpart H—Settlement Part

§ 2200.120 Settlement procedure.

(a) Voluntary settlement—(1) Applicability and duration. (i) Voluntary settlement applies only to notices of contests by employers and to applications for fees under the Equal Access to Justice Act and 29 CFR part 2204.


(ii) Upon motion of any party conforming to § 2200.40 after the docketing of the notice of contest, or with the consent of the parties at any time in the proceedings, the Chief Administrative Law Judge may assign a case to a Settlement Judge for proceedings under this section. In the event either the Secretary or the employer objects to the use of a Settlement Judge procedure, such procedure shall not be imposed.


(2) Length of voluntary settlement procedures. Voluntary settlement procedures shall be for a period not to exceed 75 days, unless extended with the concurrence of the Chief Administrative Law Judge.


(b) Mandatory settlement—(1) Applicability. Mandatory settlement applies only to notices of contest by employers in which the aggregate amount of the penalties sought by the Secretary is $205,000 or greater. Periodically, the aggregate amount of penalties for case referral to Mandatory Settlement Proceedings may be adjusted proportionately upon consideration of the penalty increases required by the Inflation Adjustment Act of 2015. The adjusted aggregate penalty amount for case referral to Mandatory Settlement will be posted on the Commission’s website (www.oshrc.gov).


(2) Assignment of case and appointment of Settlement Judge. Notwithstanding any other provisions of these rules, upon the docketing of the notice of contest, the Chief Administrative Law Judge shall assign to the Settlement Part any case which satisfies the criteria set forth in paragraph (b)(1) of this section. The Chief Administrative Law Judge shall appoint a Settlement Judge, who shall be a Judge other than the one assigned to hear and decide the case, except as provided in paragraph (f)(2) of this section.


(3) Mandatory settlement proceedings. (i) The Settlement Judge may consult all attorneys, non-attorney representatives, and self-represented parties by any suitable means to schedule the Settlement Conference and to facilitate preparation for the conference.


(ii) The Settlement Judge may issue a preconference scheduling order addressing procedural matters, including but not limited to, formal pleadings, settlement status conference calls, ex parte caucus calls, and allowing, limiting, or suspending discovery during the settlement proceedings.


(iii) The Settlement Conference shall be conducted as soon as practicable, taking into consideration the case size, the complexity of the issues, and the time needed to complete preconference preparation.


(iv) Mandatory settlement procedures under this section shall be for a period not to exceed 120 days, unless extended with the concurrence of the Chief Administrative Law Judge.


(v) If at the conclusion of the settlement proceedings the case has not been settled, the Settlement Judge shall promptly inform the Chief Administrative Law Judge in accordance with § 2200.120(f)(2).


(c) Powers and duties of Settlement Judges. (1) The Settlement Judge shall confer with the parties regarding the whole or partial settlement of the case and seek resolution of as many issues as is feasible.


(2) The Settlement Judge may require the parties to provide statements of the issues in controversy and the factual predicate for each party’s position on each issue and may enter other orders as appropriate to facilitate the proceedings.


(3) The Settlement Judge may allow or suspend discovery during the settlement proceedings.


(4) The Settlement Judge has the discretion to engage in ex parte communications throughout the course of settlement proceedings. The Settlement Judge may suggest privately to each attorney or other representative of a party what concessions the client should consider and assess privately with each attorney or other representative the reasonableness of the party’s case or settlement position.


(5) The Settlement Judge may, with the consent of the parties, conduct such other settlement proceedings as may aid in the settlement of the case.


(d) Settlement conference—(1) General. The Settlement Judge shall convene and preside over conferences between the parties. The Settlement Judge shall designate the time, place, and nature of the conference.


(2) Participation in conference. The Settlement Judge may require that any attorney or other representative who is expected to try the case for each party be present. The Settlement Judge may also require that the party’s representative be accompanied by an official of the party having full settlement authority on behalf of the party. The parties and their representatives or attorneys are expected to be completely candid with the Settlement Judge so that the Settlement Judge may properly guide settlement discussions. The failure to be present at a settlement conference or otherwise to comply with the orders of the Settlement Judge or the refusal to cooperate fully within the spirit of this rule may result in default or the imposition of sanctions under § 2200.101.


(3) Confidentiality of settlement proceedings. (i) All statements made and all information presented during the course of settlement proceedings under this section shall be regarded as confidential and shall not be divulged outside of these proceedings except with the consent of the parties. The Settlement Judge shall issue appropriate orders to protect the confidentiality of settlement proceedings.


(ii) The Settlement Judge shall not divulge any statements or information presented during private negotiations with a party or the party’s representative during settlement proceedings except with the consent of that party.


(iii) The following shall not be admissible in any subsequent hearing, except by stipulation of the parties:


(A) Evidence of statements or conduct in settlement proceedings under this section within the scope of Federal Rule of Evidence 408,


(B) Notes or other material prepared by or maintained by the Settlement Judge in connection with settlement proceedings, and


(C) Communications between the Settlement Judge and the Chief Administrative Law Judge in connection with settlement proceedings including the report of the Settlement Judge under paragraph (f) of this section.


(iv) Documents and factual information disclosed in the settlement proceeding may not be used in litigation unless obtained through appropriate discovery or subpoena.


(v) With respect to the Settlement Judge’s participation in settlement proceedings, the Settlement Judge shall not discuss the merits of the case with any other person, nor appear as a witness in any hearing of the case.


(vi) The requirements of paragraph (d)(3) of this section apply unless disclosure is required by any applicable law or public policy.


(e) Record of settlement proceedings. No material of any form required to be held confidential under paragraph (d)(3) of this section shall be considered part of the official case record required to be maintained under 29 U.S.C. 661(g), nor shall any such material be open to public inspection as required by section 661(g), unless the parties otherwise stipulate. With the exception of an order approving the terms of any partial settlement agreed to between the parties as set forth in paragraph (f)(1) of this section, the Settlement Judge shall not file or cause to be filed in the official case record any material in the Settlement Judge’s possession relating to these settlement proceedings, including but not limited to communications with the Chief Administrative Law Judge and the Settlement Judge’s report under paragraph (f) of this section, unless the parties otherwise stipulate.


(f) Report of Settlement Judge. (1) The Settlement Judge shall promptly notify the Chief Administrative Law Judge in writing of the status of the case at the conclusion of the settlement period or such time that the Settlement Judge determines further negotiations would be fruitless. If the Settlement Judge has made such a determination and a settlement agreement is not achieved within 75 days of the case being assigned to voluntary settlement proceedings or within 120 days of being assigned for mandatory settlement proceedings, the Settlement Judge shall then advise the Chief Administrative Law Judge in writing. The Chief Administrative Law Judge may then in the Chief Administrative Law Judge’s discretion allow an additional period of time, for further proceedings under this section. If at the expiration of the period allotted under this paragraph the Settlement Judge has not approved a full settlement, the Settlement Judge shall furnish to the Chief Administrative Law Judge copies of any written stipulations and orders embodying the terms of any partial settlement the parties have reached.


(2) At the termination of the settlement period without a full settlement, the Chief Administrative Law Judge shall promptly assign the case to an Administrative Law Judge other than the Settlement Judge or Chief Administrative Law Judge for appropriate action on the remaining issues. If all the parties, the Settlement Judge, and the Chief Administrative Law Judge agree, the Settlement Judge may be retained as the Hearing Judge.


(g) Non-reviewability. Notwithstanding the provisions of § 2200.73 regarding interlocutory review, any decision concerning the assignment of any Judge and any decision by the Settlement Judge to terminate settlement proceedings under this section is not subject to review, appeal, or rehearing.


[84 FR 14558, Apr. 10, 2019, as amended at 87 FR 8949, Feb. 17, 2022]


Subparts I-L [Reserved]

Subpart M—Simplified Proceedings

§ 2200.200 Purpose.

(a) The purpose of the Simplified Proceedings subpart is to provide simplified procedures for resolving contests under the Occupational Safety and Health Act of 1970, so that parties before the Commission may reduce the time and expense of litigation while being assured due process and a hearing that meets the requirements of the Administrative Procedure Act, 5 U.S.C. 554. These procedural rules will be applied to accomplish this purpose.


(b) Procedures under this subpart are simplified in a number of ways. The major differences between these procedures and those provided in subparts A through G of the Commission’s rules of procedure are as follows.


(1) Complaints and answers are not required.


(2) Pleadings generally are not required. Early discussions among the parties and the Judge are required to narrow and define the disputes between the parties.


(3) The Secretary is required to provide the employer with certain informational documents early in the proceeding.


(4) Discovery is not permitted except as ordered by the Judge.


(5) Interlocutory appeals are not permitted.


(6) Hearings are less formal. The admission of evidence is not controlled by the Federal Rules of Evidence except as provided for in § 2200.209(c). The Judge may allow the parties to argue their case orally at the conclusion of the hearing, and may allow or require post-hearing briefs or statements of position. The judge may render a decision from the bench.


§ 2200.201 Application.

The rules in this subpart will govern proceedings before a Judge in a case chosen for Simplified Proceedings under § 2200.203.


§ 2200.202 Eligibility for Simplified Proceedings.

(a) Those cases selected for Simplified Proceedings will be those that do not involve complex issues of law or fact. Cases appropriate for Simplified Proceedings will generally include those with one or more of the following characteristics:


(1) Relatively few citation items,


(2) An aggregate proposed penalty of not more than $20,000,


(3) No allegation of willfulness or a repeat violation,


(4) Not involving a fatality,


(5) A hearing that is expected to take less than 2 days, or


(6) A small employer whether self-represented or represented by counsel.


(b) Those cases with an aggregate proposed penalty of more than $20,000, but not more than $30,000, if otherwise appropriate, may be selected for Simplified Proceedings at the discretion of the Chief Administrative Law Judge.


[84 FR 14558, Apr. 10, 2019; 84 FR 45655, Aug. 30, 2019]


§ 2200.203 Commencing Simplified Proceedings.

(a) Selection. Upon receipt of a Notice of Contest, the Chief Administrative Law Judge may, at the Chief Administrative Law Judge’s discretion, assign an appropriate case for Simplified Proceedings.


(b) Party request. Within 21 days of the notice of docketing, any party may request that the case be assigned for Simplified Proceedings. The request must be in writing. For example, “I request Simplified Proceedings” will suffice. The request must be sent to the Executive Secretary. Copies must be sent to each of the other parties.


(c) Judge’s ruling on request. The Chief Administrative Law Judge or the Judge assigned to the case may grant a party’s request and assign a case for Simplified Proceedings at the Judge’s discretion. Such request shall be acted upon within 14 days of its receipt by the Judge.


(d) Time for filing complaint or answer under § 2200.34. If a party has requested Simplified Proceedings or the Judge has assigned the case for Simplified Proceedings, the times for filing a complaint or answer will not run. If a request for Simplified Proceedings is denied, the period for filing a complaint or answer will begin to run upon issuance of the notice denying Simplified Proceedings.


§ 2200.204 Discontinuance of Simplified Proceedings.

(a) Procedure. If it becomes apparent at any time that a case is not appropriate for Simplified Proceedings, the Judge assigned to the case may, upon motion by any party or upon the Judge’s own motion, discontinue Simplified Proceedings and order the case to continue under conventional rules. Before discontinuing Simplified Proceedings, the Judge will consult with the Chief Administrative Law Judge.


(b) Party motion. At any time during the proceedings any party may request that Simplified Proceedings be discontinued and that the matter continue under conventional procedures. A motion to discontinue must conform to § 2200.40 and explain why the case is inappropriate for Simplified Proceedings. Responses to such motions shall be filed within the time specified by § 2200.40. Joint motions to return a case to conventional proceedings shall be granted by the Judge and do not require a showing of good cause, except that the Judge may deny such a motion that is filed less than 30 days before a scheduled hearing date.


(c) Ruling. If Simplified Proceedings are discontinued, the Judge may issue such orders as are necessary for an orderly continuation under conventional rules.


§ 2200.205 Filing of pleadings.

(a) Complaint and answer. Once a case is designated for Simplified Proceedings, the complaint and answer requirements are suspended. If the Secretary has filed a complaint under § 2200.34(a), a response to a petition under § 2200.37(d)(5), or a response to an employee contest under § 2200.38(a), and if Simplified Proceedings has been ordered, no response to these documents will be required.


(b) Motions. Limited, if any, motion practice is contemplated in Simplified Proceedings, but all motion practice shall conform with § 2200.40.


§ 2200.206 Disclosure of information.

(a) Disclosure to employer. (1) Within 21 days after a case is designated for Simplified Proceedings, the Secretary shall provide the employer, free of charge, copies of the narrative (Form OSHA 1-A) and the worksheet (Form OSHA 1-B) or their equivalents.


(2) Within 30 days after a case is designated for Simplified Proceedings, the Secretary shall provide the employer with reproductions of any photographs or videotapes that the Secretary anticipates using at the hearing.


(3) Within 30 days after a case is designated for Simplified Proceedings, the Secretary shall provide to the employer any exculpatory evidence in the Secretary’s possession.


(4) The Judge shall act expeditiously on any claim by the employer that the Secretary improperly withheld or redacted any portion of the documents, photographs, or videotapes on the grounds of confidentiality or privilege.


(b) Disclosure to the Secretary. When the employer raises an affirmative defense pursuant to § 2200.207(b), the Judge shall order the employer to disclose to the Secretary such documents relevant to the affirmative defense as the Judge deems appropriate.


§ 2200.207 Pre-hearing conference.

(a) When held. As early as practicable after the employer has received the documents set forth in § 2200.206(a)(1), the Judge may conduct a pre-hearing conference, which the Judge may hold in person or by telephone or electronic means.


(b) Content. At the pre-hearing conference, the parties may discuss the following: Settlement of the case; the narrowing of issues; an agreed statement of issues and facts; all defenses; witnesses and exhibits; motions; and any other pertinent matter. Except under extraordinary circumstances, any affirmative defenses not raised at the pre-hearing conference may not be raised later. At the conclusion of the conference, the Judge will issue an order that may set forth any agreements reached by the parties and that may specify the issues to be addressed by the parties at the hearing.


§ 2200.208 Discovery.

Discovery, including requests for admissions, will only be allowed under the conditions and time limits set by the Judge.


§ 2200.209 Hearing.

(a) Procedures. As soon as practicable after the conclusion of the pre-hearing conference, the Judge will hold a hearing on any issue that remains in dispute. The hearing will be in accordance with subpart E of these rules, except for § 2200.73 which will not apply.


(b) Agreements. At the beginning of the hearing, the Judge will enter into the record all agreements reached by the parties as well as defenses raised during the pre-hearing conference. The parties and the Judge then will attempt to resolve or narrow the remaining issues. The Judge will enter into the record any further agreements reached by the parties.


(c) Evidence. Except as to matters that are protected by evidentiary privilege, the admission of evidence is not controlled by the Federal Rules of Evidence, but the Judge may accept a written stipulation of the parties that the Federal Rules of Evidence shall apply in whole or, as specified, in part. The Judge will receive oral, physical, or documentary evidence that is not irrelevant, unduly repetitious, or unreliable. Testimony will be given under oath or affirmation.


(d) Reporter. A reporter will be present at the hearing. An official verbatim transcript of the hearing will be prepared and filed with the Judge. Parties may purchase copies of the transcript from the reporter.


(e) Oral and written argument. Each party may present an oral argument at the close of the hearing. The Judge may allow or require post-hearing briefs or statements of position upon the request of either party or on the Judge’s own motion. The form of any post-hearing briefs shall conform to § 2200.74 unless the Judge specifies otherwise.


(f) Judge’s decision—(1) Bench decision. The Judge may render a decision from the bench. In rendering a decision from the bench, the Judge shall state the issues in the case and make clear both the Judge’s findings of fact and conclusions of law on the record. The Judge shall reduce the bench decision in the matter to writing and serve it on the parties as soon as practicable, but no later than 45 days after the hearing. If additional time is needed, approval of the Chief Administrative Law Judge is required. The decision shall be prepared in accordance with § 2200.90(a). The written decision shall include, as an appendix, the bench decision as set forth in the transcript.


(2) Written decision. If the Judge does not render a decision from the bench, the Judge will issue a written decision within 60 days of the close of the record. The record will ordinarily be deemed closed upon the latter of the filing of the hearing transcript, or the completion of any permitted post-hearing briefing. The decision will be in accordance with § 2200.90(a). If additional time is needed, approval of the Chief Administrative Law Judge is required.


(g) Filing of Judge’s decision with the Executive Secretary. When the Judge issues a written decision, service, filing, and docketing of the Judge’s written decision shall be in accordance with § 2200.90.


§ 2200.210 Review of Judge’s decision.

Any party may petition for Commission review of the Judge’s decision as provided in § 2200.91. After the issuance of the Judge’s written decision, the parties may pursue the case following the rules in Subpart F of this part.


§ 2200.211 Applicability of subparts A through G.

The provisions of subpart D (§§ 2200.50-2200.57) and §§ 2200.34, 2200.37(d), 2200.38, 2200.71, and 2200.73 will not apply to Simplified Proceedings. All other rules contained in subparts A through G of the Commission’s rules of procedure will apply when consistent with the rules in this subpart governing Simplified Proceedings.


[84 FR 14558, Apr. 10, 2019; 84 FR 53053, Oct. 4, 2019]


PART 2201—REGULATIONS IMPLEMENTING THE FREEDOM OF INFORMATION ACT


Authority:29 U.S.C. 661(g); 5 U.S.C. 552.


Source:71 FR 56350, Sept. 27, 2006, unless otherwise noted.

§ 2201.1 Purpose and scope.

This part prescribes procedures to obtain information and records of the Occupational Safety and Health Review Commission (OSHRC or Commission) under the Freedom of Information Act (FOIA), 5 U.S.C. 552. It applies only to records or information of the Commission or in the Commission’s custody. This part does not affect discovery in adversary proceedings before the Commission. Discovery is governed by the Commission’s Rules of Procedure in 29 CFR part 2200, subpart D.


§ 2201.2 Description of agency.

OSHRC adjudicates contested enforcement actions under the Occupational Safety and Health Act of 1970, 29 U.S.C. 651-678. The Commission decides cases after the parties are given an opportunity for a hearing. All hearings are open to the public and are conducted at a place convenient to the parties by an Administrative Law Judge. Any Commissioner may direct that a decision of a Judge be reviewed by the full Commission. The President designates one of the Commissioners as Chairman, who is responsible on behalf of the Commission for the administrative operations of the Commission.


§ 2201.3 Delegation of authority and responsibilities.

(a) The Chairman delegates to the Chief FOIA Officer the authority to act upon all requests for agency records. The Chief FOIA Officer shall, subject to the authority of the Chairman:


(1) Have agency-wide responsibility for efficient and appropriate compliance with this section;


(2) Monitor implementation of the FOIA throughout the agency and keep the Chairman and the Attorney General appropriately informed of the agency’s performance in implementing this section;


(3) Recommend to the Chairman such adjustments to agency practices, policies, personnel, and funding as may be necessary to improve implementation of this section;


(4) Review and report to the Attorney General, through the Chairman, at such times and in such formats as the Attorney General may direct, on the agency’s performance in implementing this section; and


(5) Facilitate public understanding of the purposes of the statutory exemptions of this section by including concise descriptions of the exemptions in both the agency’s FOIA Reference Guide, and the agency’s annual report on this section, and by providing an overview, where appropriate, of certain general categories of agency records to which those exemptions apply.


(b) The Chief FOIA Officer shall designate the FOIA Disclosure Officer(s), who shall be responsible for processing FOIA requests.


(c) The Chief FOIA Officer shall designate the FOIA Public Liaison(s), who shall serve as the official(s) to whom a FOIA requester can raise concerns about the service the FOIA requester has received following an initial response. FOIA Public Liaisons shall be responsible for assisting in reducing delays, increasing transparency and understanding of the status of requests, and assisting in the resolution of disputes.


(d) OSHRC establishes a FOIA Requester Service Center that shall be staffed by the FOIA Disclosure Officer(s) and FOIA Public Liaison(s). The address of the FOIA Requester Service Center is 1120 20th Street NW., 9th Floor, Washington, DC 20036-3457. The telephone number, fax number and additional contact information for the FOIA Requester Service Center is located on the agency’s Web site at: http://www.oshrc.gov/foia/index.html. The FOIA Requester Service Center is available to provide information about the status of a request to the requester using the assigned tracking number (as described in § 2201.6(h)), including:


(1) The date on which the agency originally received the request; and


(2) An estimated date on which the agency will complete action on the request.


[71 FR 56350, Sept. 27, 2006, as amended at 75 FR 41371, July 16, 2010; 81 FR 95037, Dec. 27, 2016]


§ 2201.4 General policy and definitions.

(a) Non-exempt records available to public. Except for records and information exempted from disclosure by 5 U.S.C. 552(b) or published in the Federal Register under 5 U.S.C. 552(a)(1), all records of the Commission or in its custody are available to any person who requests them in accordance with § 2201.5. Records include any information that would be a record subject to the requirements of 5 U.S.C. 552 when maintained by the Commission in any format, including electronic format. In response to FOIA requests, the Commission will search for records manually or by automated means, except when an automated search would significantly interfere with the operation of the Commission’s automated information system.


(b) Record availability at the OSHRC e-FOIA Reading Room. The records of Commission activities are publicly available for inspection and copying, and may be accessed electronically on the Commission’s Web site at http://www.oshrc.gov/foia/foia_reading_room.html. These records include:


(1) Final decisions, including concurring and dissenting opinions, remand orders, as well as Administrative Law Judge decisions pending OSHRC review, briefing notices, and other significant orders;


(2) OSHRC Rules of Procedure and Guides to those procedures;


(3) Agency policy statements and interpretations adopted by OSHRC and not published in the Federal Register, if any;


(4) Administrative staff manuals that affect a member of the public, if any;


(5) Copies of records that have been released to a person under the FOIA that, because of the subject matter, the Commission determines have become or are likely to become the subject of subsequent requests for substantially the same records, or that have been requested three or more times, as well as records the Commission determines absent a FOIA request could be of significant public interest; and


(6) A general index of records referred to under paragraph (b)(5) of this section.


(c) Record availability onsite at OSHRC National Office. Any member of the public may, upon request, access OSHRC’s e-FOIA Reading Room via a computer terminal at the OSHRC National Office, located at 1120 20th St. NW., 9th Floor, Washington, DC 20036-3457. Such a request must be made in writing to the FOIA Requester Service Center, and indicate a preferred date and time for the requested access. OSHRC reserves the right to arrange a different date and time with the requester, if necessary.


(d) Definitions. For purposes of this part:


Commercial use request means a request from or on behalf of a person who seeks information for a use or purpose that furthers his or her commercial, trade, or profit interests, which can include furthering those interests through litigation. The FOIA Disclosure Officer shall determine, whenever reasonably possible, the use to which a requester will put the requested records. When it appears that the requester will put the records to a commercial use, either because of the nature of the request itself or because the FOIA Disclosure Officer has reasonable cause to doubt a requester’s stated use, the FOIA Disclosure Officer shall provide the requester a reasonable opportunity to submit further clarification.


Direct costs means those expenses that the Commission actually incurs in searching for and duplicating (and, in the case of commercial use requests, reviewing) records to respond to a FOIA request. Direct costs include, for example, the salary of the employee performing the work (the basic rate of pay for the employee, plus 16 percent of that rate to cover benefits) and the cost of operating duplication machinery. Not included in direct costs are overhead expenses such as the costs of space and heating or lighting of the facility in which the records are kept.


Duplication means the making of a copy of a record, or of the information contained in it, necessary to respond to a FOIA request. Copies can take the form of paper, microform, audiovisual materials, or electronic records (for example, magnetic tape or disk), among others. The FOIA Disclosure Officer shall honor a requester’s specified preference of form or format of disclosure if the record is readily reproducible with reasonable efforts in the requested form or format.


Educational institution means a preschool, a public or private elementary or secondary school, an institution of undergraduate higher education, an institution of graduate higher education, an institution of professional education, or an institution of vocational education, that operates a program of scholarly research. To be in this category, a requester must show that the request is authorized by and is made under the auspices of a qualifying institution and that the records are not sought for a commercial use but are sought to further scholarly research.


Exceptional circumstances does not include a delay that results from a predictable agency workload of requests under this section, unless the agency demonstrates reasonable progress in reducing its backlog of pending requests.


Noncommercial scientific institution means an institution that is not operated on a “commercial” basis, as that term is defined in this paragraph, and that is operated solely for the purpose of conducting scientific research the results of which are not intended to promote any particular product or industry. To be in this category, a requester must show that the request is authorized by and is made under the auspices of a qualifying institution and that the records are not sought for a commercial use but are sought to further scientific research.


Record means any information that would be an OSHRC record subject to the requirements of the FOIA when maintained by OSHRC in any format, including an electronic format, and any such OSHRC record that is maintained for OSHRC by an entity under Government contract, for the purposes of records management.


Representative of the news media, or news media requester is any person or entity that gathers information of potential interest to a segment of the public, uses its editorial skills to turn the raw materials into a distinct work, and distributes that work to an audience. For purposes of this definition, the term “news” means information that is about current events or that would be of current interest to the public. Examples of news media entities include television or radio stations broadcasting to the public at large and publishers of periodicals (but only in those instances where they can qualify as disseminators of “news”) who make their products available for purchase or subscription by, or free distribution to, the general public. These examples are not all-inclusive. Moreover, as methods of news delivery evolve (for example the adoption of the electronic dissemination of newspapers through telecommunications services), such alternative media shall be considered to be news-media entities. For “freelance” journalists to be regarded as working for a news organization, they must demonstrate a solid basis for expecting publication through that organization. A publication contract would be the clearest proof, but OSHRC shall also look to the past publication record of a requester in making this determination. To be in this category, a requester must not be seeking the requested records for a commercial use. However, a request for records supporting the news-dissemination function of the requester shall not be considered to be for a commercial use.


Review means the examination of a record located in response to a request in order to determine whether any portion of it is exempt from disclosure. It also includes processing any record for disclosure—for example, doing all that is necessary to redact it and prepare it for disclosure. Review costs are recoverable even if a record ultimately is not disclosed. Review time does not include time spent resolving general legal or policy issues regarding the application of exemptions.


Search means the process of looking for and retrieving records or information responsive to a request. It includes page-by-page or line-by-line identification of information within records and also includes reasonable efforts to locate and retrieve information from records maintained in electronic form or format. The FOIA Disclosure Officer shall ensure that searches are done in the most efficient and least expensive manner reasonably possible. For example, the FOIA Disclosure Officer shall not search line-by-line where duplicating an entire document would be quicker and less expensive.


Working day means a regular Federal working day. It does not include Saturdays, Sundays, or Federal legal public holidays.


[71 FR 56350, Sept. 27, 2006, as amended at 75 FR 41371, July 16, 2010; 81 FR 95037, Dec. 27, 2016]


§ 2201.5 Procedure for requesting records.

(a) General information. All requests for information must be made in writing to the FOIA Disclosure Officer and may be: Mailed or delivered; faxed; or emailed. Requests may also be made using the Commission’s online FOIA request form (which is a downloadable PDF file found at http://www.oshrc.gov/foia/foia_request_form.html) and the completed form can be submitted by mail, fax, or email. Contact information for the FOIA Disclosure Officer is described in § 2201.3(d). For mailed or delivered requests, the words “Freedom of Information Act Request” must be printed on the face of the request’s envelope or covering as well as the request itself.


(b) A requester who is making a request for records about himself or herself must comply with verification of identity requirements as required by 29 CFR 2400.4 in OSHRC’s Privacy Act regulations.


(c) Where a request for records pertains to another individual, a requester may receive greater access by submitting either a notarized authorization signed by that individual or a declaration made in compliance with the requirements set forth in 28 U.S.C. 1746 by that individual authorizing disclosure of the records to the requester, or by submitting proof that the individual is deceased (e.g., a copy of a death certificate or an obituary).


(d) Description of records sought. A request must describe the records sought in sufficient detail to enable the Commission to locate them with a reasonable amount of effort. To the extent possible, the request should include specific information to identify the requested records, such as the docket number(s) or case name(s). Before submitting a request, the requester may contact the FOIA Disclosure Officer, as described in § 2201.3(d), to discuss the records being sought and receive assistance in describing them. If a determination is made after receiving a request that it does not reasonably describe the records sought, the FOIA Disclosure Officer will contact the requester to explain what additional information is needed or why the request is otherwise insufficient. A requester attempting to reformulate or modify such a request is encouraged to discuss the request with the FOIA Disclosure Officer. If a request does not reasonably describe the records sought, the agency’s response may be delayed.


(e) Requests may specify the preferred form or format (including electronic formats) of the response. The FOIA Disclosure Officer shall honor a requester’s specified preference of form or format of disclosure if the record is readily reproducible with reasonable efforts in the requested form or format. When a requester does not specify the preferred form or format of the response, the FOIA Disclosure Officer shall respond in the form or format in which the record is most accessible to the Commission.


(f) The requester must provide contact information, such as a phone number, email address, and/or mailing address, to facilitate the agency’s communication with the requester.


(g) Date of receipt. A request that complies with paragraph (a) of this section is deemed received on the actual date it is received by the Commission. A request that does not comply with paragraph (a) of this section is deemed received when it is actually received by the FOIA Disclosure Officer. For requests that are expected to result in fees exceeding $250, the request shall not be deemed to have been received until the requester is advised of the anticipated costs and the Commission has received full payment or satisfactory assurance of full payment as provided under § 2201.8(f).


[81 FR 95037, Dec. 27, 2016, as amended at 85 FR 72565, Nov. 13, 2020]


§ 2201.6 Responses to requests.

(a) Responses within 20 working days. The FOIA Disclosure Officer will either grant or deny a request for records within 20 working days after receiving the request. The 20-day period shall not be tolled by the agency except in the following cases. In these cases, the agency’s receipt of the requester’s response to the agency’s request for information or clarification ends the tolling period.


(1) The agency may toll the 20-day period once while awaiting information that it has reasonably requested from the requester under this section. The agency may make more than one request to the requester for information not related to issues regarding fee assessment, but can only toll the 20-day period once; and


(2) The agency may toll the 20-day period as many times as are necessary to clarify any issues regarding fee assessment.


(b) Extensions of response time in unusual circumstances. In unusual circumstances, the Commission may extend the time limit prescribed in paragraph (a) of this section by not more than 10 working days. The FOIA Disclosure Officer shall notify the requester in writing of the extension, the reasons for the extension and the date on which a determination is expected. “Unusual circumstances” exists, but only to the extent reasonably necessary to the proper processing of the particular request, when there is a need to:


(1) Search for and collect the requested records from one of OSHRC’s regional offices or off-site storage facilities;


(2) Search for, collect, and appropriately examine a voluminous amount of separate and distinct records that are demanded in a single request; or


(3) Consult, with all practicable speed, with another agency having a substantial interest in the determination of the request.


(c) Additional extension. The FOIA Disclosure Officer shall notify the requester in writing when it appears that a request cannot be completed within the allowable time (20 working days plus a 10-working-day extension). In such instances, the requester will be provided an opportunity to limit the scope of the request so that it may be processed in the time limit, or to agree to a reasonable alternative time frame for processing. The FOIA Disclosure Officer or FOIA Public Liaison shall be available to assist the requester for this purpose and shall notify the requester of the right to seek dispute resolution services from the National Archives and Records Administration’s Office of Government Information Services (OGIS).


(d) Two-track processing. To ensure the most equitable treatment possible for all requesters, the Commission will process requests on a first-in, first-out basis using a two-track processing system based upon the estimated time it will take to process the request.


(1) The first track is for requests of simple to moderate complexity that are expected to be completed within 20 working days.


(2) The second track is for requests involving “unusual circumstances” that are expected to take between 21 to 30 working days to complete and those that, because of their unusual volume or other complexity, are expected to take more than 30 working days to complete.


(3) A requester should assume, unless otherwise notified by the Commission, that its request is in the first track of processing. The Commission will notify a requester when its request is placed in the second track for processing and that notification will include the estimated time for completion. Should subsequent information substantially change the estimated time to process a request, the requester will be notified in writing. In the case of a request expected to take more than 30 working days for action, a requester may modify the request to allow it to be processed faster or to reduce the cost of processing. Partial responses may be sent to a requester as documents are obtained by the FOIA Disclosure Officer from the supplying offices.


(e) Expedited processing. (1) The Commission may place a person’s request at the front of the queue for the appropriate track for that request upon receipt of a written request that clearly demonstrates a compelling need for expedited processing. Requesters must provide detailed explanations to support their expedited requests. For purposes of determining expedited processing, the term compelling need means:


(i) That a failure to obtain requested records on an expedited basis could reasonably be expected to pose an imminent threat to the life or physical safety of any individual; or


(ii) That a request is made by a person primarily engaged in disseminating information, and that person establishes that there is an urgency to inform the public concerning actual or alleged Federal Government activity.


(2) A person requesting expedited processing must include a statement certifying the compelling need given to be true and correct to the best of his or her knowledge and belief. The certification requirement may be waived by the Commission as a matter of agency discretion.


(3) The FOIA Disclosure Officer will make the initial determination whether to grant or deny a request for expedited processing and will notify a requester within 10 calendar days after receiving the request whether processing will be expedited.


(f) Content of denial. When the FOIA Disclosure Officer denies a request for records, either in whole or in part, a request for expedited processing, and/or a request for fee waivers (see § 2201.9), the written notice of the denial shall state the reason for denial, give a reasonable estimate of the volume of matter denied (unless doing so would harm an interest protected by the exemption(s) under which the request was denied), set forth the name and title or position of the person responsible for the denial of the request, notify the requester of the right to appeal the determination as specified in § 2201.10, and notify the requester of the assistance available from the FOIA Public Liaison and the dispute resolution services offered by OGIS. A refusal by the FOIA Disclosure Officer to process the request because the requester has not made advance payment or given a satisfactory assurance of full payment required under § 2201.8(f) may be treated as a denial of the request and appealed under § 2201.10.


(g) Deletions. The FOIA Disclosure Officer shall provide to the requester in writing a justification for deletions within records. The amount of information deleted from records shall be indicated on the released portion of the record, unless including that indication would harm an interest protected by the exemption under which the deletion is made. If technically feasible, the place in the record where the deletion is made, and the exemption under which the deletion is made, shall be marked.


(h) Tracking numbers. The FOIA Disclosure Officer shall assign an individualized tracking number to each request received for processing and provide the requester with the tracking number.


(i) Determining responsive records. In determining which records are responsive to a request, OSHRC ordinarily will include only records in its possession as of the date it begins its search for them. If any other date is used, OSHRC shall inform the requester of that date.


[71 FR 56350, Sept. 27, 2006, as amended at 75 FR 41372, July 16, 2010; 81 FR 95038, Dec. 27, 2016; 85 FR 72565, Nov. 13, 2020]


§ 2201.7 Confidential commercial information.

(a) Definitions. (1) Confidential commercial information means commercial or financial information obtained by OSHRC from a submitter that may be protected from disclosure under Exemption 4 of the FOIA, 5 U.S.C. 552(b)(4).


(2) Submitter means any person or entity, including a corporation, State, or foreign government, but not including another Federal Government entity, that provides confidential commercial information, either directly or indirectly to OSHRC.


(b) Designation of confidential commercial information. A submitter of confidential commercial information must use good faith efforts to designate by appropriate markings, at the time of submission, any portion of its submission that it considers to be protected from disclosure under Exemption 4. These designations expire 10 years after the date of the submission unless the submitter requests and provides justification for a longer designation period.


(c) When notice to submitters is required. OSHRC shall promptly provide written notice to the submitter of confidential commercial information whenever records containing such information are requested under the FOIA if OSHRC determines that it may be required to disclose the records, provided the submitter has complied with paragraph (b) of this section or OSHRC has a reason to believe that the requested information may be protected from disclosure under Exemption 4, but has not yet determined whether the information is protected from disclosure. The notice must either describe the commercial information requested or include a copy of the requested records or portions of records containing the information.


(d) Exceptions to submitter notice requirements. The notice requirements of this section do not apply if:


(1) OSHRC determines that the information is exempt under the FOIA, and therefore will not be disclosed;


(2) The information has been lawfully published or has been officially made available to the public;


(3) Disclosure of the information is required by a statute other than the FOIA or by a regulation issued in accordance with the requirements of Executive Order 12600 of June 23, 1987; or


(4) The designation made by the submitter under paragraph (b) of this section appears obviously frivolous. In such case, OSHRC shall give the submitter written notice of any final decision to disclose the information within a reasonable number of days prior to a specified disclosure date.


(e) Opportunity to object to disclosure. OSHRC shall specify a reasonable time period within which the submitter must provide a response to the notice referenced above. If a submitter has any objections to disclosure, it should provide a detailed written statement that specifies all grounds for withholding the particular information under any exemption of the FOIA. In order to rely on Exemption 4 as basis for nondisclosure, the submitter must explain why the information constitutes a trade secret or commercial or financial information that is confidential. A submitter who fails to respond within the time period specified in the notice will be considered to have no objection to disclosure of the information. OSHRC is not required to consider any information received after the date of any disclosure decision. Any information provided by a submitter under this subpart may itself be subject to disclosure under the FOIA.


(f) Analysis of objections. OSHRC shall consider a submitter’s objections and specific grounds for nondisclosure in deciding whether to disclose the requested information.


(g) Notice of decision. OSHRC shall provide the submitter with written notice once a decision is made as to whether or not to disclose information over the submitter’s objection. When a decision is made to disclose information over the submitter’s objection, this notice shall include a statement of the reasons why each of the submitter’s disclosure objections was not sustained, a description of the information to be disclosed or copies of the records as the agency intends to release them, and a specified disclosure date (which must be a reasonable time after the notice).


(h) Notice of FOIA lawsuit. OSHRC shall promptly notify the submitter when a requester files a lawsuit seeking to compel the disclosure of confidential commercial information.


(i) Requester notification. OSHRC shall notify the requester whenever it provides the submitter with notice and an opportunity to object to disclosure; whenever it notifies the submitter of its intent to disclose the requested information; and whenever a submitter files a lawsuit to prevent the disclosure of the information.


[81 FR 95038, Dec. 27, 2016]


§ 2201.8 Fees for copying, searching, and review.

(a) Fees required unless waived. The FOIA Disclosure Officer shall charge fees in accordance with the Uniform Freedom of Information Fee Schedule and Guidelines published by the Office of Management and Budget and in accordance with paragraph (b) of this section. See appendix A to this part. If the fees for a request are less than the threshold amount as provided in OSHRC’s fee schedule, no fees shall be charged. The FOIA Disclosure Officer shall, however, waive the fees in the circumstances stated in § 2201.9.


(b) Calculation of fees. Fees for copying, searching and reviewing will be based on the direct costs of these services, including the average hourly salary (base plus DC locality payment), plus 16 percent for benefits, of the following three categories of employees involved in responding to FOIA requests: Clerical—based on an average of all employees at GS-9 and below; professional—based on an average of all employees at GS-10 through GS-14; and managerial—based on an average of all employees at GS-15 and above. OSHRC will calculate a schedule of fees based on these direct costs. The schedule of fees under this section appears in appendix A to this part. A copy of the schedule of fees may also be obtained at no charge from the FOIA Disclosure Officer. See § 2201.3(d).


(1) Copying fee. The fee per copy of each page shall be calculated in accordance with the per-page amount established in OSHRC’s fee schedule. See appendix A to this part. For other forms of duplication, direct costs of producing the copy, including operator time, shall be calculated and assessed. Copying fees shall not be charged for the first 100 pages of copies unless the copies are requested for a commercial use. No copying fee shall be charged for educational, scientific, or news media requests if the agency fails to comply with any time limit in § 2201.6, provided that no unusual or exceptional circumstances (as those terms are defined in §§ 2201.6(b) and 2201.4(d), respectively) apply to the processing of the request.


(2) Search fee. Search fees shall be calculated in accordance with the amounts established in OSHRC’s fee schedule. See appendix A to this part. Commercial requesters shall be charged for all search time, except as described below. Search fees shall be charged even if the responsive documents are not located or if they are located but withheld on the basis of an exemption. However, search fees shall be limited or not charged as follows:


(i) Easily identifiable decisions. Search fees shall not be charged for searching for decisions that the requester identifies by name and date, or by docket number, or that are otherwise easily identifiable.


(ii) Educational, scientific or news media requests. No fee shall be charged if the request is not for a commercial use and is by an educational or scientific institution, whose purpose is scholarly or scientific research, or by a representative of the news media.


(iii) Other non-commercial requests. No fee shall be charged for the first two hours of searching if the request is not for a commercial use and is not by an educational or scientific institution, or a representative of the news media.


(iv) Requests for records about self. No fee shall be charged to search for records filed in the Commission’s systems of records if the requester is the subject of the requested records. See the Privacy Act of 1974, 5 U.S.C. 552a(f)(5) (fees to be charged only for copying).


(v) Failure to comply with time limits. No search fee shall be charged if the Commission fails to comply with any time limit in § 2201.6, provided that no unusual or exceptional circumstances (as those terms are defined in §§ 2201.6(b) and2201.4(d), respectively) apply to the processing of the request.


(3) Unusual circumstances. (i) If the Commission has determined that unusual circumstances, as defined in § 2201.6(b), apply and has provided timely written notice to the requester, a failure to comply with the time limit shall be excused for an additional 10 days and the Commission shall assess fees as usual.


(ii) If the Commission has determined that unusual circumstances, as defined in § 2201.6(b), apply and more than 5,000 pages are necessary to respond to the request, the Commission may charge search fees, or, in the case of requesters described in § 2201.8(b)(2)(ii), may charge duplication fees, if the Commission provided timely written notice of unusual circumstances to the requester in accordance with § 2201.6(b) and the Commission discussed with the requester via written mail, email, or telephone (or made not less than three good-faith attempts to do so) how the requester could effectively limit the scope of the request in accordance with the FOIA. If this exception is satisfied, the Commission may charge all applicable fees incurred in the processing of the request even if such processing extends beyond an additional 10 days.


(4) If a court has determined that exceptional circumstances exist, as defined in § 2201.4(d), a failure to comply with the time limits shall be excused for the length of time provided by the court order.


(5) Review fee. A review fee shall be charged only for commercial requests. Review fees shall be calculated in accordance with the amounts established in OSHRC’s schedule of fees. See appendix A to this part. A review fee shall be charged for the initial examination of documents located in response to a request to determine if it may be withheld from disclosure, and for the excision of withholdable portions. However, a review fee shall not be charged for review by the Chairman under § 2201.10 (Appeal of denials).


(c) Invoices. The FOIA Disclosure Officer shall provide the requester with an invoice containing an itemization of assessed fees.


(d) Aggregation of requests. When the FOIA Disclosure Officer reasonably believes that a requester, or a group of requesters acting in concert, is attempting to break a request into a series of requests for the purpose of evading the assessment of fees, the FOIA Disclosure Officer may aggregate any such requests and charge accordingly.


(e) Fees likely to exceed $25. If the total fee charges are likely to exceed $25, the FOIA Disclosure Officer shall notify the requester of the estimated amount of the charges, unless the requester has indicated a willingness to pay fees up to the estimated amount. The notification shall offer the requester an opportunity to confer with the FOIA Disclosure Officer to reformulate the request to meet the requester’s needs at a lower cost. In cases in which a requester has been notified that actual or estimated fees amount to more than $25, the time period for responding to the request shall be tolled in accordance with § 2201.6(a)(2) and further work shall not be done on it until the requester agrees to pay the actual or estimated total fee. Any such agreement shall be memorialized in writing.


(f) Advance payments. Advance payment of fees will generally not be required. If, however, charges are likely to exceed $250, the FOIA Disclosure Officer shall notify the requester of the likely cost and: if the requester has a history of prompt payment of FOIA charges, obtain satisfactory assurance of full payment; or if the requester has no history of payment, require an advance payment of an amount up to the full estimated charge. If the requester has previously failed to pay a fee within 30 days of the date of billing, the FOIA Disclosure Officer shall require the requester to pay the full amount owed plus any interest owed as provided in paragraph (h) of this section or demonstrate that he or she has, in fact, paid the fee, and to make an advance payment of the full amount of the estimated charges before the FOIA Disclosure Officer begins to process the new request or a pending request from that requester.


(g) Fees for services not required by the Freedom of Information Act. The Commission has discretion regarding its response to requests for services not required by the FOIA. For example, the FOIA does not require agencies to certify or authenticate responsive documents, nor does it require responsive documents to be sent by express mail. If these services are requested, the FOIA Disclosure Officer shall assess the direct costs of such services.


(h) Interest on unpaid bills. The Commission’s Office of the Executive Director shall begin assessing interest charges on unpaid bills starting on the thirty-first day after the date the bill was sent. Interest will accrue from the date of billing until the Commission receives full payment. Interest will be at the rate described in 31 U.S.C. 3717.


(i) Debt collection procedures. If bills are unpaid 60 days after the mailing of a written notice to the requester, the Commission’s Office of the Executive Director may resort to the debt collection procedures set out in the Debt Collection Act of 1982 (Pub. L. 97-365, 96 Stat. 1749), as amended, and its administrative procedures, including the use of consumer reporting agencies, collection agencies, and offset.


[71 FR 56350, Sept. 27, 2006, as amended at 75 FR 41372, July 16, 2010. Redesignated and amended at 81 FR 95038, 95039, Dec. 27, 2016; 85 FR 72565, Nov. 13, 2020]


§ 2201.9 Waiver of fees.

(a) General. The FOIA Disclosure Officer shall waive part or all of the fees assessed under § 2201.8(b) if two conditions are satisfied: Disclosure of the information is in the public interest because it is likely to contribute significantly to public understanding of the operations or activities of the government; and disclosure is not primarily in the commercial interest of the requester. Where the FOIA Disclosure Officer has reasonable cause to doubt the use to which a requester will put the records sought, or where that use is not clear from the request itself, the FOIA Disclosure Officer may seek clarification from the requester before assigning the request to a specific category for fee assessment purposes. The FOIA Disclosure Officer shall afford the requester the opportunity to show that the requester comes within these two conditions. The following factors may be considered in determining whether the two conditions are satisfied:


(1) Whether the subject of the requested records concerns the operations or activities of the government;


(2) Whether the disclosure is likely to contribute significantly to public understanding of government operations or activities;


(3) Whether the requester has a commercial interest that would be furthered by the requested disclosure; and, if so, whether the magnitude of the identified commercial interest of the requester is sufficiently large, in comparison with the public interest in disclosure, that disclosure is primarily in the commercial interest of the requester.


(b) Partial waiver of fees. If the two conditions stated in paragraph (a) of this section are met, the FOIA Disclosure Officer will ordinarily waive all fees. In exceptional cases, however, only a partial waiver may be granted if the request for records would impose an exceptional burden or require an exceptional expenditure of Commission resources, and the request for a waiver minimally satisfies the “public interest” requirement in paragraph (a) of this section.


[71 FR 56350, Sept. 27, 2006. Redesignated and amended at 81 FR 95038, 95039, Dec. 27, 2016]


§ 2201.10 Appeal of denials.

(a) Requirements for making an appeal. A denial of a request for records, either in whole or in part, a request for expedited processing, or a request for fee waivers, may be appealed in writing to the Chairman of the Commission. To be considered timely, the appeal must be postmarked, or in the case of electronic submissions, transmitted, within 90 calendar days of the date of the agency’s written notice of denial. The appeal should clearly identify the agency determination that is being appealed and the assigned FOIA tracking number. To facilitate handling, the requester should mark both the appeal and its envelope, or state in the subject line of an electronic transmission, “Freedom of Information Act Appeal.”


(b) Adjudication of appeals. The Chairman shall act on the appeal under 5 U.S.C. 552(a)(6)(A)(ii) within 20 working days after the receipt of the appeal. An appeal ordinarily will not be adjudicated if the request becomes a matter of FOIA litigation. On receipt of any appeal involving classified information, the Chairman shall take appropriate action to ensure compliance with applicable classification rules.


(c) Decisions on appeals. The Chairman shall provide the decision on an appeal in writing. If the Chairman wholly or partially upholds the denial of the request, the decision shall contain a statement that identifies the reasons for the affirmance, including any FOIA exemptions applied. The decision must include notification that the requester may obtain judicial review of the decision under 5 U.S.C. 552(a)(4)(B)-(G). The decision shall also inform the requester of the dispute resolution services offered by OGIS as a non-exclusive alternative to litigation. If the Chairman’s decision is remanded or modified on appeal to the court, the requester will be notified by the agency of that determination in writing. The Commission shall then further process the request in accordance with the appeal determination and shall respond directly to the requester.


(d) Engaging in dispute services provided by OGIS. Dispute resolution is a voluntary process. If the Commission agrees to participate in the dispute resolution services provided by OGIS, it will actively engage as a partner in the process in an attempt to resolve the dispute.


(e) When appeal is required. Before seeking review by a court of the Commission’s adverse determination, a requester generally must first submit a timely administrative appeal.


[81 FR 95039, Dec. 27, 2016]


§ 2201.11 Maintenance of statistics.

(a) The FOIA Disclosure Officer shall maintain records of:


(1) The number of determinations made by the agency not to comply with the requests for records made to the agency and the reasons for those determinations;


(2) The number of appeals made by persons, the results of those appeals, and the reason for the action upon each appeal that results in a denial of information;


(3) A complete list of all statutes that the agency used to authorize the withholding of information under 5 U.S.C. 552(b)(3), which exempts information that is specifically exempted from disclosure by other statutes and the number of occasions on which each statute was relied upon;


(4) A description of whether a court has upheld the decision of the agency to withhold information under each of those statutes cited, and a concise description of the scope of any information upheld;


(5) The number of requests for records pending before the agency as of September 30 of the preceding year, and the median and average number of days that these requests had been pending before the agency as of that date;


(6) The number of requests for records received by the agency and the number of requests the agency processed;


(7) The median number of days taken by the agency to process different types of requests, based on the date on which the requests were received by the agency;


(8) The average number of days for the agency to respond to a request beginning on the date on which the request was received by the agency, the median number of days for the agency to respond to such requests, and the range in number of days for the agency to respond to such requests;


(9) Based on the number of business days that have elapsed since each request was originally received by the agency—


(i) The number of requests for records to which the agency has responded with a determination within a period up to and including 20 days, and in 20-day increments up to and including 200 days;


(ii) The number of requests for records to which the agency has responded with a determination within a period greater than 200 days and less than 301 days;


(iii) The number of requests for records to which the agency has responded with a determination within a period greater than 300 days and less than 401 days; and


(iv) The number of requests for records to which the agency has responded with a determination within a period greater than 400 days;


(10) The average number of days for the agency to provide the granted information beginning on the date on which the request was originally filed, the median number of days for the agency to provide the granted information, and the range in number of days for the agency to provide the granted information;


(11) The median and average number of days for the agency to respond to administrative appeals based on the date on which the appeals originally were received by the agency, the highest number of business days taken by the agency to respond to an administrative appeal, and the lowest number of business days taken by the agency to respond to an administrative appeal;


(12) Data on the 10 active requests with the earliest filing dates pending at the agency, including the amount of time that has elapsed since each request was originally received by the agency;


(13) Data on the 10 active administrative appeals with the earliest filing dates pending before the agency as of September 30 of the preceding year, including the number of business days that have elapsed since the requests were originally received by the agency;


(14) The number of expedited review requests that are granted and denied, the average and median number of days for adjudicating expedited review requests, and the number adjudicated within the required 10 days;


(15) The number of fee waiver requests that are granted and denied, and the average and median number of days for adjudicating fee waiver determinations;


(16) The total amount of fees collected by the agency for processing requests;


(17) The number of full-time staff of the agency devoted to the processing of requests for records under this section; and


(18) The total amount expended by the agency for processing these requests.


(b) The FOIA Disclosure Officer shall annually, on or before February 1 of each year, prepare and submit to the Attorney General an annual report covering each of the categories of records to be maintained in accordance with paragraph (a) of this section, for the previous fiscal year. A copy of the report will be available for public inspection and copying at the OSHRC FOIA Reading Room, and a copy will be accessible on OSHRC’s Web site at http://www.oshrc.gov.


[71 FR 56350, Sept. 27, 2006, as amended at 75 FR 41373, July 16, 2010. Redesignated and amended at 81 FR 95038, 95040, Dec. 27, 2016]


§ 2201.12 Preservation of records.

OSHRC shall preserve all correspondence pertaining to FOIA requests, as well as copies of all requested records, until disposition or destruction is authorized pursuant to title 44 of the United States Code or the applicable General Records Schedule of the National Archives and Records Administration. OSHRC shall not dispose of or destroy records while they are the subject of a pending request, appeal or lawsuit under the FOIA.


[81 FR 95040, Dec. 27, 2016]


Appendix A to Part 2201—Schedule of Fees

Type of fee
Amount of fee
Threshold Amount (Amount below which fees will not be assessed)$10
Search and Review Hourly Fees:
Clerical (GS-9 and below)23
Professional (GS-10 through GS 14)46
Managerial (GS-15 and above)76
Duplication cost per page0.25
Computer printout copying fee0.40
Searches of computerized recordsActual cost to the Commission, but shall not exceed $300 per hour, including machine time and the cost of the operator and clerical personnel.
Certification Fee$35 per authenticating affidavit or declaration. (Note: Search and review charges may be assessed in accordance with the rates listed above.)

PART 2202 [RESERVED]

PART 2203—REGULATIONS IMPLEMENTING THE GOVERNMENT IN THE SUNSHINE ACT


Authority:29 U.S.C. 661(g); 5 U.S.C. 552b(d)(4); 5 U.S.C. 552b(g).


Source:50 FR 51679, Dec. 19, 1985, unless otherwise noted.

§ 2203.1 Purpose and scope.

This part applies to all meetings of the Occupational Safety and Health Review Commission. Its purpose is to implement the Government in the Sunshine Act, 5 U.S.C. 552b. The rules in this part are intended to open to public observation, to the extent practicable, the meetings of the Commission, while preserving the Commission’s ability to fulfill its adjudicatory responsibilities and protecting the rights of individuals.


§ 2203.2 Definitions.

For the purposes of this part:


Expedited closing procedure means the simplified procedures described at 5 U.S.C. 552b(d)(4) for announcing and closing certain agency meetings.


General Counsel means the General Counsel of the Commission, or any other person designated by the General Counsel to carry out his responsibilities under this part.


Meeting means the deliberations of at least two Commissioners, where such deliberations determine or result in the joint conduct or disposition of “official Commission business.” A conference telephone call among the Commissioners is a meeting if it otherwise qualifies as a meeting under this paragraph. The term does not include:


(a) The deliberations required or permitted under §§ 2203.4(d) and 2203.5, e.g., a discussion of whether to open or close a meeting under this part;


(b) Business that is conducted by circulating written materials sequentially among the Commissioners for their consideration on an individual basis;


(c) A gathering at which the Chairman of the Commission seeks the advice of the other Commissioners on the carrying out of a function that has been vested in the Chairman, by statute or otherwise; or


(d) Informal discussions of the Commissioners that clarify issues and expose varying views but do not effectively predetermine official actions.


Official Commission business means matters that are the responsibility of the Commission acting as a collegial body, including the adjudication of litigated cases. The term does not include matters that are the responsibility of the Commission’s Chairman. See, e.g., 29 U.S.C. 661(e).


Regularly-scheduled meetings means meetings of the Commission that are held at 10:30 a.m. on Thursday of each week, except on legal holidays. The term includes regularly-scheduled meetings that have been rescheduled for another time or day.


[50 FR 51679, Dec. 19, 1985, as amended at 73 FR 56492, Sept. 29, 2008; 74 FR 63988, Dec. 7, 2009]


§ 2203.3 Public attendance at Commission meetings.

(a) Policy. Commissioners will not jointly conduct or dispose of official Commission business in a meeting unless it is conducted in accordance with this part. Because the Commission was created for the purpose of adjudicating litigated cases, it can be expected that most of its meetings will be closed to the public. However, meetings that do not involve Commission adjudication or discussion of issues in cases before it will be open to the extent practicable. The public will not be allowed to participate in discussions during open meetings.


(b) Grounds for closing meetings. Except where the Commission finds that the public interest requires otherwise, all or part of a meeting may be closed to the public, and information about a meeting may be withheld from the public, where the Commission determines that the meeting, or part of the meeting, or information about the meeting, is likely to:


(1) Disclose matters that are:


(i) Specifically authorized under criteria established by an Executive order to be kept secret in the interests of national defense or foreign policy and


(ii) In fact properly classified pursuant to such Executive order;


(2) Relate solely to the internal personnel rules and practices of the Commission;


(3) Disclose matters specifically exempted from disclosure by statute (other than section 552 of title 5), provided that such statute


(i) Requires that the matter be withheld from the public in such a manner as to leave no discretion on the issue, or


(ii) Establishes particular criteria for withholding or refers to particular types of matters to be withheld;


(4) Disclose trade secrets and commercial or financial information obtained from a person that are privileged or confidential;


(5) Involve accusing any person of a crime, or formally censuring any person;


(6) Disclose information of a personal nature where disclosure would constitute a clearly unwarranted invasion of personal privacy;


(7) Disclose investigatory records compiled for law enforcement purposes, or information which if written would be contained in such records, but only to the extent that the production of such records or information would:


(i) Interfere with enforcement proceedings,


(ii) Deprive a person of a right to a fair trial or an impartial adjudication,


(iii) Constitute an unwarranted invasion of personal privacy,


(iv) Disclose the identity of a confidential source and, in the case of a record compiled by a criminal law enforcement authority in the course of a criminal investigation, or by an agency conducting a lawful national security intelligence investigation, confidential information furnished only by the confidential source,


(v) Disclose investigative techniques and procedures, or


(vi) Endanger the life or physical safety of law enforcement personnel;


(8) Disclose information contained in or related to examination, operating, or condition reports prepared by, on behalf of, or for the use of an agency responsible for the regulation or supervision of financial institutions;


(9) Disclose information the premature disclosure of which would:


(i) Be likely to (A) lead to significant financial speculation in currencies, securities, or commodities, or (B) significantly endanger the stability of any financial institution, or


(ii) Be likely to significantly frustrate implementation of a proposed Commission action, except where the Commission has already disclosed to the public the content or nature of its proposed action, or where the Commission is required by law to make such disclosure on its own initiative prior to taking final agency action on such proposal; or


(10) Specifically concern the Commission’s issuance of a subpoena or the Commission’s participation in a civil action or proceeding, an action in a foreign court or international tribunal, or an arbitration, or the initiation, conduct, discussion or disposition by the Commission of a particular case of formal Commission adjudication.


(c) Regularly-scheduled meetings. The Commission will hold regularly-scheduled meetings for the purpose of considering matters that may properly be closed to the public under paragraph (b)(4), (8), (9)(i) or (10) of this section, or any combination thereof. Primarily, these meetings will be held for the purpose of considering or disposing of particular cases of formal Commission adjudication. The Commission therefore expects to close all regularly-scheduled meetings. The procedures established in § 2203.4 apply to the public announcement and closing of regularly-scheduled meetings.


(d) Other Commission meetings. All other meetings of the Commission will be open to public observation unless the Commission determines that all or part of a meeting is likely to disclose information of the kind set forth in any subparagraph of paragraph (b) of this section. The procedures established in § 2203.5 apply to the public announcement of Commission meetings that are not regularly scheduled and to the total or partial closing of these meetings.


[50 FR 51679, Dec. 19, 1985, as amended at 62 FR 35963, July 3, 1997; 74 FR 63988, Dec. 7, 2009]


§ 2203.4 Procedures applicable to regularly-scheduled meetings.

(a) Statutory authority to adopt expedited closing procedure. The Government in the Sunshine Act provides, at 5 U.S.C. 552b(d)(4), that qualified agencies may establish by regulation expedited procedures for announcing and closing certain meetings. Specifically, “[a]ny agency, a majority of whose meetings may properly be closed to the public pursuant to paragraph (4), (8), (9)(A), or (10) of subsection (c) [of the statute], or any combination thereof, may provide by regulation for the closing of such meetings or portions thereof [through the expedited closing procedure].” See § 2203.3(b)(4), (8), (9)(i) and (10), which are equivalent to the referenced paragraphs of the statute. The Commission had determined, for the reasons stated in paragraph (b) of this section, that it is qualified to adopt implementing regulations under 5 U.S.C. 552b(d)(4). It hereby announces that it will follow the expedited closing procedure authorized under that statutory provision in conducting its regularly-scheduled meetings.


(b) Commission qualification to adopt expedited closing procedure. The Commission has determined that a majority of its meetings may be closed to the public under 5 U.S.C. 552b(c)(10). See § 2203.3(b)(10). The Commission is an adjudicatory agency that has no regulatory functions. It was established to resolve disputes arising out of enforcement actions brought by the Secretary of Labor under the Occupational Safety and Health Act of 1970, 29 U.S.C. 651-678. See 29 U.S.C. 659(c). The Commission’s experience under the Government in the Sunshine Act has been that almost all of its meetings have been closed, in whole or in part, under 5 U.S.C. 552b(c)(10) because they involved only formal agency adjudication of specific cases.


(c) Announcements. Regularly-scheduled meetings of the Commission will be held at 10:30 a.m. every Thursday, except for legal holidays, in the Hearing Room (Suite 965) of the Commission’s national office at One Lafayette Centre, 1120-20th Street NW., Washington, DC 20036-3457. If a regularly-scheduled meeting is scheduled, public announcement of the time, date and place of the meeting will be made at the earliest practicable time by posting a notice in a prominent place at the Commission’s national office. If a regularly-scheduled meeting is cancelled, a notice of cancellation will be posted in the same manner. Information about the subject of each regularly-scheduled meeting will be made available in the Office of the General Counsel, telephone number (202) 606-5410, at the earliest practicable time. However, no information that may be withheld under § 2203.3(b) will be made available, and individual items may be added to or deleted from the agenda at any time. Inquiries from the public regarding any regularly-scheduled meeting will be directed to the Office of the General Counsel.


(d) Voting. At the beginning of each regularly-scheduled meeting, the Commission will vote on whether to close the meeting. No proxy vote will be permitted and the vote of each Commissioner will be recorded. This record of each Commissioner’s vote will be made available to the public at the Commission’s national office immediately after the meeting.


[50 FR 51679, Dec. 19, 1985, as amended at 58 FR 26066, Apr. 30, 1993; 73 FR 56492, Sept. 29, 2008]


§ 2203.5 Procedures applicable to other meetings.

(a) Announcements—(1) Meetings announced. Public announcement will be made of every meeting that is not a regularly-scheduled meeting. This announcement will state the time, place, and subject of the meeting, whether it is to be open or closed, and the name and phone number of the person designated to respond to requests for information about the meeting. The announcement will be made at least one week before the meeting unless at least two Commissioners determine by a recorded vote that Commission business requires that such meeting be called at an earlier date. In that case, the Commission will make its public announcement at the earliest practicable time.


(2) Changes announced. The time or place of a meeting may be changed following the public announcement required by paragraph (a)(1) of this section, but only if public announcement of the change is made at the earliest practicable time. The subject of a meeting, or the determination by the Commission to open or close all or part of a meeting, may also be changed following the public announcement required by paragraph (a)(1) of this section; however, these changes may be made only if:


(i) At least two Commissioners determine by recorded vote that Commission business so requires and that no earlier announcement of the change was possible and


(ii) Public announcement of the change and the vote of each Commissioner on the change is made at the earliest practicable time.


(3) Form of announcements. The announcements required under paragraph (a) of this section will be made by posting a notice in a prominent place at the Commission’s national office. In addition, immediately following each announcement required by paragraph (a) of this section, notice of the same matters described in the posted notice will also be submitted for publication in the Federal Register.


(b) Voting—(1) Requirement that vote be taken. Action to close all or part of a meeting that is not regularly scheduled or to withhold information about a meeting that is not regularly scheduled, under any paragraph of § 2203.3(b), will be taken only when at least two Commissioners vote to take the proposed action.


(2) Separate votes required. A separate vote of the Commissioners will be taken with respect to each Commission meeting or each part of a meeting that is proposed to be closed under paragraph (b) of this section or with respect to any information that is proposed to be withheld under paragraph (b) of this section.


(3) Single vote on a series of meetings. A single vote may be taken with respect to closing all or part of a series of meetings under paragraph (b) of this section, or with respect to any information concerning a series of meetings, so long as each meeting in the series involves the same particular matters and is scheduled to be held no more than 30 days after the initial meeting in the series.


(4) Public requests to close meetings. Any person whose interest may be directly affected by a portion of an open meeting may request that the Commission close that portion to the public for any of the reasons referred to in paragraph (b)(5), (6) or (7) of § 2203.3. Upon the motion of any Commissioner, the Commission will vote by recorded vote whether to grant the request.


(5) Proxy votes; recording of votes. No proxy vote will be permitted for any vote required under paragraph (b) of this section. The vote of each participating Commissioner will be recorded.


(6) Public announcement of votes. Within one day after any vote taken under paragraph (b) of this section, the vote of each Commissioner on the question will be made publicly available at the Commission’s national office. If any part of a meeting is to be closed under paragraph (b) of this section, a full written explanation of the Commission’s action, together with a list of all persons expected to attend the meeting and their affiliation, will be made publicly available at the Commission’s national office within one day after the vote to close.


§ 2203.6 Certification by the General Counsel.

For every meeting closed under any provision of these rules, the General Counsel will be asked to certify before the meeting that in his opinion the meeting may properly be closed to the public, and to state which exemptions he has relied upon. A copy of this certification, together with a statement (from the Commissioner presiding over the meeting) setting forth the time and place of the meeting and the persons present, shall be retained by the Commission as part of the transcript, recording or minutes of the meeting described in § 2203.7.


§ 2203.7 Transcripts, recordings and minutes of closed meetings.

(a) Record of meeting. The Commission will make a complete transcript or electronic recording adequate to record fully the proceedings of each meeting, or portion of a meeting, closed to the public. However, if all or part of a meeting is closed under paragraph (b)(8), (9)(i) or (10) of § 2203.3, the Commission shall maintain either such a transcript or recording, or a set of minutes. Such minutes will fully and clearly describe all matters discussed and will provide a full and accurate summary of any actions taken, and the reasons for the actions. The minutes will also include a description of each of the views expressed on any item and a record of any roll call vote (reflecting the vote of each Commissioner on the question). In addition, the minutes will identify all documents considered in connection with any action.


(b) Public access to records. The Commission will make promptly available to the public, at its national office, the transcript, electronic recording, or minutes of the discussion of any item on the agenda, or of any testimony of any witness received at the meeting, except for such item or items of such discussion or testimony as the Commission determines to contain information which may be withheld under § 2203.3(b). Copies of the transcript, the minutes, or a transcription of the recording disclosing the identity of each speaker, with the deletions noted in the preceding sentence, will be furnished to any person at the actual cost of duplication or transcription. Requests to inspect or to have copies made of any transcript, electronic recording or set of minutes of any meeting, or any item(s) on the agenda of any meeting, should be made in writing to the General Counsel at the Office of the General Counsel, Occupational Safety and Health Review Commission, Room 941, One Lafayette Centre, 1120-20th Street NW., Washington, DC 20036-3457. The request should identify the time, date, and place of the meeting and briefly describe the items sought. The Commission will maintain a complete verbatim copy of the transcript, a complete copy of the minutes, or a complete electronic recording of each closed meeting, or closed portion of a meeting, for a period of at least two years after the meeting, or until one year after the conclusion of any Commission proceeding with respect to which all or part of the meeting was held, whichever occurs later.


[50 FR 51679, Dec. 19, 1985, as amended at 58 FR 26066, Apr. 30, 1993; 73 FR 56492, Sept. 29, 2008]


PART 2204—IMPLEMENTATION OF THE EQUAL ACCESS TO JUSTICE ACT IN PROCEEDINGS BEFORE THE OCCUPATIONAL SAFETY AND HEALTH REVIEW COMMISSION


Authority:5 U.S.C. 504.


Source:86 FR 26659, May 17, 2021, unless otherwise noted.

Subpart A—General Provisions

§ 2204.101 Scope of this part.

The Equal Access to Justice Act, 5 U.S.C. 504 (called “EAJA” in this part), provides for the award of attorney or agent fees and other expenses to eligible individuals and entities who are parties to certain administrative proceedings (called “adversary adjudications”) before the Occupational Safety and Health Review Commission. An eligible party may receive an award when it prevails over the Secretary of Labor, unless the Secretary’s position in the proceeding was substantially justified or special circumstances make an award unjust. Alternatively, an eligible party, even if not a prevailing party, may receive an award under 5 U.S.C. 504(a)(4) when it successfully defends against an excessive demand made by the Secretary.


Subpart B—Definitions

§ 2204.201 Definitions.

For the purposes of this part:


Adversary adjudication means an adjudication under 5 U.S.C. 554 and 29 U.S.C. 659(c) in which the position of the Secretary is represented by counsel or otherwise, subject to certain exclusions set forth in 5 U.S.C. 504(b)(1)(C).


Agent means any person other than an attorney who represents a party in a proceeding before the Commission pursuant to § 2200.22 of this chapter.


Commission means the Occupational Safety and Health Review Commission.


Demand means the express demand of the Secretary which led to the adversary adjudication, but does not include a recitation by the Secretary of the maximum statutory penalty:


(1) In the administrative complaint; or


(2) Elsewhere when accompanied by an express demand for a lesser amount.


Excessive demand means a demand by the Secretary, in an adversary adjudication arising from the Secretary’s action to enforce a party’s compliance with a statutory requirement that is substantially in excess of the decision of the judge or Commission and is unreasonable when compared with such decision, under the facts and circumstances of the case.


Final disposition means the date on which a decision or order disposing of the merits of the adversary adjudication or any other complete resolution of the adversary adjudication, such as a settlement or voluntary dismissal, become final and unappealable, both within the agency and to the courts.


Judge means the Administrative Law Judge appointed under 29 U.S.C. 661(j) who presided over the adversary adjudication or presides over an EAJA proceeding.


Party means a party, as defined in 5 U.S.C. 551(3), who is:


(1) An individual whose net worth did not exceed $2,000,000 at the time the adversary adjudication was initiated; or


(2) Any owner of an unincorporated business, or any partnership, corporation, association, unit of local government, or organization, the net worth of which did not exceed $7,000,000 at the time the adversary adjudication was initiated, and which had not more than 500 employees at the time the adversary adjudication was initiated; except that an organization described in section 501(c)(3) of the Internal Revenue Code of 1986 exempt from taxation under section 501(a) of such Code, or a cooperative association as defined in section 15(a) of the Agricultural Marketing Act, may be a party regardless of the net worth of such organization or cooperative association. For purposes of 5 U.S.C. 504(a)(4), “party” also includes a small entity as defined in 5 U.S.C. 601.


Position of the Secretary means, in addition to the position taken by the Secretary in the adversary adjudication, the action or failure to act by the Secretary upon which the adversary adjudication is based, except that fees and other expenses may not be awarded to a party for any portion of the adversary adjudication in which the party has unreasonably protracted the proceedings.


Secretary means the Secretary of Labor.


Subpart C—EAJA Application

§ 2204.301 Application requirements.

(a) A party seeking an award under EAJA shall file an application with the judge that conducted the adversarial adjudication within 30 days after the final disposition of the adversary adjudication.


(b) The application shall identify the applicant and the proceeding for which an award is sought. The application shall show that the applicant has prevailed and identify the position of the Secretary that the applicant alleges was not substantially justified; or, if the applicant has not prevailed, shall show that the Secretary’s demand was substantially in excess of the decision of the judge or Commission and was unreasonable when compared with that decision under the facts and circumstances of that case. The application shall also identify the Secretary’s position(s) in the proceeding that the applicant alleges was (were) not substantially justified or the Secretary’s demand that is alleged to be excessive and unreasonable. Unless the applicant is an individual, the application shall also state the number of employees of the applicant and briefly describe the type and purpose of its organization or business.


(c) The application shall also show that the applicant meets the definition of “party” in § 2204.201, including adequate documentation of its net worth, as set forth in § 2204.302.


(d) The application shall state the amount of fees and expenses for which an award is sought, subject to the requirements and limitations as set forth in 5 U.S.C. 504(b)(1)(A), with adequate documentation as set forth in § 2204.303.


(e) The application shall be signed by the applicant or an authorized officer, attorney, or agent of the applicant. It shall also contain or be accompanied by a written verification under penalty of perjury that the information provided in the application is true and correct.


§ 2204.302 Net worth exhibit.

(a) Each applicant except a qualified tax-exempt organization, cooperative association, or, in the case of an application for an award related to an allegedly excessive demand by the Secretary, a small entity as that term is defined by 5 U.S.C. 601(6), shall provide with its application a detailed exhibit showing the net worth of the applicant as required by § 2204.301(c) when the proceeding was initiated. The exhibit may be in any form convenient to the applicant that provides full disclosure of the applicant’s assets and liabilities and is sufficient to determine whether the applicant qualifies as a party as defined in § 2204.201. The judge or Commission may require an applicant to file additional information to determine its eligibility for an award.


(b) Ordinarily, the net worth exhibit will be included in the public record of the proceeding. However, an applicant that objects to public disclosure of information in any portion of the exhibit and believes there are legal grounds for withholding it from disclosure may request that the documents be filed under seal or otherwise be treated as confidential, pursuant to §§ 2200.8 and 2200.52 of this chapter.


[86 FR 26659, May 17, 2021, as amended at 86 FR 31166, June 11, 2021]


§ 2204.303 Documentation of fees and expenses.

The application shall be accompanied by adequate documentation of the fees and other expenses incurred after the initiation of the adversary adjudication, including, but not limited to, the reasonable cost of any study, analysis, engineering report, test, or project. An application seeking an increase in fees to account for inflation pursuant to § 2200.406 of this chapter shall also include adequate documentation of the change in the consumer price index for the attorney or agent’s locality. With respect to a claim for fees and expenses involving an excessive demand by the Secretary, the application shall be accompanied by adequate documentation of such fees and expenses incurred after initiation of the adversary adjudication for which an award is sought attributable to the portion of the demand alleged to be excessive and unreasonable. A separate itemized statement shall be submitted for each professional firm or individual whose services are covered by the application, showing the hours spent in connection with the proceeding by each individual, a description of the specific services performed, the rate at which each fee has been computed, any expenses for which reimbursement is sought, the total amount claimed, and the total amount paid or payable by the applicant or by any other person or entity for the services provided. The judge or Commission may require the applicant to provide vouchers, receipts, or other substantiation for any fees or expenses claimed.


Subpart D—Procedures for Considering Applications

§ 2204.401 Filing and service of documents.

Any application for an award, or any accompanying documentation related to an application shall be filed and served on all parties to the proceeding in accordance with §§ 2200.7 and 2200.8 of this chapter, except as provided in § 2204.302(b) for confidential financial information.


§ 2204.402 Answer to application.

(a) Within 30 days after service of an application, the Secretary shall file an answer to the application. Unless the Secretary requests an extension of time for filing or files a statement of intent to negotiate under paragraph (b) of this section, failure to file an answer within the 30-day period may be treated as a consent to the award requested.


(b) If the Secretary and the applicant believe that the issues in the fee application can be settled, they may jointly file a statement of their intent to negotiate a settlement. The filing of this statement shall extend the time for filing an answer for an additional 30 days, and further extensions may be granted by the judge upon request.


(c) The answer shall explain in detail any objections to the award requested and identify the facts relied on in support of the Secretary’s position. If the answer is based on any alleged facts not already in the record of the proceeding, the Secretary shall include with the answer either supporting affidavits or a request for further proceedings under § 2204.405.


§ 2204.403 Reply.

Within 15 days after service of an answer, the applicant may file a reply. If the reply is based on any alleged facts not already in the record of the proceeding, the applicant shall include with the reply either supporting affidavits or a request for further proceedings under § 2204.405.


§ 2204.404 Settlement.

The applicant and the Secretary may agree on a proposed settlement of the award before final action on the application, either in connection with a settlement of the underlying adversary adjudication, or after the adversary adjudication has been concluded, in accordance with the Commission’s standard settlement procedures as set forth in § 2200.120 of this chapter. If a prevailing party and the Secretary agree on a proposed settlement of an award before an application has been filed, the application shall be filed with the proposed settlement. If a proposed settlement of an underlying proceeding provides that each side shall bear its own expenses and the settlement is accepted, no application may be filed.


§ 2204.405 Further proceedings.

(a) Ordinarily, the determination of an award will be made on the basis of the written record. However, on request of either the applicant or the Secretary, or on his or her own initiative, the judge presiding over an EAJA proceeding may, if necessary for a full and fair decision on the application, order the filing of additional written submissions; hold oral argument; or allow for discovery or hold an evidentiary hearing, but only as to issues other than whether the agency’s position was substantially justified (such as those involving the applicant’s eligibility or substantiation of fees and expenses). Any written submissions shall be made, oral argument held, discovery conducted, and evidentiary hearing held as promptly as possible so as not to delay a decision on the application for fees. Whether or not the position of the Secretary was substantially justified shall be determined on the basis of the administrative record, as a whole, which is made in the adversary adjudication for which fees and other expenses are sought.


(b) A request for further proceedings under this section shall specifically identify the information sought or the disputed issues and shall explain why the additional proceedings are necessary to resolve the issues.


§ 2204.406 Decision.

The preparation and issuance of decision on the fee application shall be in accordance with § 2200.90 of this chapter.


(a) For an application involving a prevailing party. The decision shall include written findings and conclusions on the applicant’s eligibility and status as a prevailing party and an explanation of the reasons for any difference between the amount requested and the amount awarded. The decision shall also include, if applicable, findings on whether the Secretary’s position was substantially justified, whether the applicant unduly protracted the proceedings, or whether special circumstances make an award unjust.


(b) For an application involving an allegedly excessive agency demand. The decision shall include written findings and conclusions on the applicant’s eligibility and an explanation of the reasons why the agency’s demand was or was not determined to be substantially in excess of the underlying decision in the matter and whether the Secretary’s demand was or was not unreasonable. That determination shall be based upon all the facts and circumstances of the case.


(c) Awards. The judge presiding over an EAJA proceeding or the Commission on review may reduce the amount to be awarded, or deny any award, to the extent that the party during the course of the proceedings engaged in conduct which unduly and unreasonably protracted the final resolution of the matter in controversy.


(1) Awards shall be based on rates customarily charged by persons engaged in the business of acting as attorneys, agents and expert witnesses, even if the services were made available without charge or at a reduced rate to the applicant.


(2) An award for the fee of an attorney or agent under this paragraph (c) shall not exceed the hourly rate specified in 5 U.S.C. 504(b)(1)(A), except to account for inflation since the last update of the statute’s maximum award upon the request of the applicant as documented in the application pursuant to § 2204.303. An award to compensate an expert witness shall not exceed the highest rate at which the Secretary pays expert witnesses. However, an award may include the reasonable expenses of the attorney, agent or witness as a separate item, if the attorney, agent or witness ordinarily charges clients separately for such expenses.


(3) In determining the reasonableness of the fee sought for an attorney, agent, or expert witness, the following shall be considered:


(i) If the attorney, agent, or witness is in private practice, his or her customary fee for similar services, or, if an employee of the applicant, the fully allocated cost of the services;


(ii) The prevailing rate for similar services in the community in which the attorney, agent, or witness ordinarily perform services;


(iii) The time actually spent in the representation of the applicant;


(iv) The time reasonably spent in light of the difficulty or complexity of the issues in the proceeding; and


(v) Such other factors as may bear on the value of the services provided.


(4) The reasonable cost of any study, analysis, engineering report, test, project, or similar matter prepared on behalf of the party may be awarded, to the extent that the charge for the service does not exceed the prevailing rate for similar services, and the study or other matter was necessary for preparation of the applicant’s case.


§ 2204.407 Commission review.

Either the applicant or the Secretary may seek review of the judge’s decision on the fee application, and the Commission may grant such a petition for review or direct review of the decision on the Commission’s own initiative. Review by the Commission shall be in accordance with §§ 2200.91 and 2200.92 of this chapter.


§ 2204.408 Judicial review.

Judicial review of final decisions on awards may be sought as provided in 5 U.S.C. 504(c)(2).


§ 2204.409 Stay of decision concerning award.

Any proceedings on an application for fees under this part shall be automatically stayed until the adversary adjudication has become a final disposition.


§ 2204.410 Waiver.

After reasonable notice to the parties, the judge or the Commission may waive, for good cause shown, any provision contained in this part as long as the waiver is consistent with the terms and purpose of the EAJA.


§ 2204.411 Payment of award.

An applicant seeking payment of an award shall submit to the officer designated by the Secretary a copy of the Commission’s final decision granting the award, accompanied by a certification that the applicant will not seek review of the decision in the United States courts.


PART 2205—ENFORCEMENT OF NONDISCRIMINATION ON THE BASIS OF DISABILITY IN PROGRAMS OR ACTIVITIES CONDUCTED BY THE OCCUPATIONAL SAFETY AND HEALTH REVIEW COMMISSION AND IN ACCESSIBILITY OF COMMISSION ELECTRONIC AND INFORMATION TECHNOLOGY


Authority:29 U.S.C. 794; 29 U.S.C. 794d.


Source:76 FR 39285, July 6, 2011, unless otherwise noted.

§ 2205.101 Purpose.

This part effectuates section 119 of the Rehabilitation, Comprehensive Services, and Developmental Disabilities Amendments of 1978, which amended section 504 of the Rehabilitation Act of 1973 to prohibit discrimination on the basis of disability in programs or activities conducted by Executive agencies or the United States Postal Service. This part also effectuates section 508 of the Rehabilitation Act of 1973, as amended, with respect to the accessibility of electronic and information technology developed, procured, maintained, or used by the agency.


§ 2205.102 Application.

This part applies to all programs or activities conducted by the agency and to its development, procurement, maintenance, and use of electronic and information technology.


§ 2205.103 Definitions.

For purposes of this part, the term—


Assistant Attorney General means the Assistant Attorney General, Civil Rights Division, United States Department of Justice.


Auxiliary aids means services or devices that enable persons with impaired sensory, manual, or speaking skills to have an equal opportunity to participate in, and enjoy the benefits of, programs or activities conducted by the agency. For example, auxiliary aids useful for persons with impaired vision include readers, brailled materials, audio recordings, telecommunications devices and other similar services and devices. Auxiliary aids useful for persons with impaired hearing include telephone handset amplifiers, telephones compatible with hearing aids, telecommunication devices for deaf persons (TDD’s), interpreters, notetakers, written materials, and other similar services and devices.


Complete complaint means a written statement that contains the complainant’s name and address and describes the agency’s alleged discriminatory action in sufficient detail to inform the agency of the nature and date of the alleged violation of section 504 or section 508. It shall be signed by the complainant or by someone authorized to do so on his or her behalf. Complaints filed on behalf of classes or third parties shall describe or identify (by name, if possible) the alleged victims of discrimination.


Electronic and Information technology includes information technology and any equipment or interconnected system or subsystem of equipment that is used in the creation, conversion, or duplication of data or information. The term electronic and information technology includes, but is not limited to, telecommunications products (such as telephones), information kiosks and transaction machines, World Wide Web sites, multimedia, and office equipment such as copiers and fax machines. The term does not include any equipment that contains embedded information technology that is used as an integral part of the product, but the principal function of which is not the acquisition, storage, manipulation, management, movement, control, display, switching, interchange, transmission, or reception of data or information. For example, HVAC (heating, ventilation, and air conditioning) equipment such as thermostats or temperature control devices, and medical equipment where information technology is integral to its operation are not information technology.


Facility means all or any portion of buildings, structures, equipment, roads, walks, parking lots, rolling stock or other conveyances, or other real or personal property.


Historic preservation programs means programs conducted by the agency that have preservation of historic properties as a primary purpose.


Historic properties means those properties that are listed or eligible for listing in the National Register of Historic Places or properties designated as historic under a statute of the appropriate State or local government body.


Individual with a disability means any person who has a physical or mental impairment that substantially limits one or more major life activities, has a record of such an impairment, or is regarded as having such an impairment. As used in this definition, the phrase:


(1) Physical or mental impairment includes—


(i) Any physiological disorder or condition, cosmetic disfigurement, or anatomical loss affecting one or more of the following body systems: Neurological; musculoskeletal; special sense organs; respiratory, including speech organs; cardiovascular; reproductive; digestive; genitourinary; hemic and lymphatic; skin; and endocrine; or


(ii) Any mental or psychological disorder, such as mental retardation, organic brain syndrome, emotional or mental illness, and specific learning disabilities. The term physical or mental impairment includes, but is not limited to, such diseases and conditions as orthopedic, visual, speech, and hearing impairments, cerebral palsy, epilepsy, muscular dystrophy, multiple sclerosis, cancer, heart disease, diabetes, mental retardation, emotional illness, and drug addiction and alcoholism.


(2) Major life activities includes functions such as caring for one’s self, performing manual tasks, walking, seeing, hearing, speaking, breathing, learning, and working.


(3) Has a record of such an impairment means has a history of, or has been misclassified as having, a mental or physical impairment that substantially limits one or more major life activities.


(4) Is regarded as having an impairment means—


(i) Has a physical or mental impairment that does not substantially limit major life activities but is treated by the agency as constituting such a limitation;


(ii) Has a physical or mental impairment that substantially limits major life activities only as a result of the attitudes of others toward such impairment; or


(iii) Has none of the impairments defined in subparagraph (1) of this definition but is treated by the agency as having such an impairment.


Information technology means any equipment or interconnected system or subsystem of equipment that is used in the automatic acquisition, storage, manipulation, management, movement, control, display, switching, interchange, transmission, or reception of data or information. The term information technology includes computers, ancillary equipment, software, firmware and similar procedures, services (including support services), and related resources.


Qualified individual with a disability means—


(1) With respect to any agency program or activity under which a person is required to perform services or to achieve a level of accomplishment, an individual with a disability who meets the essential eligibility requirements and who can achieve the purpose of the program or activity without modifications in the program or activity that the agency can demonstrate would result in a fundamental alteration in its nature;


(2) With respect to any other program or activity, an individual with a disability who meets the essential eligibility requirements for participation in, or receipt of benefits from, that program or activity; and


(3) Qualified individual with a disability is defined for purposes of employment in 29 CFR 1630.2(m), which is made applicable to this part by § 2205.140.


Section 504 means section 504 of the Rehabilitation Act of 1973 (Pub. L. 93-112, 87 Stat. 394 (29 U.S.C. 794)), as amended by the Rehabilitation Act Amendments of 1974 (Pub. L. 93-516, 88 Stat. 1617); the Rehabilitation, Comprehensive Services, and Developmental Disabilities Amendments of 1978 (Pub. L. 95-602, 92 Stat. 2955); and the Rehabilitation Act Amendments of 1986 (Pub. L. 99-506, 100 Stat. 1810). As used in this part, section 504 applies only to programs or activities conducted by Executive agencies and not to federally assisted programs.


Section 508 means section 508 of the Rehabilitation Act of 1973, Pub. L. 93-112, Title V, section 508, as added by Pub. L. 99-506, Title VI, section 603(a), Oct. 21, 1986, 100 Stat. 1830, and amended Pub. L. 100-630, Title II, section 206(f), Nov. 7, 1988, 102 Stat. 3312; Pub. L. 102-569, Title V, section 509(a), Oct. 29, 1992, 106 Stat. 4430; Pub. L. 105-220, Title IV, section 408(b), Aug. 7, 1998, 112 Stat. 1203.


Substantial impairment means a significant loss of the integrity of finished materials, design quality, or special character resulting from a permanent alteration.


§§ 2205.104-2205.110 [Reserved]

§ 2205.111 Notice.

The agency shall make available to employees, applicants, participants, beneficiaries, and other interested persons such information regarding the provisions of this part and its applicability to the programs or activities conducted by the agency, and make such information available to them in such manner as the Chairman finds necessary to apprise such persons of the protections against discrimination assured them by section 504 or the access to technology provided under section 508 and this regulation.


§§ 2205.112-2205.129 [Reserved]

§ 2205.130 General prohibitions against discrimination.

(a) No qualified individual with a disability shall, on the basis of disability, be excluded from participation in, be denied the benefits of, or otherwise be subjected to discrimination under any program or activity conducted by the agency.


(b)(1) The agency, in providing any aid, benefit, or service, may not, directly or through contractual, licensing, or other arrangements, on the basis of disability—


(i) Deny a qualified individual with a disability the opportunity to participate in or benefit from the aid, benefit, or service;


(ii) Afford a qualified individual with a disability an opportunity to participate in or benefit from the aid, benefit, or service that is not equal to that afforded others;


(iii) Provide a qualified individual with a disability with an aid, benefit, or service that is not as effective in affording equal opportunity to obtain the same result, to gain the same benefit, or to reach the same level of achievement as that provided to others;


(iv) Provide different or separate aid, benefits, or services to individuals with disabilities or to any class of individuals with disabilities than is provided to others unless such action is necessary to provide qualified individuals with disabilities with aid, benefits, or services that are as effective as those provided to others;


(v) Deny a qualified individual with a disability the opportunity to participate as a member of planning or advisory boards; or


(vi) Otherwise limit a qualified individual with a disability in the enjoyment of any right, privilege, advantage, or opportunity enjoyed by others receiving the aid, benefit, or service.


(2) The agency may not deny a qualified individual with a disability the opportunity to participate in programs or activities that are not separate or different, despite the existence of permissibly separate or different programs or activities.


(3) The agency may not, directly or through contractual or other arrangements, utilize criteria or methods of administration the purpose or effect of which would—


(i) Subject qualified individuals with disabilities to discrimination on the basis of disability; or


(ii) Defeat or substantially impair accomplishment of the objectives of a program or activity with respect to individuals with disabilities.


(4) The agency may not, in determining the site or location of a facility, make selections the purpose or effect of which would—


(i) Exclude individuals with disabilities from, deny them the benefits of, or otherwise subject them to discrimination under any program or activity conducted by the agency; or


(ii) Defeat or substantially impair the accomplishment of the objectives of a program or activity with respect to individuals with disabilities.


(5) The agency, in the selection of procurement contractors, may not use criteria that subject qualified individuals with disabilities to discrimination on the basis of disability.


(6) The agency may not administer a licensing or certification program in a manner that subjects qualified individuals with disabilities to discrimination on the basis of disability, nor may the agency establish requirements for the programs or activities of licensees or certified entities that subject qualified individuals with disabilities to discrimination on the basis of disability. However, the programs or activities of entities that are licensed or certified by the agency are not, themselves, covered by this part.


(c) The exclusion of individuals without disabilities from the benefits of a program limited by Federal statute or Executive order to individuals with disabilities or the exclusion of a specific class of individuals with disabilities from a program limited by Federal statute or Executive order to a different class of individuals with disabilities is not prohibited by this part.


(d) The agency shall administer programs and activities in the most integrated setting appropriate to the needs of qualified individuals with disabilities.


§§ 2205.131-2205.134 [Reserved]

§ 2205.135 Electronic and information technology requirements.

(a) In accordance with section 508 and the standards published by the Architectural and Transportation Barriers Compliance Board at 36 CFR part 1194, the agency shall ensure, absent an undue burden, that the electronic and information technology developed, procured, maintained, or used by the agency allows:


(1) Individuals with disabilities who are agency employees or applicants to have access to and use of information and data that is comparable to the access to and use of information and data by agency employees who are individuals without disabilities; and


(2) Individuals with disabilities who are members of the public seeking information or services from the agency to have access to and use of information and data that is comparable to the access to and use of information and data by such members of the public who are not individuals with disabilities.


(b) When development, procurement, maintenance, or use of electronic and information technology that meets the standards at 36 CFR part 1194 would impose an undue burden, the agency shall provide individuals with disabilities covered by this section with the information and data involved by an alternative means of access that allows the individuals to use the information and data.


§§ 2205.136-2205.139 [Reserved]

§ 2205.140 Employment.

No qualified individual with a disability shall, on the basis of disability, be subjected to discrimination in employment under any program or activity conducted by the agency. The definitions, requirements, and procedures of section 501 of the Rehabilitation Act of 1973 (29 U.S.C. 791), as established by the Equal Employment Opportunity Commission in 29 CFR part 1614, shall apply to employment in federally conducted programs or activities.


§§ 2205.141-2205.148 [Reserved]

§ 2205.149 Program accessibility: discrimination prohibited.

Except as otherwise provided in § 2205.150, no qualified individual with a disability shall, because the agency’s facilities are inaccessible to or unusable by individuals with disabilities, be denied the benefits of, be excluded from participation in, or otherwise be subjected to discrimination under any program or activity conducted by the agency.


§ 2205.150 Program accessibility: existing facilities.

(a) General. The agency shall operate each program or activity so that the program or activity, when viewed in its entirety, is readily accessible to and usable by individuals with disabilities. This paragraph (a) does not—


(1) Necessarily require the agency to make each of its existing facilities accessible to and usable by individuals with disabilities;


(2) In the case of historic preservation programs, require the agency to take any action that would result in a substantial impairment of significant historic features of an historic property; or


(3) Require the agency to take any action that it can demonstrate would result in a fundamental alteration in the nature of a program or activity or in undue financial and administrative burdens. In those circumstances where agency personnel believe that the proposed action would fundamentally alter the program or activity or would result in undue financial and administrative burdens, the agency has the burden of proving that compliance with this paragraph (a) would result in such alteration or burdens. The decision that compliance would result in such alteration or burdens must be made by the Chairman or his or her designee after considering all agency resources available for use in the funding and operation of the conducted program or activity, and must be accompanied by a written statement of the reasons for reaching that conclusion. If an action would result in such an alteration or such burdens, the agency shall take any other action that would not result in such an alteration or such burdens but would nevertheless ensure that individuals with disabilities receive the benefits and services of the program or activity.


(b) Methods—(1) General. The agency may comply with the requirements of this section through such means as redesign of equipment, reassignment of services to accessible buildings, assignment of aides to beneficiaries, home visits, delivery of services at alternate accessible sites, alteration of existing facilities and construction of new facilities, use of accessible rolling stock, or any other methods that result in making its programs or activities readily accessible to and usable by individuals with disabilities. The agency is not required to make structural changes in existing facilities where other methods are effective in achieving compliance with this section. The agency, in making alterations to existing buildings, shall meet accessibility requirements to the extent compelled by the Architectural Barriers Act of 1968, as amended (42 U.S.C. 4151-4157), and any regulations implementing it. In choosing among available methods for meeting the requirements of this section, the agency shall give priority to those methods that offer programs and activities to qualified individuals with disabilities in the most integrated setting appropriate.


(2) Historic preservation programs. In meeting the requirements of paragraph (a) of this section in historic preservation programs, the agency shall give priority to methods that provide physical access to individuals with disabilities. In cases where a physical alteration to an historic property is not required because of paragraph (a)(2) or (3) of this section, alternative methods of achieving program accessibility include—


(i) Using audio-visual materials and devices to depict those portions of an historic property that cannot otherwise be made accessible;


(ii) Assigning persons to guide individuals with disabilities into or through portions of historic properties that cannot otherwise be made accessible; or


(iii) Adopting other innovative methods.


§ 2205.151 Program accessibility: new construction and alterations.

Each building or part of a building that is constructed or altered by, on behalf of, or for the use of the agency shall be designed, constructed, or altered so as to be readily accessible to and usable by individuals with disabilities. The definitions, requirements, and standards of the Architectural Barriers Act (42 U.S.C. 4151-4157), as established in 41 CFR 102-76.60 to 102-76.95, apply to buildings covered by this section.


§§ 2205.152-2205.159 [Reserved]

§ 2205.160 Communications.

(a) The agency shall take appropriate steps to ensure effective communication with applicants, participants, personnel of other Federal entities, and members of the public.


(1) The agency shall furnish appropriate auxiliary aids where necessary to afford an individual with a disability an equal opportunity to participate in, and enjoy the benefits of, a program or activity conducted by the agency.


(i) In determining what type of auxiliary aid is necessary, the agency shall give primary consideration to the requests of the individual with a disability.


(ii) The agency need not provide individually prescribed devices, readers for personal use or study, or other devices of a personal nature.


(2) Where the agency communicates with applicants and beneficiaries by telephone, TDD’s or equally effective telecommunication systems shall be used.


(b) The agency shall ensure that interested persons, including persons with impaired vision or hearing, can obtain information as to the existence and location of accessible services, activities, and facilities.


(c) The agency shall provide signage at a primary entrance to each of its inaccessible facilities, directing users to a location at which they can obtain information about accessible facilities. The international symbol for accessibility shall be used at each primary entrance of an accessible facility.


(d) This section does not require the agency to take any action that it can demonstrate would result in a fundamental alteration in the nature of a program or activity or in undue financial and administrative burdens. In those circumstances where agency personnel believe that the proposed action would fundamentally alter the program or activity or would result in undue financial and administrative burdens, the agency has the burden of proving that compliance with this section would result in such alteration or burdens. The decision that compliance would result in such alteration or burdens must be made by the Chairman or his or her designee after considering all agency resources available for use in the funding and operation of the conducted program or activity, and must be accompanied by a written statement of the reasons for reaching that conclusion. If an action required to comply with this section would result in such an alteration or such burdens, the agency shall take any other action that would not result in such an alteration or such burdens but would nevertheless ensure that, to the maximum extent possible, individuals with disabilities receive the benefits and services of the program or activity.


§§ 2205.161-2205.169 [Reserved]

§ 2205.170 Compliance procedures.

(a) Except as provided in paragraph (b) of this section, this section applies to all allegations of discrimination on the basis of disability in programs or activities conducted by the agency in violation of section 504. Paragraphs (c) through (j) of this section also apply to all complaints alleging a violation of the agency’s responsibility to procure electronic and information technology under section 508, whether filed by members of the public or agency employees or applicants.


(b) The agency shall process complaints alleging violations of section 504 with respect to employment according to the procedures established by the Equal Employment Opportunity Commission in 29 CFR part 1614 pursuant to section 501 of the Rehabilitation Act of 1973 (29 U.S.C. 791).


(c)(1) Any person who believes that he or she has been subjected to discrimination prohibited by this part or that the agency’s procurement of electronic and information technology has violated section 508, or an authorized representative of such person, may file a complaint with the Executive Director.


(2) The Executive Director shall be responsible for coordinating implementation of this section. Complaints shall be sent to Executive Director, Occupational Safety and Health Review Commission, One Lafayette Centre, 1120-20th Street NW., 9th Floor, Washington, DC 20036-3457. Complaints shall be filed with the Executive Director within 180 days of the alleged act of discrimination. A complaint shall be deemed filed on the date it is postmarked, or, in the absence of a postmark, on the date it is received by the agency. The agency may extend this time period for good cause.


(d)(1) The agency shall accept a complete complaint that is filed in accordance with paragraph (c) of this section and over which it has jurisdiction. The Executive Director shall notify the complainant and the respondent of receipt and acceptance of the complaint.


(2) If the agency receives a complaint that is not complete, the Executive Director shall notify the complainant, within 30 days of receipt of the incomplete complaint, that additional information is needed. If the complainant fails to complete the complaint within 30 days of receipt of this notice, the Executive Director shall dismiss the complaint without prejudice and shall so inform the complainant.


(3) If the agency receives a complaint over which it does not have jurisdiction, it shall promptly notify the complainant and shall make reasonable efforts to refer the complaint to the appropriate government entity.


(e) The agency shall notify the Architectural and Transportation Barriers Compliance Board upon receipt of any complaint alleging that a building or facility that is subject to the Architectural Barriers Act of 1968, as amended (42 U.S.C. 4151-4157), or section 502 of the Rehabilitation Act of 1973, as amended (29 U.S.C. 792), is not readily accessible to and usable by individuals with disabilities.


(f) Within 180 days of the receipt of a complete complaint for which it has jurisdiction, the agency shall notify the complainant of the results of the investigation in a letter containing—


(1) Findings of fact and conclusions of law;


(2) A description of a remedy for each violation found; and


(3) A notice of the right to appeal.


(g) Appeals of the findings of fact and conclusions of law or remedies must be filed with the Chairman by the complainant within 90 days of receipt from the agency of the letter required by paragraph (f) of this section. The agency may extend this time for good cause. Appeals shall be sent to the Chairman, Occupational Safety and Health Review Commission, One Lafayette Centre, 1120-20th Street, NW., 9th Floor, Washington, DC 20036-3457. An appeal shall be deemed filed on the date it is postmarked, or, in the absence of a postmark, on the date it is received by the agency. It should be clearly marked “Appeal of Section 504 decision” or “Appeal of Section 508 decision” and should contain specific objections explaining why the complainant believes the initial decision was factually or legally wrong. Attached to the appeal letter should be a copy of the initial decision being appealed.


(h) Timely appeals shall be accepted and decided by the Chairman. The Chairman shall notify the complainant of the results of the appeal within 60 days of the receipt of the request. If the Chairman determines that additional information is needed from the complainant, he or she shall have 60 days from the date of receipt of the additional information to make his or her determination on the appeal.


(i) The time limits cited in paragraphs (f) and (h) of this section may be extended with the permission of the Assistant Attorney General.


(j) The agency may delegate its authority for conducting complaint investigations to other Federal agencies or may contract with non-Federal entities to conduct such investigations, except that the authority for making the final determination may not be delegated.


§§ 2205.171-2205.999 [Reserved]

PART 2400—REGULATIONS IMPLEMENTING THE PRIVACY ACT


Authority:5 U.S.C. 552a(f); 5 U.S.C. 553.



Source:85 FR 65222, Oct. 15, 2020, unless otherwise noted.

§ 2400.1 Purpose and scope.

This part provides procedures to implement the Privacy Act of 1974, 5 U.S.C. 552a. It is applicable only to records that are maintained by the Occupational Safety and Health Review Commission (OSHRC or the Commission), which includes all systems of records operated by an entity on behalf of OSHRC, pursuant to a contract, to accomplish an agency function. For purposes of this part, such contractors do not include any consumer reporting agency to which a record is disclosed under 31 U.S.C. 3711(e). This part does not affect discovery in adversary proceedings before the Commission. Discovery is governed by the Commission’s Rules of Procedures in 29 CFR part 2200, subpart D.


§ 2400.2 Description of agency.

OSHRC adjudicates contested enforcement actions under the Occupational Safety and Health Act of 1970, 29 U.S.C. 651-678. The Commission decides cases after the parties are given an opportunity for a hearing. All hearings are open to the public and are conducted at a place convenient to the parties by an Administrative Law Judge. Any Commissioner may direct that a decision of a Judge be reviewed by the full Commission. The President designates one of the Commissioners as Chairman, who is responsible on behalf of the Commission for the administrative operations of the Commission.


§ 2400.3 Delegation of authority.

The Chairman shall designate an OSHRC employee as the Privacy Officer and shall delegate to the Privacy Officer the authority to ensure agency-wide compliance with this part. As necessary, the Privacy Officer shall coordinate this delegated responsibility with the Senior Agency Official for Privacy.


§ 2400.4 Procedures for requesting notification of and access to personal records.

The purpose of this section is to provide procedures by which an individual may request notification about whether a system of records contains a record about that individual (“a personal record”), or may gain access to such a record included in a system of records.


(a) Submission of requests—(1) Manner. An individual seeking information regarding the content of a system of records or access to a personal record in a system of records should submit a written request either in person or by mail to the Privacy Officer, OSHRC, One Lafayette Centre, 1120 20th Street NW, Ninth Floor, Washington, DC 20036-3457. A request may also be submitted to the FOIA Disclosure Officer in accordance with the procedures set forth at 29 CFR 2201.5(a). Such a request, however, must be identified as a “Privacy Act Request.” The FOIA Disclosure Officer will forward any request identified in this manner to the Privacy Officer for processing.


(2) Notification requests. A request for notification about whether a system of records contains a personal record must specify which system of records, as described in the agency’s system-of-records notices published in Federal Register, is the subject of the request.


(3) Access requests. A request for access to a personal record shall describe the nature of the record sought, the approximate dates covered by the record, and the system of records in which the record is thought to be included as described in the agency’s system-of-records notices published in the Federal Register. The request should also indicate whether the requester wishes to review the record in person or obtain a copy by mail. If the information supplied is insufficient to locate or identify the record, the requester shall be notified promptly and, if necessary, informed of the additional information required.


(b) Period for response. After receiving a request, the Privacy Officer shall respond to it no later than 10 working days from the request’s receipt.


(c) Verification of identity. The following standards for verifying an individual’s identity are applicable to any individual who requests a personal record under this part:


(1) An individual seeking access to a record in person shall, if possible, present a government-issued identification that includes a photo, such as a passport or a driver’s license.


(2) An individual seeking access to a record by mail shall, if possible, provide a signature, address, date of birth, place of birth, and a photocopy of a government-issued identification that includes a photo, such as a passport or a driver’s license.


(3) An individual seeking access to a record either by mail or in person who cannot provide the necessary documentation of identification specified in paragraphs (c)(1) and (2) of this section may provide a declaration in accordance with 28 U.S.C. 1746, swearing or affirming to his or her identity and to the fact that he or she understands the penalties for false statements pursuant to 18 U.S.C. 1001.


(d) Verification of guardianship. The parent or guardian of a minor or an individual judicially determined to be incompetent and seeking to act on behalf of such minor or incompetent shall, in addition to establishing his or her own identity, establish the identity of the minor or other individual he or she represents as required in paragraph (c) of this section and establish his or her own parentage or guardianship of the subject of the record by furnishing either a copy of a birth certificate showing parentage or a court order establishing the guardianship.


(e) Accompanying persons. An individual seeking to review a personal record in person may be accompanied by another individual of his or her own choosing. Both the individual seeking access and the accompanying individual shall be required to sign a form provided by OSHRC indicating that OSHRC is authorized to discuss the contents of the subject record in the presence of both individuals.


(f) When compliance is possible. (1) The Privacy Officer shall inform the requester of the determination to grant the request and shall make the personal record available to the individual in the manner requested, that is, either by forwarding a copy of the information to the requester or by making it available for review, unless:


(i) It is impracticable to provide the requester with a copy, in which case the requester shall be notified of this and informed of the procedures set forth in paragraph (c) of this section, or


(ii) The Privacy Officer has reason to believe that the cost of a copy is considerably more expensive than anticipated by the requester, in which case the Privacy Officer shall notify the requester of the estimated cost, and ascertain whether the requester still wishes to be provided with a copy of the information.


(2) Where a personal record is to be reviewed by the requester in person, the Privacy Officer shall inform the requester in writing of:


(i) The date on which the record shall become available for review, the location at which it may be reviewed, and the hours for inspection;


(ii) The requirements for verifying identity as set forth in paragraphs (c) and (d);


(iii) The requester’s right to be accompanied by another individual to review the record as set forth in paragraph (e) of this section; and


(iv) The requester’s right to have another individual review the record.


(3) If the requester seeks to inspect the personal record without receiving a copy, the requester shall not leave OSHRC premises with the record and shall sign a statement identifying the specific record or category of records that has been reviewed.


(g) When compliance is not possible. The denial of a written request to review a personal record shall be sent to the requester in writing and signed by the Privacy Officer. This response shall be provided when the requested record does not exist, does not contain personal information relating to the requester, or is exempt. The response shall include a statement regarding the determining factors of denial, and the requester’s rights to administrative appeal and, thereafter, judicial review in a district court of the United States.


§ 2400.5 Special procedures for requesting medical records.

(a) Upon an individual’s request for access to any medical record about the requester, including any psychological record, the Privacy Officer shall make a preliminary determination on whether access to such record(s) could have an adverse effect upon the requester. If the Privacy Officer determines that access could have an adverse effect on the requester, OSHRC shall notify the requester in writing and advise that the record(s) at issue can be made available only to a physician of the requester’s designation.


(b) OSHRC shall forward such record(s) to the physician designated by the requester once the following requirements are met:


(1) The requester has informed OSHRC of the designated physician’s identity;


(2) OSHRC has verified the identity of the physician; and


(3) The physician has agreed to review the record(s) with the requester to both explain the meaning of the record(s) and offer counseling designed to temper any adverse reaction.


(c) If, within 60 calendar days of OSHRC’s written request for a designation, the requester has failed to respond or designate a physician, or the physician fails to agree to the release conditions, then OSHRC shall hold the records(s) in abeyance and advise the requester that this action may be construed as a technical denial. OSHRC shall also advise the requester of his or her rights to administrative appeal and, thereafter, judicial review in a district court of the United States.


§ 2400.6 Procedures for amending personal records.

(a) Submission of requests for amendment. Upon review of an individual’s personal record, that individual may submit a request to amend such record. This request shall be submitted in writing to the Privacy Officer, in accordance with § 2400.4(a)(1)’s procedures, and shall include a statement of the amendment requested and the reasons for such amendment, e.g., relevance, accuracy, timeliness or completeness of the record.


(b) Action to be taken by the Privacy Officer. Upon receiving an amendment request, the Privacy Officer shall promptly:


(1) Acknowledge in writing within 10 working days the receipt of the request;


(2) Make such inquiry as is necessary to determine whether the amendment is appropriate; and


(3) Resolve the request by either:


(i) Correcting or eliminating any information that is found to be incomplete, inaccurate, irrelevant to a statutory purpose of OSHRC, or untimely and notifying the requester in writing when this action is complete; or


(ii) Notifying the requester in writing of a determination not to amend the personal record, including the reasons for the denial, and advising the requester of his or her right to appeal in accordance with § 2400.7.


§ 2400.7 Procedures for appealing.

(a) Submission of appeal. (1) If a request to provide notification of a personal record, or to access or amend a personal record, is denied either in whole or in part, or if no determination is made within the period prescribed by this part, then the requester may appeal in writing to the Chairman by mailing an appeal letter to the following address: Privacy Appeal, OSHRC, One Lafayette Centre, 1120 20th Street NW, Ninth Floor, Washington, DC 20036-3457.


(2) To be considered timely, the requester must submit the appeal letter within 30 calendar days of the date of denial, or within 90 calendar days of his or her request if the appeal is from a failure of the Privacy Officer to make a determination. The appeal letter should include, as applicable:


(i) Reasonable identification of the system to which notification was sought, the personal record to which access was sought, or the amendment that was requested.


(ii) A statement of the OSHRC action or failure to act being appealed and the relief sought.


(iii) A copy of the request, the notification of denial, and any other related correspondence.


(b) Final decisions. The Chairman must make a final decision no later than 30 working days from the date of the request, but the Chairman may extend this time period for good cause. The requester, however, must be notified of the extension within the initial 30 working-day period, and the extension may not exceed 90 calendar days from the date of the request. Any personal record found on appeal to be incomplete, inaccurate, irrelevant, or untimely, shall within 30 working days of the date of such findings be appropriately amended.


(c) Decision requirements. The decision of the Chairman constitutes the final decision of OSHRC on the right of the requester to be notified of, or to access or amend, a personal record. The decision on the appeal shall be in writing and, in the event of a denial, shall set forth the reasons for such denial and state the individual’s right to obtain judicial review in a district court of the United States. An indexed file of the agency’s decisions on appeal shall be maintained by the Privacy Officer.


§ 2400.8 Procedures for statements of disagreement and notification of amendment.

(a) Submission of statement of disagreement. If a final decision concerning an amendment request does not satisfy the requester, then the requester may provide a statement of disagreement that is of reasonable length and sets forth a position regarding the disputed information. This statement of disagreement shall be accepted by OSHRC and included in the relevant personal record. If deemed appropriate, OSHRC may also include a concise statement in the record of its reasons for not making a requested amendment.


(b) Notification of amendment and statement of disagreement. (1) OSHRC shall inform any person or other agency about an amendment to a personal record, or notation made to the record under paragraph (a) of this section, if that record has been disclosed to the person or agency, the amendment or notation was made pursuant to this part, and an accounting of the disclosure was made pursuant to 5 U.S.C. 552a(c).


(2) When a personal record is disclosed to a person or other agency after a notation under paragraph (a) of this section is made to the record, OSHRC shall clearly note any portion of the record that is disputed and provide a copy of any notation included in the record.


§ 2400.9 Schedule of fees.

(a) Policy. The purpose of this section is to establish fair and equitable fees to permit reproduction of personal records for concerned individuals.


(b) Reproduction. (1) For the fees associated with reproduction of personal records, refer to appendix A to part 2201, Schedule of Fees.


(2) OSHRC shall not normally furnish more than one copy of any record.


(c) Limitations. No fee shall be charged to any individual for the process of retrieving, reviewing, or amending personal records.


PARTS 2401-2499 [RESERVED]

CHAPTER XXV—EMPLOYEE BENEFITS SECURITY ADMINISTRATION, DEPARTMENT OF LABOR

SUBCHAPTER A—GENERAL

PARTS 2500-2508 [RESERVED]

PART 2509—INTERPRETIVE BULLETINS RELATING TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974


Authority:29 U.S.C. 1135. Secretary of Labor’s Order 1-2003, 68 FR 5374 (Feb. 3, 2003). Sections 2509.75-10 and 2509.75-2 issued under 29 U.S.C. 1052, 1053, 1054. Sec. 2509.75-5 also issued under 29 U.S.C. 1002. Sec. 2509.95-1 also issued under sec. 625, Pub. L. 109-280, 120 Stat. 780.

§ 2509.75-2 Interpretive bulletin relating to prohibited transactions.


On February 6, 1975, the Department of Labor issued an interpretive bulletin, ERISA IB 75-2, with respect to whether a party in interest has engaged in a prohibited transaction with an employee benefit plan where the party in interest has engaged in a transaction with a corporation or partnership (within the meaning of section 7701 of the Internal Revenue Code of 1954) in which the plan has invested.


On November 13, 1986 the Department published a final regulation dealing with the definition of “plan assets”. See § 2510.3-101 of this title. Under that regulation, the assets of certain entities in which plans invest would include “plan assets” for purposes of the fiduciary responsibility provisions of the Act. Section 2510.3-101 applies only for purposes of identifying plan assets on or after the effective date of that section, however, and § 2510.3-101 does not apply to plan investments in certain entities that qualify for the transitional relief provided for in paragraph (k) of that section. The principles discussed in paragraph (a) of this Interpretive Bulletin continue to be applicable for purposes of identifying assets of a plan for periods prior to the effective date of § 2510.3-101 and for investments that are subject to the transitional rule in § 2510.3-101(k). Paragraphs (b) and (c) of this Interpretive Bulletin, however, relate to matters outside the scope of § 2510.3-101, and nothing in that section affects the continuing application of the principles discussed in those parts.


(a) Principles applicable to plan investments to which § 2510.3-101 does not apply. Generally, investment by a plan in securities (within the meaning of section 3(20) of the Employee Retirement Income Security Act of 1974) of a corporation or partnership will not, solely by reason of such investment, be considered to be an investment in the underlying assets of such corporation or partnership so as to make such assets of the entity “plan assets” and thereby make a subsequent transaction between the party in interest and the corporation or partnership a prohibited transaction under section 406 of the Act.


For example, where a plan acquires a security of a corporation or a limited partnership interest in a partnership, a subsequent lease or sale of property between such corporation or partnership and a party in interest will not be a prohibited transaction solely by reason of the plan’s investment in the corporation or partnership.


This general proposition, as applied to corporations and partnerships, is consistent with section 401(b)(1) of the Act, relating to plan investments in investment companies registered under the Investment Company Act of 1940. Under section 401(b)(1), an investment by a plan in securities of such an investment company may be made without causing, solely by reason of such investment, any of the assets of the investment company to be considered to be assets of the plan.


(b) [Reserved]


(c) Applications of the fiduciary responsibility rules. The preceding paragraphs do not mean that an investment of plan assets in a security of a corporation or partnership may not be a prohibited transaction. For example, section 406(a)(1)(D) prohibits the direct or indirect transfer to, or use by or for the benefit of, a party in interest of any assets of the plan and section 406(b)(1) prohibits a fiduciary from dealing with the assets of the plan in his own interest or for his own account.


Thus, for example, if there is an arrangement under which a plan invests in, or retains its investment in, an investment company and as part of the arrangement it is expected that the investment company will purchase securities from a party in interest, such arrangement is a prohibited transaction.


Similarly, the purchase by a plan of an insurance policy pursuant to an arrangement under which it is expected that the insurance company will make a loan to a party in interest is a prohibited transaction.


Moreover, notwithstanding the foregoing, if a transaction between a party in interest and a plan would be a prohibited transaction, then such a transaction between a party in interest and such corporation or partnership will ordinarily be a prohibited transaction if the plan may, by itself, require the corporation or partnership to engage in such transaction.


Similarly, if a transaction between a party in interest and a plan would be a prohibited transaction, then such a transaction between a party in interest and such corporation or partnership will ordinarily be a prohibited transaction if such party in interest, together with one or more persons who are parties in interest by reason of such persons’ relationship (within the meaning of section 3(14)(E) through (I)) to such party in interest may, with the aid of the plan but without the aid of any other persons, require the corporation or partnership to engage in such a transaction. However, the preceding sentence does not apply if the parties in interest engaging in the transaction, together with one or more persons who are parties in interest by reason of such persons’ relationship (within the meaning of section 3(14)(E) through (I)) to such party in interest, may, by themselves, require the corporation or partnership to engage in the transaction.


Further, the Department of Labor emphasizes that it would consider a fiduciary who makes or retains an investment in a corporation or partnership for the purpose of avoiding the application of the fiduciary responsibility provisions of the Act to be in contravention of the provisions of section 404(a) of the Act.


[51 FR 41280, Nov. 13, 1986, as amended at 61 FR 33849, July 1, 1996]


§ 2509.75-3 Interpretive bulletin relating to investments by employee benefit plans in securities of registered investment companies.


On March 12, 1975, the Department of Labor issued an interpretive bulletin, ERISA IB 75-3, with regard to its interpretation of section 3(21)(B) of the Employee Retirement Income Security Act of 1974. That section provides that an investment by an employee benefit plan in securities issued by an investment company registered under the Investment Company Act of 1940 shall not by itself cause the investment company, its investment adviser or principal underwriter to be deemed to be a fiduciary or party in interest “except insofar as such investment company or its investment adviser or principal underwriter acts in connection with an employee benefit plan covering employees of the investment company, the investment adviser, or its principal underwriter.”


The Department of Labor interprets this section as an elaboration of the principle set forth in section 401(b)(1) of the Act and ERISA IB 75-2 (issued February 6, 1975) that the assets of an investment company shall not be deemed to be assets of a plan solely by reason of an investment by such plan in the shares of such investment company. Consistent with this principle, the Department of Labor interprets this section to mean that a person who is connected with an investment company, such as the investment company itself, its investment adviser or its principal underwriter, is not to be deemed to be a fiduciary of or party in interest with respect to a plan solely because the plan has invested in the investment company’s shares.


This principle applies, for example, to a plan covering employees of an investment adviser to an investment company where the plan invests in the securities of the investment company. In such a case the investment company or its principal underwriter is not to be deemed to be a fiduciary of or party in interest with respect to the plan solely because of such investment.


On the other hand, the exception clause in section 3(21) emphasizes that if an investment company, its investment adviser or its principal underwriter is a fiduciary or party in interest for a reason other than the investment in the securities of the investment company, such a person remains a party in interest or fiduciary. Thus, in the preceding example, since an employer is a party in interest, the investment adviser remains a party in interest with respect to a plan covering its employees.


The Department of Labor emphasized that an investment adviser, principal underwriter or investment company which is a fiduciary by virtue of section 3(21)(A) of the Act is subject to the fiduciary responsibility provisions of part 4 of title I of the Act, including those relating to fiduciary duties under section 404.


[40 FR 31599, July 28, 1975. Redesignated at 41 FR 1906, Jan. 13, 1976]


§ 2509.75-4 Interpretive bulletin relating to indemnification of fiduciaries.


On June 4, 1975, the Department of Labor issued an interpretive bulletin, ERISA IB 75-4, announcing the Department’s interpretation of section 410(a) of the Employee Retirement Income Security Act of 1974, insofar as that section relates to indemnification of fiduciaries. Section 410(a) states, in relevant part, that “any provision in an agreement or instrument which purports to relieve a fiduciary from responsibility or liability for any responsibility, obligation, or duty under this part shall be void as against public policy.”


The Department of Labor interprets this section to permit indemnification agreements which do not relieve a fiduciary of responsibility or liability under part 4 of title I. Indemnification provisions which leave the fiduciary fully responsible and liable, but merely permit another party to satisfy any liability incurred by the fiduciary in the same manner as insurance purchased under section 410(b)(3), are therefore not void under section 410(a).


Examples of such indemnification provisions are:


(1) Indemnification of a plan fiduciary by (a) an employer, any of whose employees are covered by the plan, or an affiliate (as defined in section 407(d)(7) of the Act) of such employer, or (b) an employee organization, any of whose members are covered by the plan; and


(2) Indemnification by a plan fiduciary of the fiduciary’s employees who actually perform the fiduciary services.


The Department of Labor interprets section 410(a) as rendering void any arrangement for indemnification of a fiduciary of an employee benefit plan by the plan. Such an arrangement would have the same result as an exculpatory clause, in that it would, in effect, relieve the fiduciary of responsibility and liability to the plan by abrogating the plan’s right to recovery from the fiduciary for breaches of fiduciary obligations.


While indemnification arrangements do not contravene the provisions of section 410(a), parties entering into an indemnification agreement should consider whether the agreement complies with the other provisions of part 4 of title I of the Act and with other applicable laws.


[40 FR 31599, July 28, 1975. Redesignated at 41 FR 1906, Jan. 13, 1976]


§ 2509.75-5 Questions and answers relating to fiduciary responsibility.


On June 25, 1975, the Department of Labor issued an interpretive bulletin, ERISA IB 75-5, containing questions and answers relating to certain aspects of the recently enacted Employee Retirement Income Security Act of 1974 (the “Act”).


Pending the issuance of regulations or other guidelines, persons may rely on the answers to these questions in order to resolve the issues that are specifically considered. No inferences should be drawn regarding issues not raised which may be suggested by a particular question and answer or as to why certain questions, and not others, are included. Furthermore, in applying the questions and answers, the effect of subsequent legislation, regulations, court decisions, and interpretative bulletins must be considered. To the extent that plans utilize or rely on these answers and the requirements of regulations subsequently adopted vary from the answers relied on, such plans may have to be amended.


An index of the questions and answers, relating them to the appropriate sections of the Act, is also provided.


Index

key to question prefixes

D—Refers to Definitions.


FR—Refers to Fiduciary Responsibility.


Section No.
Question No.
3(21)D-1.
3(38)FR-6, FR-7.
402(a)FR-1, FR-2, FR-3.
402(b)(1)FR-4, FR-5.
402(c)(3)FR-6, FR-7.
404(a)FR-10.
405(a)(3)FR-10.
405(b)(1)(A)FR-10.
406(a)FR-9.
409(a)FR-10.
412(a)FR-8, FR-9.

D-1 Q: Is an attorney, accountant, actuary or consultant who renders legal, accounting, actuarial or consulting services to an employee benefit plan (other than an investment adviser to the plan) a fiduciary to the plan solely by virtue of the rendering of such services, absent a showing that such consultant (a) exercises discretionary authority or discretionary control respecting the management of the plan, (b) exercises authority or control respecting management or disposition of the plan’s assets, (c) renders investment advice for a fee, direct or indirect, with respect to the assets of the plan, or has any authority or responsibility to do so, or (d) has any discretionary authority or discretionary responsibility in the administration of the plan?


A: No. However, while attorneys, accountants, actuaries and consultants performing their usual professional functions will ordinarily not be considered fiduciaries, if the factual situation in a particular case falls within one of the categories described in clauses (a) through (d) of this question, such persons would be considered to be fiduciaries within the meaning of section 3(21) of the Act. The Internal Revenue Service notes that such persons would also be considered to be fiduciaries within the meaning of section 4975(e)(3) of the Internal Revenue Code of 1954.


FR-1 Q: If an instrument establishing an employee benefit plan provides that the plan committee shall control and manage the operation and administration of the plan and specifies who shall constitute the plan committee (either by position or by naming individuals to the committee), does such provision adequately satisfy the requirement in section 402(a) that a “named fiduciary” be provided for in a plan instrument?


A: Yes. While the better practice would be to state explicitly that the plan committee is the “named fiduciary” for purposes of the Act, clear identification of one or more persons, by name or title, combined with a statement that such person or persons have authority to control and manage the operation and administration of the plan, satisfies the “named fiduciary” requirement of section 402(a). The purpose of this requirement is to enable employees and other interested persons to ascertain who is responsible for operating the plan. The instrument in the above example, which provides that “the plan committee shall control and manage the operation and administration of the plan”, and specifies, by name or position, who shall constitute the committee, fulfills this requirement.


FR-2 Q: In a union negotiated employee benefit plan, the instrument establishing the plan provides that a joint board on which employees and employers are equally represented shall control and manage the operation and administration of the plan. Does this provision adequately satisfy the requirement in section 402(a) that a “named fiduciary” be provided for in a plan instrument?


A: Yes, for the reasons stated in response to question FR-1. The joint board is clearly identified as the entity which has authority to control and manage the operation and administration of the plan, and the persons designated to be members of such joint board would be named fiduciaries under section 402(a).


FR-3 Q: May an employee benefit plan covering employees of a corporation designate the corporation as the “named fiduciary” for purposes of section 402(a)(1) of the Act?


A: Yes, it may. Section 402(a)(2) of the Act states that a “named fiduciary” is a fiduciary either named in the plan instrument or designated according to a procedure set forth in the plan instrument. A fiduciary is a “person” falling within the definition of fiduciary set forth in section 3(21)(A) of the Act. A “person” may be a corporation under the definition of person contained in section 3(9) of the Act. While such designation satisfies the requirement of enabling employees and other interested persons to ascertain the person or persons responsible for operating the plan, a plan instrument which designates a corporation as “named fiduciary” should provide for designation by the corporation of specified individuals or other persons to carry out specified fiduciary responsibilities under the plan, in accordance with section 405(c)(1)(B) of the Act.


FR-4 Q: A defined benefit pension plan’s procedure for establishing and carrying out a funding policy provides that the plan’s trustees shall, at a meeting duly called for the purpose, establish a funding policy and method which satisfies the requirements of part 3 of title I of the Act, and shall meet annually at a stated time of the year to review such funding policy and method. It further provides that all actions taken with respect to such funding policy and method and the reasons therefor shall be recorded in the minutes of the trustees’ meetings. Does this procedure comply with section 402(b)(1) of the Act?


A: Yes. The above procedure specifies who is to establish the funding policy and method for the plan, and provides for a written record of the actions taken with respect to such funding policy and method, including the reasons for such actions. The purpose of the funding policy requirement set forth in section 402(b)(1) is to enable plan participants and beneficiaries to ascertain that the plan has a funding policy that meets the requirements of part 3 of title I of the Act. The procedure set forth above meets that requirement.


FR-5 Q: Must a welfare plan in which the benefits are paid out of the general assets of the employer have a procedure for establishing and carrying out a funding policy set forth in the plan instrument?


A: No. Section 402(b)(1) requires that the plan provide for such a procedure “consistent with the objectives of the plan” and requirements of title I of the Act. In situations in which a plan is unfunded and title I of the Act does not require the plan to be funded, there is no need to provide for such a procedure. If the welfare plan were funded, a procedure consistent with the objectives of the plan would have to be established.


FR-6 Q: May an investment adviser which is neither a bank nor an insurance company, and which is neither registered under the Investment Advisers Act of 1940 nor registered as an investment adviser in the State where it maintains its principal office and place of business, be appointed an investment manager under section 402(c)(3) of the Act?


A: No. The only persons who may be appointed an investment manager under section 402(c)(3) of the Act are persons who meet the requirements of section 3(38) of the Act—namely, banks (as defined in the Investment Advisers Act of 1940), insurance companies qualified under the laws of more than one state to manage, acquire and dispose of plan assets, persons registered as investment advisers under the Investment Advisers Act of 1940, or persons not registered under the Investment Advisers Act by reason of paragraph 1 of section 203A(a) of that Act who are registered as investment advisers in the State where they maintain their principal office and place of business in accordance with ERISA section 3(38) and who have met the filing requirements of 29 CFR 2510.3-38.


FR-7 Q: May an investment adviser that has a registration application pending for federal registration under the Investment Advisers Act of 1940, or pending with the appropriate state regulatory body under State investment adviser registration laws if relying on the provisions of 29 CFR 2510.3-38 to qualify as a state-registered investment manager, function as an investment manager under the Act prior to the effective date of their federal or state registration?


A: No, for the reasons stated in the answer to FR-6 above.


FR-8 Q: Under the temporary bonding regulation set forth in 29 CFR 2550.412-1, must a person who renders investment advice to a plan for a fee or other compensation, direct or indirect, but who does not exercise or have the right to exercise discretionary authority with respect to the assets of the plan, be bonded solely by reason of the provision of such investment advice?


A: No. A person who renders investment advice, but who does not exercise or have the right to exercise discretionary authority with respect to plan assets, is not required to be bonded solely by reason of the provision of such investment advice. Such a person is not considered to be “handling” funds within the meaning of the temporary bonding regulation set forth in 29 CFR 2550.412-1, which incorporates by reference 29 CFR 464.7. For purposes of the temporary bonding regulation, only those fiduciaries who handle funds must be bonded. If, in addition to the rendering of investment advice, such person performs any additional function which constitutes the handling of plan funds under 29 CFR 464.7, the person would have to be bonded.


FR-9 Q: May an employee benefit plan purchase a bond covering plan officials?


A: Yes. The bonding requirement, which applies, with certain exceptions, to every plan official under section 412(a) of the Act, is for the protection of the plan and does not benefit any plan official or relieve any plan official of any obligation to the plan. The purchase of such bond by a plan will not, therefore, be considered to be in contravention of sections 406(a) or (b) of the Act.


FR-10 Q: An employee benefit plan is considering the construction of a building to house the administration of the plan. One trustee has proposed that the building be constructed on a cost plus basis by a particular contractor without competitive bidding. When the trustee was questioned by another trustee as to the basis of choice of the contractor, the impact of the building on the plan’s administrative costs, whether a cost plus contract would yield a better price to the plan than a fixed price basis, and why a negotiated contract would be better than letting the contract for competitive bidding, no satisfactory answers were provided. Several of the trustees have argued that letting such a contract would be a violation of their general fiduciary responsibilities. Despite their arguments, a majority of the trustees appear to be ready to vote to construct the building as proposed. What should the minority trustees do to protect themselves from liability under section 409(a) of the Act and section 405(b)(1)(A) of the Act?


A: Here, where a majority of trustees appear ready to take action which would clearly be contrary to the prudence requirement of section 404(a)(1)(B) of the Act, it is incumbent on the minority trustees to take all reasonable and legal steps to prevent the action. Such steps might include preparations to obtain an injunction from a Federal District court under section 502(a)(3) of the Act, to notify the Labor Department, or to publicize the vote if the decision is to proceed as proposed. If, having taken all reasonable and legal steps to prevent the imprudent action, the minority trustees have not succeeded, they will not incur liability for the action of the majority. Mere resignation, however, without taking steps to prevent the imprudent action, will not suffice to avoid liability for the minority trustees once they have knowledge that the imprudent action is under consideration.


More generally, trustees should take great care to document adequately all meetings where actions are taken with respect to management and control of fplan assets. Written minutes of all actions taken should be kept describing the action taken, and stating how each trustee voted on each matter. If, as in the case above, trustees object to a proposed action on the grounds of possible violation of the fiduciary responsibility provisions of the Act, the trustees so objecting should insist that their objections and the responses to such objections be included in the record of the meeting. It should be noted that, where a trustee believes that a cotrustee has already committed a breach, resignation by the trustee as a protest against such breach will not generally be considered sufficient to discharge the trustee’s positive duty under section 405(a)(3) to make reasonable efforts under the circumstances to remedy the breach.


[40 FR 31599, July 28, 1975. Redesignated at 41 FR 1906, Jan. 13, 1976; 69 FR 52125, Aug. 24, 2004]


§ 2509.75-6 Interpretive bulletin relating to section 408(c)(2) of the Employee Retirement Income Security Act of 1974.


The Department of Labor today announced guidelines for determining when a party in interest with respect to an employee benefit plan may receive an advance for expenses to be incurred on behalf of the plan without engaging in a transaction prohibited by section 406 of the Employee Retirement Income Security Act of 1974. That section prohibits, among other things, any lending of money from a plan to a party in interest, or transfer to, or use by or for the benefit of, a party in interest of any assets of the plan, as well as any act whereby a fiduciary deals with the assets of a plan in his own interest or for his own account.


However, section 408(c)(2) of the Act provides that nothing in section 406 of the Act shall be construed to prohibit the reimbursement by a plan of expenses properly and actually incurred by a fiduciary in the performance of his duties with the plan. Questions have arisen under section 408(c)(2) of the Act as to whether a plan may reimburse a party in interest in the performance of his duties with the plan and as to whether a plan might make an advance to a fiduciary or other party in interest for expenses to be incurred in the future.


The Department of Labor views the relevant provisions of section 408(c)(2) as clarifying the scope of section 406 so as to permit reimbursement of fiduciaries for expenses incurred in the performance of their duties with a plan. Similarly, consistent with section 408(c)(2), section 406 is construed to permit the reimbursement by the plan of expenses properly and actually incurred by a party in interest in the performance of his duties with the plan.


If a plan makes an advance to a fiduciary or other party in interest to cover expenses to be properly and actually incurred by such person in the performance of his duties with the plan, a prohibited transaction within the meaning of section 406 shall not occur when the plan makes the advance if—


(a) The amount of such advance is reasonable with respect to the amount of the expense which is likely to be properly and actually incurred in the immediate future (such as during the next month), and


(b) The party in interest accounts to the plan at the end of the period covered by the advance for the expenses actually incurred (whether computed on the basis of actual expenses incurred or on the basis of actual transportation costs plus a reasonable per diem allowance, where appropriate).


It should be noted, however, that despite the reasonableness of the amount of the advance and of the expenses underlying it, the question of whether incurring such expenses was prudent, and thus whether the advance was for reasonable expenses, is to be judged pursuant to section 404 of the Act (relating to fiduciary responsibilities).


[40 FR 31755, July 29, 1975. Redesignated at 41 FR 1906, Jan. 13, 1976]


§ 2509.75-8 Questions and answers relating to fiduciary responsibility under the Employee Retirement Income Security Act of 1974.


The Department of Labor today issued questions and answers relating to certain aspects of fiduciary responsibility under the Act, thereby supplementing ERISA IB 75-5 (29 CFR 2555.75-5) which was issued on June 24, 1975, and published in the Federal Register on July 28, 1975 (40 FR 31598).


Pending the issuance of regulations or other guidelines, persons may rely on the answers to these questions in order to resolve the issues that are specifically considered. No inferences should be drawn regarding issues not raised which may be suggested by a particular question and answer or as to why certain questions, and not others, are included. Furthermore, in applying the questions and answers, the effect of subsequent legislation, regulations, court decisions, and interpretive bulletins must be considered. To the extent that plans utilize or rely on these answers and the requirements of regulations subsequently adopted vary from the answers relied on, such plans may have to be amended.


An index of the questions and answers, relating them to the appropriate sections of the Act, is also provided.


Index

Key to question prefixes: D—refers to definitions; FR—refers to fiduciary responsibility.


Section No.
Question No.
3(21)(A)D-2, D-3, D-4, D-5.
3(38)FR-15.
402(c)(1)FR-12.
402(c)(2)FR-15.
402(c)(3)FR-15.
403(a)(2)FR-15.
404(a)(1)(B)FR-11, FR-17.
405(a)FR-13, FR-14, FR-16.
405(c)(1)FR-12, FR-15.
405(c)(2)D-4, FR-13, FR-14, FR-16.
412D-2.


Note:

Questions D-2, D-3, D-4, and D-5 relate to not only section 3(21)(A) of title I of the Act, but also section 4975(e)(3) of the Internal Revenue Code (section 2003 of the Act). The Internal Revenue Service has indicated its concurrence with the answers to these questions.


D-2 Q: Are persons who have no power to make any decisions as to plan policy, interpretations, practices or procedures, but who perform the following administrative functions for an employee benefit plan, within a framework of policies, interpretations, rules, practices and procedures made by other persons, fiduciaries with respect to the plan:


(1) Application of rules determining eligibility for participation or benefits;


(2) Calculation of services and compensation credits for benefits;


(3) Preparation of employee communications material;


(4) Maintenance of participants’ service and employment records;


(5) Preparation of reports required by government agencies;


(6) Calculation of benefits;


(7) Orientation of new participants and advising participants of their rights and options under the plan;


(8) Collection of contributions and application of contributions as provided in the plan;


(9) Preparation of reports concerning participants’ benefits;


(10) Processing of claims; and


(11) Making recommendations to others for decisions with respect to plan administration?


A: No. Only persons who perform one or more of the functions described in section 3(21)(A) of the Act with respect to an employee benefit plan are fiduciaries. Therefore, a person who performs purely ministerial functions such as the types described above for an employee benefit plan within a framework of policies, interpretations, rules, practices and procedures made by other persons is not a fiduciary because such person does not have discretionary authority or discretionary control respecting management of the plan, does not exercise any authority or control respecting management or disposition of the assets of the plan, and does not render investment advice with respect to any money or other property of the plan and has no authority or responsibility to do so.


However, although such a person may not be a plan fiduciary, he may be subject to the bonding requirements contained in section 412 of the Act if he handles funds or other property of the plan within the meaning of applicable regulations.


The Internal Revenue Service notes that such persons would not be considered plan fiduciaries within the meaning of section 4975(e)(3) of the Internal Revenue Code of 1954.


D-3 Q: Does a person automatically become a fiduciary with respect to a plan by reason of holding certain positions in the administration of such plan?


A: Some offices or positions of an employee benefit plan by their very nature require persons who hold them to perform one or more of the functions described in section 3(21)(A) of the Act. For example, a plan administrator or a trustee of a plan must, be the very nature of his position, have “discretionary authority or discretionary responsibility in the administration” of the plan within the meaning of section 3(21)(A)(iii) of the Act. Persons who hold such positions will therefore be fiduciaries.


Other offices and positions should be examined to determine whether they involve the performance of any of the functions described in section 3(21)(A) of the Act. For example, a plan might designate as a “benefit supervisor” a plan employee whose sole function is to calculate the amount of benefits to which each plan participant is entitled in accordance with a mathematical formula contained in the written instrument pursuant to which the plan is maintained. The benefit supervisor, after calculating the benefits, would then inform the plan administrator of the results of his calculations, and the plan administrator would authorize the payment of benefits to a particular plan participant. The benefit supervisor does not perform any of the functions described in section 3(21)(A) of the Act and is not, therefore, a plan fiduciary. However, the plan might designate as a “benefit supervisor” a plan employee who has the final authority to authorize or disallow benefit payments in cases where a dispute exists as to the interpretation of plan provisions relating to eligibility for benefits. Under these circumstances, the benefit supervisor would be a fiduciary within the meaning of section 3(21)(A) of the Act.


The Internal Revenue Service notes that it would reach the same answer to this question under section 4975(e)(3) of the Internal Revenue Code of 1954.


D-4 Q: In the case of a plan established and maintained by an employer, are members of the board of directors of the employer fiduciaries with respect to the plan?


A: Members of the board of directors of an employer which maintains an employee benefit plan will be fiduciaries only to the extent that they have responsibility for the functions described in section 3(21)(A) of the Act. For example, the board of directors may be responsible for the selection and retention of plan fiduciaries. In such a case, members of the board of directors exercise “discretionary authority or discretionary control respecting management of such plan” and are, therefore, fiduciaries with respect to the plan. However, their responsibility, and, consequently, their liability, is limited to the selection and retention of fiduciaries (apart from co-fiduciary liability arising under circumstances described in section 405(a) of the Act). In addition, if the directors are made named fiduciaries of the plan, their liability may be limited pursuant to a procedure provided for in the plan instrument for the allocation of fiduciary responsibilities among named fiduciaries or for the designation of persons other than named fiduciaries to carry out fiduciary responsibilities, as provided in section 405(c)(2).


The Internal Revenue Service notes that it would reach the same answer to this question under section 4975(e)(3) of the Internal Revenue Code of 1954.


D-5 Q: Is an officer or employee of an employer or employee organization which sponsors an employee benefit plan a fiduciary with respect to the plan solely by reason of holding such office or employment if he or she performs none of the functions described in section 3(21)(A) of the Act?


A: No, for the reasons stated in response to question D-2.


The Internal Revenue Service notes that it would reach the same answer to this question under section 4975(e)(3) of the Internal Revenue Code of 1954.


FR-11 Q: In discharging fiduciary responsibilities, may a fiduciary with respect to a plan rely on information, data, statistics or analyses provided by other persons who perform purely ministerial functions for such plan, such as those persons described in D-2 above?


A: A plan fiduciary may rely on information, data, statistics or analyses furnished by persons performing ministerial functions for the plan, provided that he has exercised prudence in the selection and retention of such persons. The plan fiduciary will be deemed to have acted prudently in such selection and retention if, in the exercise of ordinary care in such situation, he has no reason to doubt the competence, integrity or responsibility of such persons.


FR-12 Q: How many fiduciaries must an employee benefit plan have?


A: There is no required number of fiduciaries that a plan must have. Each plan must, of course, have at least one named fiduciary who serves as plan administrator and, if plan assets are held in trust, the plan must have at least one trustee. If these requirements are met, there is no limit on the number of fiduciaries a plan may have. A plan may have as few or as many fiduciaries as are necessary for its operation and administration. Under section 402(c)(1) of the Act, if the plan so provides, any person or group of persons may serve in more than one fiduciary capacity, including serving both as trustee and administrator. Conversely, fiduciary responsibilities not involving management and control of plan assets may, under section 405(c)(1) of the Act, be allocated among named fiduciaries and named fiduciaries may designate persons other than named fiduciaries to carry out such fiduciary responsibilities, if the plan instrument expressly provides procedures for such allocation or designation.


FR-13 Q: If the named fiduciaries of an employee benefit plan allocate their fiduciary responsibilities among themselves in accordance with a procedure set forth in the plan for the allocation of responsibilities for operation and administration of the plan, to what extent will a named fiduciary be relieved of liability for acts and omissions of other named fiduciaries in carrying out fiduciary responsibilities allocated to them?


A: If named fiduciaries of a plan allocate responsibilities in accordance with a procedure for such allocation set forth in the plan, a named fiduciary will not be liable for acts and omissions of other named fiduciaries in carrying out fiduciary responsibilities which have been allocated to them, except as provided in section 405(a) of the Act, relating to the general rules of co-fiduciary responsibility, and section 405(c)(2)(A) of the Act, relating in relevant part to standards for establishment and implementation of allocation procedures.


However, if the instrument under which the plan is maintained does not provide for a procedure for the allocation of fiduciary responsibilities among named fiduciaries, any allocation which the named fiduciaries may make among themselves will be ineffective to relieve a named fiduciary from responsibility or liability for the performance of fiduciary responsibilities allocated to other named fiduciaries.


FR-14 Q: If the named fiduciaries of an employee benefit plan designate a person who is not a named fiduciary to carry out fiduciary responsibilities, to what extent will the named fiduciaries be relieved of liability for the acts and omissions of such person in the performance of his duties?


A: If the instrument under which the plan is maintained provides for a procedure under which a named fiduciary may designate persons who are not named fiduciaries to carry out fiduciary responsibilities, named fiduciaries of the plan will not be liable for acts and omissions of a person who is not a named fiduciary in carrying out the fiduciary responsibilities which such person has been designated to carry out, except as provided in section 405(a) of the Act, relating to the general rules of co-fiduciary liability, and section 405(c)(2)(A) of the Act, relating in relevant part to the designation of persons to carry out fiduciary responsibilities.


However, if the instrument under which the plan is maintained does not provide for a procedure for the designation of persons who are not named fiduciaries to carry out fiduciary responsibilities, then any such designation which the named fiduciaries may make will not relieve the named fiduciaries from responsibility or liability for the acts and omissions of the persons so designated.


FR-15 Q: May a named fiduciary delegate responsibility for management and control of plan assets to anyone other than a person who is an investment manager as defined in section 3(38) of the Act so as to be relieved of liability for the acts and omissions of the person to whom such responsibility is delegated?


A: No. Section 405(c)(1) does not allow named fiduciaries to delegate to others authority or discretion to manage or control plan assets. However, under the terms of sections 403(a)(2) and 402(c)(3) of the Act, such authority and discretion may be delegated to persons who are investment managers as defined in section 3(38) of the Act. Further, under section 402(c)(2) of the Act, if the plan so provides, a named fiduciary may employ other persons to render advice to the named fiduciary to assist the named fiduciary in carrying out his investment responsibilities under the plan.


FR-16 Q: Is a fiduciary who is not a named fiduciary with respect to an employee benefit plan personally liable for all phases of the management and administration of the plan?


A: A fiduciary with respect to the plan who is not a named fiduciary is a fiduciary only to the extent that he or she performs one or more of the functions described in section 3(21)(A) of the Act. The personal liability of a fiduciary who is not a named fiduciary is generally limited to the fiduciary functions, which he or she performs with respect to the plan. With respect to the extent of liability of a named fiduciary of a plan where duties are properly allocated among named fiduciaries or where named fiduciaries properly designate other persons to carry out certain fiduciary duties, see question FR-13 and FR-14.


In addition, any fiduciary may become liable for breaches of fiduciary responsibility committed by another fiduciary of the same plan under circumstances giving rise to co-fiduciary liability, as provided in section 405(a) of the Act.


FR-17 Q: What are the ongoing responsibilities of a fiduciary who has appointed trustees or other fiduciaries with respect to these appointments?


A: At reasonable intervals the performance of trustees and other fiduciaries should be reviewed by the appointing fiduciary in such manner as may be reasonably expected to ensure that their performance has been in compliance with the terms of the plan and statutory standards, and satisfies the needs of the plan. No single procedure will be appropriate in all cases; the procedure adopted may vary in accordance with the nature of the plan and other facts and circumstances relevant to the choice of the procedure.


[40 FR 47491, Oct. 9, 1975. Redesignated at 41 FR 1906, Jan. 13, 1976]


§ 2509.75-10 Interpretive bulletin relating to the ERISA Guidelines and the Special Reliance Procedure.


On November 5, 1975, the Department of Labor (the “Department”) and the Internal Revenue Service (the “Service”) announced the publication of a compendium of authoritative rules (hereinafter referred to as the “ERISA Guidelines”) relating to ERISA requirements. See T.I.R. No. 1415 (November 5, 1975) issued by the Service. These rules were published in recognition of the need to provide an immediate and complete set of interim guidelines to facilitate (1) adoption of new employee pension benefit plans (hereinafter referred to as “plans”), and (2) prompt amendment of existing plans, in conformance with the applicable requirements of the Employee Retirement Income Security Act of 1974 (“ERISA”) pending the issuance of final regulations or other rules. These rules govern the application of (1) the qualification requirements of the Internal Revenue Code of 1954 (the “Code”) added or amended by ERISA, and (2) the requirements of the provisions of parts 2 and 3 of title I of ERISA paralleling such qualification requirements (both such sets of requirements hereinafter referred to collectively as the “new qualification requirements”).


The ERISA Guidelines incorporate by reference the documents relating to the new qualification requirements heretofore published by the Department and by the Service as temporary or proposed regulations, revenue rulings, revenue procedures, questions and answers, technical information releases, and other issuances. The ERISA Guidelines also incorporate additional documents published on November 5, 1975, or to be published forthwith, which are necessary to complete the interim guidelines relating to the new qualification requirements. See the schedule set forth below for a complete list and brief description of the documents comprising the ERISA Guidelines.


The Department and the Service emphasized that the ERISA Guidelines constitute the entire set of interim rules of the Department and the Service for satisfying the new qualification requirements, and thus provide authoritative guidance in respect of the new statutory requirements bearing on qualification. These rules are applicable to individually designed plans and to multiemployer (or other multiple employer) plans, and may be relied upon until amended or supplemented by final regulations or other rules. Moreover, the Department and the Service announced that any provisions of final regulations or other rules which amend or supplement the rules contained in the ERISA Guidelines will generally be prospective only, from the date of publication. Further, in the case of employee plan provisions adopted or amended before the date of such publication which satisfy the ERISA Guidelines, such final regulations or other rules will generally be made effective for plan years commencing after such date, except in unusual circumstances.


The Service further announced that the ERISA Guidelines incorporate the procedures that will enable employers to obtain determination letters as to the qualification of pension, annuity, profit sharing, stock bonus and bond purchase plans which satisfy the requirements of sections 401(a), 403(a) and 405(a) of the Code, as amended by ERISA. The Service also pointed out that the ERISA Guidelines will enable sponsors of master and prototype plans (whether newly established or amended) to obtain opinion letters as to the acceptability of the form of such plans, and further, that employers who establish plans designed to meet the requirements of section 301(d) of the Tax Reduction Act of 1975 (relating to employee stock ownership plans) will be able to obtain determination letters as to the acceptability of such plans (whether or not such plans are intended to be qualified).


To facilitate further the adoption of new plans and the prompt amendment of existing plans in conformance with the new qualification requirements, the Service announced on November 5, 1975, the adoption of a special procedure (hereinafter referred to as the “Special Reliance Procedure”) pursuant to which the adoption, on or before May 30, 1976, of new plans and amendments of existing plans may be effectuated with full reliance upon the rules which comprise the ERISA Guidelines and without regard to any amendment or supplementation of such rules before such date. Therefore, except in unusual circumstances (described in Technical Information Release No. 1416 (November 5, 1975)), plans which comply with the Special Reliance Procedure shall generally be considered by the Service as satisfying the qualification requirements of the Code added or amended by ERISA for plan years commencing on or before December 31, 1976, to which such requirements are applicable, notwithstanding the date when final regulations or other rules hereafter published which amend or supplement the rules comprising the ERISA Guidelines may otherwise be made effective. Reference is hereby made to Technical Information Release No. 1416 (November 5, 1975) for a description of the Special Reliance Procedure.


The Department announced that plans which comply with the Special Reliance Procedure will be considered by the Department as satisfying the requirements of the provisions of parts 2 and 3 of title I of ERISA which parallel the qualification requirements of the Code added or amended by ERISA to the same extent as such plans are considered by the Service as satisfying, in accordance with the terms of the Special Reliance Procedure, such qualification requirements.


The availability of the Special Reliance Procedure will substantially diminish the occasions for plans to avail themselves of the right to satisfy, for tax purposes, the qualification requirements of the Code (added or amended by ERISA) by retroactive amendments adopted during or after the close of a plan year, in accordance with section 401(b) of the Code and the temporary regulations thereunder. The Department pointed out that no explicit parallel provision to section 401(b) of the Code is contained in title I of ERISA. Nevertheless, to the extent retroactive amendments to a plan are made to satisfy the requirements of parts 2 and 3 of title I of ERISA which parallel the qualification requirements of the Code added or amended by ERISA, the Department noted that such plan will be in compliance with such requirements if such an amendment designed to satisfy such requirements (1) is adopted by the end of the plan year to which such requirements are applicable, and (2) is made effective for all purposes for such entire plan year.


The schedule of documents comprising the ERISA Guidelines follows.


ERISA Guidelines—Schedule of Documents

Publication date 1975
Document
Subject
Code and ERISA sections
Jan. 8TIR 1334Questions and answers relating to defined contribution plans subject to ERISA410, 411, et al.
Apr. 2140 FR 17576Notice of proposed rulemaking: Qualification (and other aspects) of HR-10 plans401(c), 401(d), 401(e), 46, 50A, 72, 404(e), 901, and 1379.
June 4T.D. 7358Temporary regulations: Notification of interested parties7476.
July 14T.D. 7367Temporary regulations: Notice of determination of qualification7476.
Sept. 840 FR 41654Department of Labor—Minimum standards for hours of service, years of service, and breaks in service relating to participation, vesting, and accrual of benefits401(a)(3)(B), 411(a)(5)(C), and ERISA secs. 202, 203, and 204.
Sept. 17TIR 1403Questions and answers relating mainly to defined benefit plans subject to ERISA (addition to TIR 1334)410, 411, et al.
Sept. 1840 FR 43034Notice of proposed rulemaking: Definitions of multi-employer plan and plan administrator414(f) and (g).
Sept. 29T.D. 7377Temporary regulations: Certain retroactive amendments of employee plans401(b).
Oct. 3T.D. 7379Temporary regulations: Qualified joint and survivor annuities401(a)(11).
T.D. 7380Temporary regulations: Minimum participation standards410.
Oct. 8T.D. 7381Temporary regulations: Commencement of benefits401(a)(14).
Oct. 15T.D. 7382Temporary regulations: Requirement that benefits under a qualified plan are not decreased on account of certain social security increases401(a)(15).
Oct. 16T.D. 7383Temporary regulations: Nonbank trustees of pension and profit sharing trusts benefiting owner-employees401(d)(1).
40 FR 48517Notice of proposed rulemaking: Certain custodial accounts401(f).
Oct. 30TIR 1408Questions and answers relating to mergers, consolidations, etc401(a)(12) and 414(1).
Nov. 3Rev. Rul. 75-480, 1975-44 IRBUpdating of Rev. Rul. 71-446 to reflect changes mandated by ERISA401(a)(5).
Rev. Rul. 75-481, 1975-44 IRBGuidelines for determining whether contributions or benefits under plan satisfy the limitations of sec. 415 of the code401(a)(16) and 415.
TIR 1411, Rev. Proc. 75-49, 1975-48 IRBVesting and discrimination401(a)(4) and 411(d)(1).
Nov. 4TIR 1413Questions and answers relating to employee stock ownership plans401, 4975, and sec. 301(d) of the Tax Reduction Act of 1975.
Nov. 5T.D. 7387Temporary regulations on minimum vesting standards411.
T.D. 7388Controlled groups, businesses under common control, etc414(b) and (c).
(
1)
TIRNonforfeiture of employee derived accrued benefit upon death411(a)(1).
(
1)
Department of Labor—Interpretive bulletin: Definition of seasonal industries410(a)(3)(B), 411(a)(5)(C), and ERISA secs. 202(a)(3)(C), 203(b)(2)(C).
Nov. 740 FR 52008Department of Labor—additional requirements applicable to definition of multiemployer plan414(f) and ERISA sec. 3(37).
(
1)
Department of Labor—suspension of benefits upon reemployment of retiree411(a)(3)(B) and ERISA sec. 203(a)(3)(A).
Dec. 3TIR 1422Assignment or alienation of plan benefits401(a)(13).
Dec. 9TIR 1424, Rev. Proc. 76-1, 1976-1 IRB.Vesting and discrimination401(a)(4) and 411(d)(1).
(
1)
TIR, Rev. RulAppropriate conversion factor411(c)(2)(B)(ii).


1 To be published forthwith.


[41 FR 3289, Jan. 22, 1976]


§ 2509.78-1 Interpretive bulletin relating to payments by certain employee welfare benefit plans.


The Department of Labor today announced its interpretation of certain provisions of part 4 of title I of the Employee Retirement Income Security Act of 1974 (ERISA), as those sections apply to a payment by multiple employer vacation plans of a sum of money to which a participant of beneficiary of the plan is entitled to a party other than the participant or beneficiary.
1




1 Multiple employer vacation plans generally consist of trust funds to which employers are obligated to make contributions pursuant to collective bargaining agreements. Benefits are generally paid at specified intervals (usually annually or semi-annually) and such benefits are neither contingent upon the occurrence of a specified event nor restricted to use for a specified purpose when paid to the participant.


Section 402(b)(4) of ERISA requires every employee benefit plan to specify the basis on which payments are made to and from the plan.


Section 403(c)(1) of ERISA generally requires the assets of an employee benefit plan to be held for the exclusive purpose of providing benefits to participants in the plan and their beneficiaries
2
and defraying reasonable expenses of administering the plan. Similarly, section 404(a)(1)(A) requires a plan fiduciary to discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries of the plan and for the exclusive purpose of providing benefits to participants and their beneficiaries and defraying reasonable expenses of administering the plan. Section 404(a)(1)(D) further requires the fiduciary to act in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with the provisions of title I of ERISA.




2 Section 403 (c) and (d) provide certain exceptions to this requirement, not here relevant.


In addition, section 406(a) of ERISA specifically prohibits a fiduciary with respect to a plan from causing the plan to engage in a transaction if he knows or should know that such transaction constitutes, inter alia, a direct or indirect: furnishing of goods, services or facilities between the plan and a party in interest (section 406(a)(1)(C)); or transfer to, or use by or for the benefit of, a party in interest of any assets of the plan (section 406(a)(1)(D)). Section 406(b)(2) of ERISA prohibits a plan fiduciary from acting in any transaction involving the plan on behalf of a party, or representing a party, whose interests are adverse to the interests of the plan or of its participants or beneficiaries.


In this regard, however, Prohibited Transaction Exemptions 76-1, Part C, (41 FR 12740, March 26, 1976) and 77-10 (42 FR 33918, July 1, 1977) exempt from the prohibitions of section 406(a) and 406(b)(2), respectively, the provision of administrative services by a multiple employer plan if specified conditions are met. These conditions are: (a) the plan receives reasonable compensation for the provision of the services (for purposes of the exemption, “reasonable compensation” need not include a profit which would ordinarily have been received in an arm’s length transaction, but must be sufficient to reimburse the plan for its costs); (b) the arrangement allows any multiple employer plan which is a party to the transaction to terminate the relationship on a reasonably short notice under the circumstances; and (c) the plan complies with certain recordkeeping requirements. It should be noted that plans not subject to Prohibited Transaction Exemptions 76-1 and 77-10—i.e., plans that are not multiple employer plans—cannot rely upon these exemptions.


A payment by a vacation plan of all or any portion of benefits to which a plan participant or beneficiary is entitled to a party other than the participant or beneficiary will comply with the above-mentioned sections of ERISA if the arrangement pursuant to which payments are made does not constitute a prohibited transaction under ERISA and:


(1) The plan documents expressly state that benefits payable under the plan to a participant or beneficiary may, at the direction of the participant or beneficiary, be paid to a third party rather than to the participant or beneficiary;


(2) The participant or beneficiary directs in writing that the plan trustee(s) shall pay a named third party all or a specified portion of the sum of money which would otherwise be paid under the plan to him or her; and


(3) A payment is made to a third party only when or after the money would otherwise be payable to the plan participant or beneficiary.


In the case of a multiple employer plan (as defined in Prohibited Transaction Exemption 76-1, Part C, Section III), if the arrangement to make payments to a third party is a prohibited transaction under ERISA, the arrangement will comply with the above-mentioned sections of ERISA if the conditions of Prohibited Transaction Exemptions 76-1, Part C, and 77-10 and the above three paragraphs are met. In this regard, it is the view of the Department that the mere payment of money to which a participant or beneficiary is entitled, at the direction of the participant or beneficiary, to a third party who is a party in interest would not constitute a transfer of plan assets prohibited under section 406(a)(1)(D). It is also the view of the Department that if a trustee or other fudiciary of a plan, in addition to his duties with respect to the plan, serves in a decisionmaking capacity with another party, the mere fact that the fiduciary effects payments to such party of money to which a participant is entitled at the direction of the participant and in accordance with specific provisions of governing plan documents and instruments, does not amount to a prohibited transaction under section 406(b)(2).

It should be noted that the interpretation set forth herein deals solely with the application of the provisions of title I of ERISA to the arrangements described herein. It does not deal with the application of any other statute to such arrangements. Specifically, no opinion is expressed herein as to the application of section 302 of the Labor Management Relations Act, 1947 or the Internal Revenue Code of 1954 (particularly the provisions of section 501(c)(9) of the Code).


[43 FR 58565, Dec. 15, 1978]


§ 2509.94-3 Interpretive bulletin relating to in-kind contributions to employee benefit plans.


(a) General. This bulletin sets forth the views of the Department of Labor (the Department) concerning in-kind contributions (i.e., contributions of property other than cash) in satisfaction of an obligation to contribute to an employee benefit plan to which part 4 of title I of the Employee Retirement Income Security Act of 1974 (ERISA) or a plan to which section 4975 of the Internal Revenue Code (the Code) applies. (For purposes of this document the term “plan” shall refer to either or both types of such entities as appropriate). Section 406(a)(1)(A) of ERISA provides that a fiduciary with respect to a plan shall not cause the plan to engage in a transaction if the fiduciary knows or should know that the transaction constitutes a direct or indirect sale or exchange of any property between a plan and a “party in interest” as defined in section 3(14) of ERISA. The Code imposes a two-tier excise tax under section 4975(c)(1)(A) an any direct or indirect sale or exchange of any property between a plan and a “disqualified person” as defined in section 4975(e)(2) of the Code. An employer or employee organization that maintains a plan is included within the definitions of “party in interest” and “disqualified person.”
1




1 Under Reorganization Plan No. 4 of 1978 (43 FR 47713, October 17, 1978), the authority of the Secretary of the Treasury to issue rulings under the prohibited transactions provisions of section 4975 of the Code has been transferred, with certain exceptions not here relevant, to the Secretary of Labor. Except with respect to the types of plans covered, the prohibited transaction provisions of section 406 of ERISA generally parallel the prohibited transaction of provisions of section 4975 of the Code.


In Commissioner of Internal Revenue v. Keystone Consolidated Industries, Inc., ____ U.S. ____, 113 S. Ct. 2006 (1993), the Supreme Court held that an employer’s contribution of unencumbered real property to a tax-qualified defined benefit pension plan was a sale or exchange prohibited under section 4975 of the Code where the stated fair market value of the property was credited against the employer’s obligation to the defined benefit pension plan. The parties stipulated that the property was contributed to the plan free of encumbrances and the stated fair market value of the property was not challenged. 113 S. Ct. at 2009. In reaching its holding the Court construed section 4975(f)(3) of the Code (and therefore section 406(c) of ERISA), regarding transfers of encumbered property, not as a limitation but rather as extending the reach of section 4975(c)(1)(A) of the Code (and thus section 406(a)(1)(A) of ERISA) to include contributions of encumbered property that do not satisfy funding obligations. Id. at 2013. Accordingly, the Court concluded that the contribution of unencumbered property was prohibited under section 4975(c)(1)(A) of the Code (and thus section 406(a)(1)(A) of ERISA) as “at least both an indirect type of sale and a form of exchange, since the property is exchanged for diminution of the employer’s funding obligation.” 113 S. Ct. at 2012.


(b) Defined benefit plans. Consistent with the reasoning of the Supreme Court in Keystone, because an employer’s or plan sponsor’s in-kind contribution to a defined benefit pension plan is credited to the plan’s funding standard account it would constitute a transfer to reduce an obligation of the sponsor or employer to the plan. Therefore, in the absence of an applicable exemption, such a contribution would be prohibited under section 406(a)(1)(A) of ERISA and section 4975(c)(1)(A) of the Code. Such an in-kind contribution would constitute a prohibited transaction even if the value of the contribution is in excess of the sponsor’s or employer’s funding obligation for the plan year in which the contribution is made and thus is not used to reduce the plan’s accumulated funding deficiency for that plan year because the contribution would result in a credit against funding obligations which might arise in the future.


(c) Defined contribution and welfare plans. In the context of defined contribution pension plans and welfare plans, it is the view of the Department that an in-kind contribution to a plan that reduces an obligation of a plan sponsor or employer to make a contribution measured in terms of cash amounts would constitute a prohibited transaction under section 406(a)(1)(A) of ERISA (and section 4975(c)(1)(A) of the Code) unless a statutory or administrative exemption under section 408 of ERISA (or sections 4975(c)(2) or (d) of the Code) applies. For example, if a profit sharing plan required the employer to make annual contributions “in cash or in kind” equal to a given percentage of the employer’s net profits for the year, an in-kind contribution used to reduce this obligation would constitute a prohibited transaction in the absence of an exemption because the amount of the contribution obligation is measured in terms of cash amounts (a percentage of profits) even though the terms of the plan purport to permit in-kind contributions.


Conversely, a transfer of unencumbered property to a welfare benefit plan that does not relieve the sponsor or employer of any present or future obligation to make a contribution that is measured in terms of cash amounts would not constitute a prohibited transaction under section 406(a)(1)(A) of ERISA or section 4975(c)(1)(A) of the Code. The same principles apply to defined contribution plans that are not subject to the minimum funding requirements of section 302 of ERISA or section 412 of the Code. For example, where a profit sharing or stock bonus plan, by its terms, is funded solely at the discretion of the sponsoring employer, and the employer is not otherwise obligated to make a contribution measured in terms of cash amounts, a contribution of unencumbered real property would not be a prohibited sale or exchange between the plan and the employer. If, however, the same employer had made an enforceable promise to make a contribution measured in terms of cash amounts to the plan, a subsequent contribution of unencumbered real property made to offset such an obligation would be a prohibited sale or exchange.


(d) Fiduciary standards. Independent of the application of the prohibited transaction provisions, fiduciaries of plans covered by part 4 of title I of ERISA must determine that acceptance of an in-kind contribution is consistent with ERISA’s general standards of fiduciary conduct. It is the view of the Department that acceptance of an in-kind contribution is a fiduciary act subject to section 404 of ERISA. In this regard, sections 406(a)(1)(A) and (B) of ERISA require that fiduciaries discharge their duties to a plan solely in the interests of the participants and beneficiaries, for the exclusive purpose of providing benefits and defraying reasonable administrative expenses, and with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. In addition, section 406(a)(1)(C) requires generally that fiduciaries diversify plan assets so as to minimize the risk of large losses. Accordingly, the fiduciaries of a plan must act “prudently,” “solely in the interest” of the plan’s participants and beneficiaries and with a view to the need to diversify plan assets when deciding whether to accept in-kind contributions. If accepting an in-kind contribution is not “prudent,” not “solely in the interest” of the participants and beneficiaries of the plan, or would result in an improper lack of diversification of plan assets, the responsible fiduciaries of the plan would be liable for any losses resulting from such a breach of fiduciary responsibility, even if a contribution in kind does not constitute a prohibited transaction under section 406 of ERISA. In this regard, a fiduciary should consider any liabilities appurtenant to the in-kind contribution to which the plan would be exposed as a result of acceptance of the contribution.


[59 FR 66736, Dec. 28, 1994]


§ 2509.95-1 Interpretive bulletin relating to the fiduciary standards under ERISA when selecting an annuity provider for a defined benefit pension plan.


(a) Scope. This Interpretive Bulletin provides guidance concerning certain fiduciary standards under part 4 of title I of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 1104-1114, applicable to the selection of an annuity provider for the purpose of benefit distributions from a defined benefit pension plan (hereafter “pension plan”) when the pension plan intends to transfer liability for benefits to an annuity provider. For guidance applicable to the selection of an annuity provider for benefit distributions from an individual account plan see 29 CFR 2550.404a-4.


(b) In General. Generally, when a pension plan purchases an annuity from an insurer as a distribution of benefits, it is intended that the plan’s liability for such benefits is transferred to the annuity provider. The Department’s regulation defining the term “participant covered under the plan” for certain purposes under title I of ERISA recognizes that such a transfer occurs when the annuity is issued by an insurance company licensed to do business in a State. 29 CFR 2510.3-3(d)(2)(ii). Although the regulation does not define the term “participant” or “beneficiary” for purposes of standing to bring an action under ERISA § 502(a), 29 U.S.C. 1132(a), it makes clear that the purpose of a benefit distribution annuity is to transfer the plan’s liability with respect to the individual’s benefits to the annuity provider.


Pursuant to ERISA section 404(a)(1), 29 U.S.C. 1104(a)(1), fiduciaries must discharge their duties with respect to the plan solely in the interest of the participants and beneficiaries. Section 404(a)(1)(A), 29 U.S.C. 1104(a)(1)(A), states that the fiduciary must act for the exclusive purpose of providing benefits to the participants and beneficiaries and defraying reasonable plan administration expenses. In addition, section 404(a)(1)(B), 29 U.S.C. 1104(a)(1)(B), requires a fiduciary to act with the care, skill, prudence and diligence under the prevailing circumstances that a prudent person acting in a like capacity and familiar with such matters would use.


(c) Selection of Annuity Providers. The selection of an annuity provider for purposes of a pension benefit distribution, whether upon separation or retirement of a participant or upon the termination of a plan, is a fiduciary decision governed by the provisions of part 4 of title I of ERISA. In discharging their obligations under section 404(a)(1), 29 U.S.C. 1104(a)(1), to act solely in the interest of participants and beneficiaries and for the exclusive purpose of providing benefits to the participants and beneficiaries as well as defraying reasonable expenses of administering the plan, fiduciaries choosing an annuity provider for the purpose of making a benefit distribution must take steps calculated to obtain the safest annuity available, unless under the circumstances it would be in the interests of participants and beneficiaries to do otherwise. In addition, the fiduciary obligation of prudence, described at section 404(a)(1)(B), 29 U.S.C. 1104(a)(1)(B), requires, at a minimum, that plan fiduciaries conduct an objective, thorough and analytical search for the purpose of identifying and selecting providers from which to purchase annuities. In conducting such a search, a fiduciary must evaluate a number of factors relating to a potential annuity provider’s claims paying ability and creditworthiness. Reliance solely on ratings provided by insurance rating services would not be sufficient to meet this requirement. In this regard, the types of factors a fiduciary should consider would include, among other things:


(1) The quality and diversification of the annuity provider’s investment portfolio;


(2) The size of the insurer relative to the proposed contract;


(3) The level of the insurer’s capital and surplus;


(4) The lines of business of the annuity provider and other indications of an insurer’s exposure to liability;


(5) The structure of the annuity contract and guarantees supporting the annuities, such as the use of separate accounts;


(6) The availability of additional protection through state guaranty associations and the extent of their guarantees. Unless they possess the necessary expertise to evaluate such factors, fiduciaries would need to obtain the advice of a qualified, independent expert. A fiduciary may conclude, after conducting an appropriate search, that more than one annuity provider is able to offer the safest annuity available.


(d) Costs and Other Considerations. The Department recognizes that there are situations where it may be in the interest of the participants and beneficiaries to purchase other than the safest available annuity. Such situations may occur where the safest available annuity is only marginally safer, but disproportionately more expensive than competing annuities, and the participants and beneficiaries are likely to bear a significant portion of that increased cost. For example, where the participants in a terminating pension plan are likely to receive, in the form of increased benefits, a substantial share of the cost savings that would result from choosing a competing annuity, it may be in the interest of the participants to choose the competing annuity. It may also be in the interest of the participants and beneficiaries to choose a competing annuity of the annuity provider offering the safest available annuity is unable to demonstrate the ability to administer the payment of benefits to the participants and beneficiaries. The Department notes, however, that increased cost or other considerations could never justify putting the benefits of annuitized participants and beneficiaries at risk by purchasing an unsafe annuity.


In contrast to the above, a fiduciary’s decision to purchase more risky, lower-priced annuities in order to ensure or maximize a reversion of excess assets that will be paid solely to the employer-sponsor in connection with the termination of an over-funded pension plan would violate the fiduciary’s duties under ERISA to act solely in the interest of the plan participants and beneficiaries. In such circumstances, the interests of those participants and beneficiaries who will receive annuities lies in receiving the safest annuity available and other participants and beneficiaries have no countervailing interests. The fiduciary in such circumstances must make diligent efforts to assure that the safest available annuity is purchased.


Similarly, a fiduciary may not purchase a riskier annuity solely because there are insufficient assets in a defined benefit plan to purchase a safer annuity. The fiduciary may have to condition the purchase of annuities on additional employer contributions sufficient to purchase the safest available annuity.


(e) Conflicts of Interest. Special care should be taken in reversion situations where fiduciaries selecting the annuity provider have an interest in the sponsoring employer which might affect their judgment and therefore create the potential for a violation of ERISA § 406(b)(1). As a practical matter, many fiduciaries have this conflict of interest and therefore will need to obtain and follow independent expert advice calculated to identify those insurers with the highest claims-paying ability willing to write the business.


[60 FR 12329, Mar. 6, 1995, as amended at 72 FR 52006, Sept. 12, 2007; 73 FR 58447, Oct. 7, 2008]


§ 2509.96-1 Interpretive bulletin relating to participant investment education.

(a) Scope. This interpretive bulletin sets forth the Department of Labor’s interpretation of section 3(21)(A)(ii) of the Employee Retirement Income Security Act of 1974, as amended (ERISA), and 29 CFR 2510.3-21(c) as applied to the provision of investment-related educational information to participants and beneficiaries in participant-directed individual account pension plans (i.e., pension plans that permit participants and beneficiaries to direct the investment of assets in their individual accounts, including plans that meet the requirements of the Department’s regulations at 29 CFR 2550.404c-1).


(b) General. Fiduciaries of an employee benefit plan are charged with carrying out their duties prudently and solely in the interest of participants and beneficiaries of the plan, and are subject to personal liability to, among other things, make good any losses to the plan resulting from a breach of their fiduciary duties. ERISA sections 403, 404 and 409, 29 U.S.C. 1103, 1104, and 1109. Section 404(c) of ERISA provides a limited exception to these rules for a pension plan that permits a participant or beneficiary to exercise control over the assets in his or her individual account. The Department of Labor’s regulation, at 29 CFR 2550.404c-1, describes the kinds of plans to which section 404(c) applies, the circumstances under which a participant or beneficiary will be considered to have exercised independent control over the assets in his or her account, and the consequences of a participant’s or beneficiary’s exercise of such control.
1
With both an increase in the number of participant-directed individual account plans and the number of investment options available to participants and beneficiaries under such plans, there has been an increasing recognition of the importance of providing participants and beneficiaries whose investment decisions will directly affect their income at retirement, with information designed to assist them in making investment and retirement-related decisions appropriate to their particular situations. Concerns have been raised, however, that the provision of such information may in some situations be viewed as rendering “investment advice for a fee or other compensation,” within the meaning of ERISA section 3(21)(A)(ii), thereby giving rise to fiduciary status and potential liability under ERISA for investment decisions of plan participants and beneficiaries. In response to these concerns, the Department of Labor is clarifying herein the applicability of ERISA section 3(21)(A)(ii) and 29 CFR 2510.3-21(c) to the provision of investment-related educational information to participants and beneficiaries in participant directed individual account plans.
2
In providing this clarification, the Department does not address the “fee or other compensation, direct or indirect,” which is a necessary element of fiduciary status under ERISA section 3(21)(A)(ii).
3




1 The section 404(c) regulation conditions relief from fiduciary liability on, among other things, the participant or beneficiary being provided or having the opportunity to obtain sufficient investment information regarding the investment alternatives available under the plan in order to make informed investment decisions. Compliance with this condition, however, does not require that participants and beneficiaries be offered or provided either investment advice or investment education, e.g. regarding general investment principles and strategies, to assist them in making investment decisions. 29 CFR 2550.404c-1(c)(4).




2 Issues relating to the circumstances under which information provided to participants and beneficiaries may affect a participant’s or beneficiary’s ability to exercise independent control over the assets in his or her account for purposes of relief from fiduciary liability under ERISA section 404(c) are beyond the scope of this interpretive bulletin. Accordingly, no inferences should be drawn regarding such issues. See 29 CFR 2550.404c-1(c)(2). It is the view of the Department, however, that the provision of investment-related information and material to participants and beneficiaries in accordance with paragraph (d) of this interpretive bulletin will not, in and of itself, affect the availability of relief under section 404(c).




3 The Department has expressed the view that, for purposes of section 3(21)(A)(ii), such fees or other compensation need not come from the plan and should be deemed to include all fees or other compensation incident to the transaction in which the investment advise has been or will be rendered. See A.O. 83-60A (Nov. 21, 1983); Reich v. McManus, 883 F. Supp. 1144 (N.D. Ill. 1995).


(c) Investment advice. Under ERISA section 3(21)(A)(ii), a person is considered a fiduciary with respect to an employee benefit plan to the extent that person “renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority to do so . . . .” The Department issued a regulation, at 29 CFR 2510.3-21(c), describing the circumstances under which a person will be considered to be rendering “investment advice” within the meaning of section 3(21)(A)(ii). Because section 3(21)(A)(ii) applies to advice with respect to “any moneys or other property” of a plan and 29 CFR 2510.3-21(c) is intended to clarify the application of that section, it is the view of the Department of Labor that the criteria set forth in the regulation apply to determine whether a person renders “investment advice” to a pension plan participant or beneficiary who is permitted to direct the investment of assets in his or her individual account. Applying 29 CFR 2510.3-21(c) in the context of providing investment-related information to participants and beneficiaries of participant-directed individual account pension plans, a person will be considered to be rendering “investment advice,” within the meaning of ERISA section 3(21)(A)(ii), to a participant or beneficiary only if:


(1)(i) The person renders advice to the participant or beneficiary as to the value of securities or other property, or makes recommendations as to the advisability of investing in, purchasing, or selling securities or other property (2510.3-21(c)(1)(i); and


(ii) The person, either directly or indirectly,


(A) Has discretionary authority or control with respect to purchasing or selling securities or other property for the participant or beneficiary (2510.3-21(c)(1)(ii)(A)), or


(B) Renders the advice on a regular basis to the participant or beneficiary, pursuant to a mutual agreement, arrangement or understanding (written or otherwise) with the participant or beneficiary that the advice will serve as a primary basis for the participant’s or beneficiary’s investment decisions with respect to plan assets and that such person will render individualized advice based on the particular needs of the participant or beneficiary (2510.3-21(c)(1)(ii)(B)).
4
Whether the provision of particular investment-related information or materials to a participant or beneficiary constitutes the rendering of “investment advice,” within the meaning of 29 CFR 2510.3-21(c)(1), generally can be determined only by reference to the facts and circumstances of the particular case with respect to the individual plan participant or beneficiary. To facilitate such determinations, however, the Department of Labor has identified, in paragraph (d), below, examples of investment-related information and materials which if provided to plan participants and beneficiaries would not, in the view of the Department, result in the rendering of “investment advice” under ERISA section 3(21)(A)(ii) and 29 CFR 2510.3-21(c).




4 This IB does not address the application of 29 CFR 2510.3-21(c) to communications with fiduciaries of participant-directed individual account pension plan plans.


(d) Investment education. For purposes of ERISA section 3(21)(A)(ii) and 29 CFR 2510.3-21(c), the Department of Labor has determined that the furnishing of the following categories of information and materials to a participant or beneficiary in a participant-directed individual account pension plan will not constitute the rendering of “investment advice,” irrespective of who provides the information (e.g., plan sponsor, fiduciary or service provider), the frequency with which the information is shared, the form in which the information and materials are provided (e.g., on an individual or group basis, in writing or orally, or via video or computer software), or whether an identified category of information and materials is furnished alone or in combination with other identified categories of information and materials.


(1) Plan information. (i) Information and materials that inform a participant or beneficiary about the benefits of plan participation, the benefits of increasing plan contributions, the impact of preretirement withdrawals on retirement income, the terms of the plan, or the operation of the plan; or


(ii) Information such as that described in 29 CFR 2550.404c-1(b)(2)(i) on investment alternatives under the plan (e.g., descriptions of investment objectives and philosophies, risk and return characteristics, historical return information, or related prospectuses).
5
The information and materials described above relate to the plan and plan participation, without reference to the appropriateness of any individual investment option for a particular participant or beneficiary under the plan. The information, therefore, does not contain either “advice” or “recommendations” within the meaning of 29 CFR 2510.3-21(c)(1)(i). Accordingly, the furnishing of such information would not constitute the rendering of “investment advice” for purposes of section 3(21)(A)(ii) of ERISA.




5 Descriptions of investment alternatives under the plan may include information relating to the generic asset class (e,g., equities, bonds, or cash) of the investment alternatives. 29 CFR 2550.404c-1(b)(2)(i)(B)(1)(ii).


(2) General financial and investment information. Information and materials that inform a participant or beneficiary about: (i) General financial and investment concepts, such as risk and return, diversification, dollar cost averaging, compounded return, and tax deferred investment; (ii) historic differences in rates of return between different asset classes (e.g., equities, bonds, or cash) based on standard market indices; (iii) effects of inflation; (iv) estimating future retirement income needs; (v) determining investment time horizons; and (vi) assessing risk tolerance. The information and materials described above are general financial and investment information that have no direct relationship to investment alternatives available to participants and beneficiaries under a plan or to individual participants or beneficiaries. The furnishing of such information, therefore, would not constitute rendering “advice” or making “recommendations” to a participant or beneficiary within the meaning of 29 CFR 2510.3-21(c)(1)(i). Accordingly, the furnishing of such information would not constitute the rendering of “investment advice” for purposes of section 3(21)(A)(ii) of ERISA.


(3) Asset allocation models. Information and materials (e.g., pie charts, graphs, or case studies) that provide a participant or beneficiary with models, available to all plan participants and beneficiaries, of asset allocation portfolios of hypothetical individuals with different time horizons and risk profiles, where: (i) Such models are based on generally accepted investments theories that take into account the historic returns of different asset classes (e.g., equities, bonds, or cash) over define periods of time; (ii) all material facts and assumptions on which such models are based (e.g., retirement ages, life expectancies, income levels, financial resources, replacement income ratios, inflation rates, and rates of return) accompany the models; (iii) to the extent that an asset allocation model identifies any specific investment alternative available under the plan, the model is accompanied by a statement indicating that other investment alternatives having similar risk and return characteristics may be available under the plan and identifying where information on those investment alternatives may be obtained; and (iv) the asset allocation models are accompanied by a statement indicating that, in applying particular asset allocation models to their individual situations, participants or beneficiaries should consider their other assets, income, and investments (e.g., equity in a home, IRA investments, savings accounts, and interests in other qualified and non-qualified plans) in addition to their interests in the plan. Because the information and materials described above would enable a participant or beneficiary to assess the relevance of an asset allocation model to his or her individual situation, the furnishing of such information would not constitute a “recommendation” within the meaning of 29 CFR 2510.3-21(c)(1)(i) and, accordingly, would not constitute “investment advice” for purposes of section 3(21)(A)(ii) of ERISA. This result would not, in the view of the Department, be affected by the fact that a plan offers only one investment alternative in a particular asset class identified in an asset allocation model.


(4) Interactive investment materials. Questionnaires, worksheets, software, and similar materials which provide a participant or beneficiary the means to estimate future retirement income needs and assess the impact of different asset allocations on retirement income, where: (i) Such materials are based on generally accepted investment theories that take into account the historic returns of different asset classes (e.g., equities, bonds, or cash) over defined periods of time; (ii) there is an objective correlation between the asset allocations generated by the materials and the information and data supplied by the participant or beneficiary; (iii) all material facts and assumptions (e.g., retirement ages, life expectancies, income levels, financial resources, replacement income ratios, inflation rates, and rates of return) which may affect a participant’s or beneficiary’s assessment of the different asset allocations accompany the materials or are specified by the participant or beneficiary; (iv) to the extent that an asset allocation generated by the materials identifies any specific investment alternative available under the plan, the asset allocation is accompanied by a statement indicating that other investment alternatives having similar risk and return characteristics may be available under the plan and identifying where information on those investment alternatives may be obtained; and (v) the materials either take into account or are accompanied by a statement indicating that, in applying particular asset allocations to their individual situations, participants or beneficiaries should consider their other assets, income, and investments (e.g., equity in a home, IRA investments, savings accounts, and interests in other qualified and non-qualified plans) in addition to their interests in the plan. The information provided through the use of the above-described materials enables participants and beneficiaries independently to design and assess multiple asset allocation models, but otherwise these materials do not differ from asset allocation models based on hypothetical assumptions. Such information would not constitute a “recommendation” within the meaning of 29 CFR 2510.3-21(c)(1)(i) and, accordingly, would not constitute “investment advice” for purposes of section 3(21)(A)(ii) of ERISA. The Department notes that the information and materials described in subparagraphs (1)-(4) above merely represent examples of the type of information and materials which may be furnished to participants and beneficiaries without such information and materials constituting “investment advice.” In this regard, the Department recognizes that there may be many other examples of information, materials, and educational services which, if furnished to participants and beneficiaries, would not constitute “investment advice.” Accordingly, no inferences should be drawn from subparagraphs (1)-(4), above, with respect to whether the furnishing of any information, materials or educational services not described therein may constitute “investment advice.” Determinations as to whether the provision of any information, materials or educational services not described herein constitutes the rendering of “investment advice” must be made by reference to the criteria set forth in 29 CFR 2510. 3-21(c)(1).


(e) Selection and monitoring of educators and advisors. As with any designation of a service provider to a plan, the designation of a person(s) to provide investment educational services or investment advice to plan participants and beneficiaries is an exercise of discretionary authority or control with respect to management of the plan; therefore, persons making the designation must act prudently and solely in the interest of the plan participants and beneficiaries, both in making the designation(s) and in continuing such designation(s). See ERISA sections 3(21)(A)(i) and 404(a), 29 U.S.C. 1002 (21)(A)(i) and 1104(a). In addition, the designation of an investment advisor to serve as a fiduciary may give rise to co-fiduciary liability if the person making and continuing such designation in doing so fails to act prudently and solely in the interest of plan participants and beneficiaries; or knowingly participates in, conceals or fails to make reasonable efforts to correct a known breach by the investment advisor. See ERISA section 405(a), 29 U.S.C. 1105(a). The Department notes, however, that, in the context of an ERISA section 404(c) plan, neither the designation of a person to provide education nor the designation of a fiduciary to provide investment advice to participants and beneficiaries would, in itself, give rise to fiduciary liability for loss, or with respect to any breach of part 4 of title I of ERISA, that is the direct and necessary result of a participant’s or beneficiary’s exercise of independent control. 29 CFR 2550.404c-1(d). The Department also notes that a plan sponsor or fiduciary would have no fiduciary responsibility or liability with respect to the actions of a third party selected by a participant or beneficiary to provide education or investment advice where the plan sponsor or fiduciary neither selects nor endorses the educator or advisor, nor otherwise makes arrangements with the educator or advisor to provide such services.


[85 FR 40590, July 7, 2020]


§ 2509.99-1 Interpretive Bulletin Relating to Payroll Deduction IRAs.


(a) Scope. This interpretive bulletin sets forth the Department of Labor’s (the Department’s) interpretation of section 3(2)(A) of the Employee Retirement Income Security Act of 1974, as amended, (ERISA) and 29 CFR 2510.3-2(d), as applied to payroll deduction programs established by employers
1
for the purpose of enabling employees to make voluntary contributions to individual retirement accounts or individual retirement annuities (IRAs) described in section 408(a) or (b) or section 408A of the Internal Revenue Code (the Code).




1 The views expressed in this Interpretive Bulletin with respect to payroll deduction programs of employers are also generally applicable to dues checkoff programs of employee organizations.


(b) General. It has been the Department’s long-held view that an employer who simply provides employees with the opportunity for making contributions to an IRA through payroll deductions does not thereby establish a “pension plan” within the meaning of section 3 (2) (A) of ERISA. In this regard, 29 CFR 2510.3-2 (d) sets forth a safe harbor under which IRAs will not be considered to be pension plans when the conditions of the regulation are satisfied. Thus, an employer may, with few constraints, provide to its employees an opportunity for saving for retirement, under terms and conditions similar to those of certain other optional payroll deduction programs, such as for automatic savings deposits or purchases of United States savings bonds, without thereby creating a pension plan under Title I of ERISA. The guidance provided herein is intended to clarify the application of the IRA safe harbor set forth at 29 CFR 2510.3-2 (d) and, thereby, facilitate the establishment of payroll deduction IRAs.


(c) Employee communications. (1) It is the Department’s view that, so long as an employer maintains neutrality with respect to an IRA sponsor in its communications with its employees, the employer will not be considered to “endorse” an IRA payroll deduction program for purposes of 29 CFR 2510.3-2(d).
2
An employer may encourage its employees to save for retirement by providing general information on the IRA payroll deduction program and other educational materials that explain the advisability of retirement savings, including the advantages of contributing to an IRA, without thereby converting the program under which the employees’ wages are withheld for contribution into the IRAs into an ERISA covered plan. However, the employer must make clear that its involvement in the program is limited to collecting the deducted amounts and remitting them promptly to the IRA sponsor and that it does not provide any additional benefit or promise any particular investment return on the employee’s savings.




2 The Department has specifically stated, in its Advisory Opinions, that an employer may demonstrate its neutrality with respect to an IRA sponsor in a variety of ways, including (but not limited to) by ensuring that any materials distributed to employees in connection with an IRA payroll deduction program clearly and prominently state, in language reasonably calculated to be understood by the average employee, that the IRA payroll deduction program is completely voluntary; that the employer does not endorse or recommend either the sponsor or the funding media; that other IRA funding media are available to employees outside the payroll deduction program; that an IRA may not be appropriate for all individuals; and that the tax consequences of contributing to an IRA through the payroll deduction program are generally the same as the consequences of contributing to an IRA outside the program. The employer would not be considered neutral, in the Department’s view, to the extent that the materials distributed to employees identified the funding medium as having as one of its purposes investing in securities of the employer or its affiliates or the funding medium in fact has any significant investments in such securities. If the IRA program were a result of an agreement between the employer and an employee organization, the Department would view informational materials that identified the funding medium as having as one of its purposes investing in an investment vehicle that is designed to benefit an employee organization by providing more jobs for its members, loans to its members, or similar direct benefits (or the funding medium’s actual investments in any such investment vehicles) as indicating the employee organization’s involvement in the program in excess of the limitations of 29 CFR 2510.3-2 (d).


(2) The employer may also do the following without converting a payroll deduction IRA program into an ERISA plan: An employer may answer employees’ specific inquiries about the mechanics of the IRA payroll deduction program and may refer other inquiries to the appropriate IRA sponsor. An employer may provide to employees informational materials written by the IRA sponsor describing the sponsor’s IRA programs or addressing topics of general interest regarding investments and retirement savings, provided that the material does not itself suggest that the employer is other than neutral with respect to the IRA sponsor and its products; the employer may request that the IRA sponsor prepare such informational materials and it may review such materials for appropriateness and completeness. The fact that the employer’s name or logo is displayed in the informational materials in connection with describing the payroll deduction program would not in and of itself, in the Department’s view, suggest that the employer has “endorsed” the IRA sponsor or its products, provided that the specific context and surrounding facts and circumstances make clear to the employees that the employer’s involvement is limited to facilitating employee contributions through payroll deductions.
3




3 For example, if the employer whose logo appeared on the promotional materials provided a statement along the lines of in the first sentence of footnote 5, the employer would not be considered to have endorsed the IRA product.


(d) Employer Limitations on the number of IRA sponsors offered under the program. The Department recognizes that the cost of permitting employees to make IRA contributions through payroll deductions may be significantly affected by the number of IRA sponsors to which the employer must remit contributions. It is the view of the Department that an employer may limit the number of IRA sponsors to which employees may make payroll deduction contributions without exceeding the limitations of 29 CFR 2510.3-2(d), provided that any limitations on, or costs or assessments associated with an employee’s ability to transfer or roll over IRA contributions to another IRA sponsor is fully disclosed in advance of the employee’s decision to participate in the program. The employer may select one IRA sponsor as the designated recipient for payroll deduction contributions, or it may establish criteria by which to select IRA sponsors, e.g., standards relating to the sponsor’s provision of investment education, forms, availability to answer employees’ questions, etc., and may periodically review its selectees to determine whether to continue to designate them. However, an employer may be considered to be involved in the program beyond the limitations set forth in 29 CFR 2510.3-2(d) if the employer negotiates with an IRA sponsor and thereby obtains special terms and conditions for its employees that are not generally available to similar purchasers of the IRA. The employer’s involvement in the IRA program would also be in excess of the limitations of the regulation if the employer exercises any influence over the investments made or permitted by the IRA sponsor.


(e) Administrative fees. The employer may pay any fee the IRA sponsor imposes on employers for services the sponsor provides in connection with the establishment and maintenance of the payroll deduction process itself, without exceeding the limitations of 29 CFR 2510.3-2(d). Further, the employer may assume the internal costs (such as for overhead, bookkeeping, etc) of implementing and maintaining the payroll deduction program without reimbursement from either employees or the IRA sponsor without exceeding the limits of the regulation. However, if an employer pays, in connection with operating an IRA payroll deduction program, any administrative, investment management, or other fee that the IRA sponsor would require employees to pay for establishing or maintaining the IRA, the employer would, in the view of the Department, fall outside the safe harbor and, as a result, may be considered to have established a “pension plan” for its employees.


(f) Reasonable Compensation for Services. 29 CFR 2510.3-2(d) provides that an employer may not receive any consideration in connection with operating an IRA payroll deduction program, but may be paid “reasonable compensation for services actually rendered in connection with payroll deductions or dues checkoffs.” Employers have asked whether “reasonable compensation” under section 2510.3-2(d) includes payments from an IRA sponsor to an employer for the employer’s cost of operating the IRA payroll deduction program. It is the Department’s view that the IRA sponsor may make such payments, to the extent that they constitute compensation for the actual costs of the program to the employer. However, “reasonable compensation” does not include any profit to the employer. See 29 CFR 2510.3-1(j), relating to group or group-type insurance programs. For example, if an IRA sponsor offers to pay an employer an amount equal to a percentage of the assets contributed by employees to IRAs through payroll deduction, such an arrangement might exceed “reasonable compensation” for the services actually rendered by the employer in connection with the IRA payroll deduction program. An employer will also be considered to have received consideration that is not “reasonable compensation” if the IRA sponsor agrees to make or to permit particular investments of IRA contributions in consideration for the employer’s agreement to make a payroll deduction program available to its employees, or if the IRA sponsor agrees to extend credit to or for the benefit of the employer in return for the employer’s making payroll deduction available to the employees.


(g) Additional rules when employer is IRA sponsor or affiliate of IRA sponsor. Under certain circumstances, an employer that offers IRAs in the normal course of its business to the general public or that is an affiliate
4
of an IRA sponsor may provide its employees with the opportunity to make contributions to IRAs sponsored by the employer or the affiliate through a payroll deduction program, without exceeding the limitations of § 2510.3-2(d). If the IRA products offered to the employees for investment of the payroll deduction contributions are identical to IRA products the sponsor offers the general public in the ordinary course of its business, and any management fees, sales commissions, and the like charged by the IRA sponsor to employees participating in the payroll deduction program are the same as those charged by the sponsor to employees of non-affiliated employers that establish an IRA payroll deduction program, the Department has generally taken the position that this alone will not cause the employer to be sufficiently involved in the IRA program as an employer or to have received consideration of the type prohibited under § 2510.2(d)(iv) to warrant the program being considered outside the safe harbor of the regulation.
5 Under such circumstances, the employer, in offering payroll deduction contribution opportunities to its employees, would appear to be acting generally as an IRA sponsor, rather than as the employer of the individuals who make the contributions.
6




4 For purposes of this interpretive bulletin, the definition of “affiliate” in ERISA section 407(d)(7) applies.



5 While the funding medium offered by an employer that is an IRA sponsor or an affiliate of an IRA sponsor might be considered an employer security when offered to its own employees, the fact that informational materials provided to employees identify the funding medium as having as one of its purposes investing in securities of the employer would not, in the Department’s view, involve the employer beyond the limits of 29 CFR 2510.3-2(d). Neither would the fact that the funding medium may actually be so invested. However, the Department would consider that an employer may have exceeded the limitation of 2510.3-2(d) if the informational materials the employer provides to employees suggest that the employer, in providing the IRA payroll deduction program for purposes of investing in employer securities, is acting as an employer in relation to persons who participate in the program, rather than as an IRA sponsor acting in the course of its ordinary business of making IRA products available to the public.



6 However, if an employer that is an IRA sponsor waives enrollment and management fees for its employees’ IRAs, and it normally charges those fees to members of the public who purchase IRAs, the employer would be considered to be so involved in the program as to be outside the safe harbor of the regulation.


[64 FR 33001, June 18, 1999]


§ 2509.2015-02 Interpretive bulletin relating to state savings programs that sponsor or facilitate plans covered by the Employee Retirement Income Security Act of 1974.

(a) Scope. This document sets forth the views of the Department of Labor (Department) concerning the application of the Employee Retirement Income Security Act of 1974 (ERISA) to certain state laws designed to expand the retirement savings options available to private sector workers through ERISA-covered retirement plans. Concern over adverse social and economic consequences of inadequate retirement savings levels has prompted several states to adopt or consider legislation to address this problem.
1
An impediment to state adoption of such measures is uncertainty about the effect of ERISA’s broad preemption of state laws that “relate to” private sector employee benefit plans. In the Department’s view, ERISA preemption principles leave room for states to sponsor or facilitate ERISA-based retirement savings options for private sector employees, provided employers participate voluntarily and ERISA’s requirements, liability provisions, and remedies fully apply to the state programs.




1 For information on the problem of inadequate retirement savings, see the May 2015 Report of the United States Government Accountability Office (GAO), RETIREMENT SECURITY—Most Households Approaching Retirement Have Low Savings (GAO Report-15-419) (available at www.gao.gov/assets/680/670153.pdf). Also see GAO’s September 2015 Report-15-566, RETIREMENT SECURITY—Federal Action Could Help State Efforts to Expand Private Sector Coverage (available at www.gao.gov/assets/680/672419.pdf).


(b) In general. There are advantages to utilizing an ERISA plan approach. Employers as well as employees can make contributions to ERISA plans, contribution limits are higher than for other state approaches that involve individual retirement plans (IRAs) that are not intended to be ERISA-covered plans,
2
and ERISA plan accounts have stronger protection from creditors. Tax credits may also allow small employers to offset part of the costs of starting certain types of retirement plans.
3
Utilizing ERISA plans also provides a well-established uniform regulatory structure with important consumer protections, including fiduciary obligations, automatic enrollment rules, recordkeeping and disclosure requirements, legal accountability provisions, and spousal protections.




2 Some states are developing programs to encourage employees to establish tax-favored IRAs funded by payroll deductions rather than encouraging employers to adopt ERISA plans. Oregon, Illinois, and California, for example, have adopted laws along these lines. Oregon 2015 Session Laws, Ch. 557 (H.B. 2960) (June 2015); Illinois Secure Choice Savings Program Act, 2014 Ill. Legis. Serv. P.A. 98-1150 (S.B. 2758) (West); California Secure Choice Retirement Savings Act, 2012 Cal. Legis. Serv. Ch. 734 (S.B. 1234) (West). These IRA-based initiatives generally require specified employers to deduct amounts from their employees’ paychecks, unless the employee affirmatively elects not to participate, in order that those amounts may be remitted to state-administered IRAs for the employees. The Department is addressing these state “payroll deduction IRA” initiatives separately through a proposed regulation that describes safe-harbor conditions for employers to avoid creation of ERISA-covered plans when they comply with state laws that require payroll deduction IRA programs. This Interpretive Bulletin does not address those laws.




3 For more information, see Choosing a Retirement Solution for Your Small Business, a joint project of the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) and the Internal Revenue Service. Available at www.irs.gov/pub/irs-pdf/p3998.pdf.


The Department is not aware of judicial decisions or other ERISA guidance directly addressing the application of ERISA to state programs that facilitate or sponsor ERISA plans, and, therefore, believes that the states, employers, other plan sponsors, workers, and other stakeholders would benefit from guidance setting forth the general views of the Department on the application of ERISA to these state initiatives. The application of ERISA in an individual case would present novel preemption questions and, if decided by a court, would turn on the particular features of the state-sponsored program at issue, but, as discussed below, the Department believes that neither ERISA section 514 specifically, nor federal preemption generally, are insurmountable obstacles to all state programs that promote retirement saving among private sector workers through the use of ERISA-covered plans.


Marketplace Approach

One state approach is reflected in the 2015 Washington State Small Business Retirement Savings Marketplace Act.
4
This law requires the state to contract with a private sector entity to establish a program that connects eligible employers with qualifying savings plans available in the private sector market. Only products that the state determines are suited to small employers, provide good quality, and charge low fees would be included in the state’s “marketplace.” Washington State employers would be free to use the marketplace or not and would not be required to establish any savings plans for their employees. Washington would merely set standards for arrangements marketed through the marketplace. The marketplace arrangement would not itself be an ERISA-covered plan, and the arrangements available to employers through the marketplace could include ERISA-covered plans and other non-ERISA savings arrangements. The state would not itself establish or sponsor any savings arrangement. Rather, the employer using the state marketplace would establish the savings arrangement, whether it is an ERISA-covered employee pension benefit plan or a non-ERISA savings program. ERISA’s reporting and disclosure requirements, protective standards and remedies would apply to the ERISA plans established by employers using the marketplace. On the other hand, if the plan or arrangement is of a type that would otherwise be exempt from ERISA (such as a payroll deduction IRA arrangement that satisfies the conditions of the existing safe harbor at 29 CFR 2510.3-2(d)), the state’s involvement as organizer or facilitator of the marketplace would not by itself cause that arrangement to be covered by ERISA. Similarly, if, as in Washington State, a marketplace includes a type of plan that is subject to special rules under ERISA, such as the SIMPLE-IRA under section 101(h) of ERISA, the state’s involvement as organizer or facilitator of the marketplace would not by itself affect the application of the special rules.




4 2015 Wash. Sess. Laws chap. 296 (SB 5826) (available at http://app.leg.wa.gov/billinfo/summary.aspx?bill=5826&year=2015).


Prototype Plan Approach

Another potential approach is a state sponsored “prototype plan.” At least one state, Massachusetts, has enacted a law to allow nonprofit organizations with fewer than 20 employees to adopt a contributory retirement plan developed and administered by the state.
5
Banks, insurance companies and other regulated financial institutions commonly market prototype plans to employers as simple means for them to establish and administer employee pension benefit plans.
6
The financial institutions develop standard form 401(k) or other tax-favored retirement plans (such as SIMPLE-IRA plans) and secure IRS approval. Typically, employers may choose features such as contribution rates to meet their specific needs. Each employer that adopts the prototype sponsors an ERISA plan for its employees. The individual employers would assume the same fiduciary obligations associated with sponsorship of any ERISA-covered plans. For example, the prototype plan documents often specify that the employer is the plan’s “named fiduciary” and “plan administrator” responsible for complying with ERISA, but they may allow the employer to delegate these responsibilities to others. The plan documents for a state-administered prototype plan could designate the state or a state designee to perform these functions. Thus, the state or a designated third-party could assume responsibility for most administrative and asset management functions of an employer’s prototype plan. The state could also designate low-cost investment options and a third-party administrative service provider for its prototype plans.




5 The retirement plan will be overseen by the Massachusetts State Treasurer’s Office. Mass. Gen. Laws ch.29, § 64E (2012). In June 2014, the Massachusetts Treasurer’s Office announced that the IRS had issued a favorable ruling on the proposal, but noted that additional approval from the IRS is still needed (see www.massnonprofitnet.org/blog/nonprofitretirement/). See also GAO’s Report 2015 Report-15-566, RETIREMENT SECURITY—Federal Action Could Help State Efforts to Expand Private Sector Coverage, which included the following statement at footnote 93 regarding the Massachusetts program: “The Massachusetts official told us that each participating employer would be considered to have created its own plan, characterizing the state’s effort as development of a volume submitter 401(k) plan, which is a type of employee benefit plan that is typically pre-approved by the Internal Revenue Service.” (GAO report is available at www.gao.gov/assets/680/672419.pdf).




6 See IRS Online Publication, Types of Pre-Approved Retirement Plans at www.irs.gov/Retirement-Plans/Types-of-Pre-Approved-Retirement-Plans.


Multiple Employer Plan (MEP) Approach

A third approach, (referenced, for example, in the “Report of the Governor’s Task Force to Ensure Retirement Security for All Marylanders”),
7
involves a state establishing and obtaining IRS tax qualification for a “multiple employer” 401(k)-type plan, defined benefit plan, or other tax-favored retirement savings program. The Department anticipates that such an approach would generally involve permitting employers that meet specified eligibility criteria to join the state multiple employer plan. The plan documents would provide that the plan is subject to Title I of ERISA and is intended to comply with Internal Revenue Code tax qualification requirements. The plan would have a separate trust holding contributions made by the participating employers, the employer’s employees, or both. The state, or a designated governmental agency or instrumentality, would be the plan sponsor under ERISA section 3(16)(B) and the named fiduciary and plan administrator responsible (either directly or through one or more contract agents, which could be private-sector providers) for administering the plan, selecting service providers, communicating with employees, paying benefits, and providing other plan services. A state could take advantage of economies of scale to lower administrative and other costs.




7 Governor’s Task Force to Ensure Retirement Security for All Marylanders, 1,000,000 of Our Neighbors at Risk: Improving Retirement Security for Marylanders (February 2015) (available at www.dllr.state.md.us/retsecurity/).


As a state-sponsored multiple employer plan (“state MEP”), this type of arrangement could also reduce overall administrative costs for participating employers in large part because the Department would consider this arrangement as a single ERISA plan. Consequently, only a single Form 5500 Annual Return/Report would be filed for the whole arrangement. In order to participate in the plan, employers simply would be required to execute a participation agreement. Under a state MEP, each employer that chose to participate would not be considered to have established its own ERISA plan, and the state could design its defined contribution MEP so that the participating employers could have limited fiduciary responsibilities (the duty to prudently select the arrangement and to monitor its operation would continue to apply). The continuing involvement by participating employers in the ongoing operation and administration of a 401(k)-type individual account MEP, however, generally could be limited to enrolling employees in the state plan and forwarding voluntary employee and employer contributions to the plan. When an employer joins a carefully structured MEP, the employer is not the “sponsor” of the plan under ERISA, and also would not act as a plan administrator or named fiduciary. Those fiduciary roles, and attendant fiduciary responsibilities, would be assigned to other parties responsible for administration and management of the state MEP.
8
Adoption of a defined benefit plan structure would involve additional funding and other employer obligations.
9




8 A state developing a state sponsored MEP could submit an advisory opinion request to the Department under ERISA Procedure 76-1 to confirm that the MEP at least in form has assigned those fiduciary functions to persons other than the participating employers. ERISA Procedure 76-1 is available at www.dol.gov/ebsa/regs/aos/ao_requests.html.




9 State laws authorizing defined benefit plans for private sector employers (as prototypes or as multiple employer plans) might create plans covered by Title IV of ERISA and subject to the jurisdiction of the Pension Benefit Guaranty Corporation (PBGC). Subject to some exceptions, the PBGC protects the retirement incomes of workers in private-sector defined benefit pension plans. A defined benefit plan provides a specified monthly benefit at retirement, often based on a combination of salary and years of service. PBGC was created by ERISA to encourage the continuation and maintenance of private-sector defined benefit pension plans, provide timely and uninterrupted payment of pension benefits, and keep pension insurance premiums at a minimum. More information is available on the PBGC’s Web site at www.pbgc.gov.


For a person (other than an employee organization) to sponsor an employee benefit plan under Title I of ERISA, such person must either act directly as the employer of the covered employees or “indirectly in the interest of an employer” in relation to a plan.
10
ERISA sections 3(2), 3(5). A person will be considered to act “indirectly in the interest of an employer, in relation to a plan,” if such person is tied to the contributing employers or their employees by genuine economic or representational interests unrelated to the provision of benefits.
11
In the Department’s view, a state has a unique representational interest in the health and welfare of its citizens that connects it to the in-state employers that choose to participate in the state MEP and their employees, such that the state should be considered to act indirectly in the interest of the participating employers.
12
Having this unique nexus distinguishes the state MEP from other business enterprises that underwrite benefits or provide administrative services to several unrelated employers.
13




10 Different rules may apply under the Internal Revenue Code for purposes of determining the plan sponsor of a tax-qualified retirement plan.




11 See, e.g., Advisory Opinion 2012-04A. See also MDPhysicians & Associates, Inc. v. State Bd. Ins., 957 F.2d 178,185 (5th Cir.), cert. denied, 506 U.S. 861 (1992) (“the entity that maintains the plan and the individuals that benefit from the plan [must be] tied by a common economic or representation interest, unrelated to the provision of benefits.” (quoting Wisconsin Educ. Assoc. Ins. Trust v. Iowa State Bd., 804 F.2d 1059, 1063 (8th Cir. 1986)).




12 The Department has also recognized other circumstances when a person sponsoring a plan is acting as an “employer” indirectly rather than as an entity that underwrites benefits or provides administrative services. See Advisory Opinion 89-06A (Department would consider a member of a controlled group which establishes a benefit plan for its employees and/or the employees of other members of the controlled group to be an employer within the meaning of section 3(5) of ERISA); Advisory Opinion 95-29A (employee leasing company may act either directly or indirectly in the interest of an employer in establishing and maintaining employee benefit plan).




13 See Advisory Opinion 2012-04A (holding that a group of employers can collectively act as the “employer” in sponsoring a multiple employer plan only if the employers group was formed for purposes other than the provision of benefits, the employers have a basic level of commonality (such as the participating employers all being in the same industry), and the employers participating in the plan in fact act as the “employer” by controlling the plan).


(c) ERISA Preemption. The Department is aware that a concern for states adopting an ERISA plan approach is whether or not those state laws will be held preempted. ERISA preemption analysis begins with the “presumption that Congress does not intend to supplant state law.” New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 654 (1995). The question turns on Congress’s intent “to avoid a multiplicity of regulation in order to permit nationally uniform administration of employee benefit plans.” Id. at 654, 657. See also Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 11 (1987) (goal of ERISA preemption is to “ensure . . . that the administrative practices of a benefit plan will be governed by only a single set of regulations.”).


Section 514 of ERISA provides that Title I “shall supersede any and all State laws insofar as they . . . relate to any employee benefit plan” covered by the statute. The U.S. Supreme Court has held that “[a] law `relates to’ an employee benefit plan, in the normal sense of the phrase, if it has a connection with or reference to such a plan.” Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97 (1983) (footnote omitted); see, e.g., Travelers, 514 U.S. at 656. A law has a “reference to” ERISA plans if the law “acts immediately and exclusively upon ERISA plans” or “the existence of ERISA plans is essential to the law’s operation.” California Div. of Labor Standards Enforcement v. Dillingham Constr., N.A., 519 U.S. 316, 325-326 (1997). In determining whether a state law has a “connection with ERISA plans,” the U.S. Supreme Court “look[s] both to `the objectives of the ERISA statute as a guide to the scope of the state laws that Congress understood would survive,’ as well as to the nature of the effect of the state law on ERISA plans,” to “determine whether [the] state law has the forbidden connection” with ERISA plans. Egelhoff v. Egelhoff, 532 U.S. 141, 147 (2001) (quoting Dillingham, 519 U.S. at 325). In various decisions, the Court has concluded that ERISA preempts state laws that: (1) Mandate employee benefit structures or their administration; (2) provide alternative enforcement mechanisms; or (3) bind employers or plan fiduciaries to particular choices or preclude uniform administrative practice, thereby functioning as a regulation of an ERISA plan itself.
14




14 Travelers, 514 U.S. at 658 (1995); Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 142 (1990); Egelhoff v. Egelhoff, 532 U.S. 141, 148 (2001); Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 14 (1987).


In the Department’s view, state laws of the sort outlined above interact with ERISA in such a way that section 514 preemption principles and purposes would not appear to come into play in the way they have in past preemption cases. Although the approaches described above involve ERISA plans, they do not appear to undermine ERISA’s exclusive regulation of ERISA-covered plans. The approaches do not mandate employee benefit structures or their administration, provide alternative regulatory or enforcement mechanisms, bind employers or plan fiduciaries to particular choices, or preclude uniform administrative practice in any way that would regulate ERISA plans.


Moreover, the approaches appear to contemplate a state acting as a participant in a market rather than as a regulator. The U.S. Supreme Court has found that, when a state or municipality acts as a participant in the market and does so in a narrow and focused manner consistent with the behavior of other market participants, such action does not constitute state regulation. Compare Building and Construction Trades Council v. Associated Builders and Contractors of Massachusetts/Rhode Island, Inc., 507 U.S. 218 (1993); Wisconsin Department of Industry, Labor and Human Relations v. Gould, 475 U.S. 282 (1986); see also American Trucking Associations, Inc. v. City of Los Angeles, 133 S. Ct. 2096, 2102 (2013) (Section 14501(c)(1) of the Federal Aviation Administration Authorization Act, which preempts a state “law, regulation, or other provision having the force and effect of law related to a price, route, or service of any motor carrier,” 49 U.S.C. 14501(c)(1), “draws a rough line between a government’s exercise of regulatory authority and its own contract-based participation in a market”); Associated General Contractors of America v. Metropolitan Water District of Southern California, 159 F.3d 1178, 1182-84 (9th Cir. 1998) (recognizing a similar distinction between state regulation and state market participation). By merely offering employers particular ERISA-covered plan options
15
(or non-ERISA plan options), these approaches (whether used separately or together as part of a multi-faceted state initiative) do not dictate how an employer’s plan is designed or operated or make offering a plan more costly for employers or employees. Nor do they make it impossible for employers operating across state lines to offer uniform benefits to their employees.
16
Rather than impair federal regulation of employee benefit plans, the state laws would leave the plans wholly subject to ERISA’s regulatory requirements and protections.




15 In the Department’s view, a state law that required employers to participate in a state prototype plan or state sponsored multiple employer plan unless they affirmatively opted out would effectively compel the employer to decide whether to sponsor an ERISA plan in a way that would be preempted by ERISA.




16 The Court in Travelers approved a New York statute that gave employers a strong incentive to provide health care benefits through Blue Cross and Blue Shield as opposed to other providers. The Court noted that the law did not “mandate” employee benefit plans or their administration, or produce such acute economic effects, either directly or indirectly, by intent or otherwise “as to force an ERISA plan to adopt a certain scheme of substantive coverage or effectively restrict its choice of insurers.” Travelers, 514 U.S. at 668. See also De Buono v. NYSA-ILA Medical and Clinical Services Fund, 520 U.S. 806, 816 (1997).


Of course, a state must implement these approaches without establishing standards inconsistent with ERISA or providing its own regulatory or judicial remedies for conduct governed exclusively by ERISA. ERISA’s system of rules and remedies would apply to these arrangements. A contractor retained by a state using the marketplace approach would be subject to the same ERISA standards and remedies that apply to any company offering the same services to employers. Similarly, a prototype plan or multiple employer plan program that a state offers to employers would have to comply with the same ERISA requirements and would have to be subject to the same remedies as any private party offering such products and services.
17




17 State laws relating to sovereign immunity for state governments and their employees would have to be evaluated carefully to ensure they do not conflict with ERISA’s remedial provisions.


Even if the state laws enacted to establish programs of the sort described above “reference” employee benefit plans in a literal sense, they should not be seen as laws that “relate to” ERISA plans in the sense ERISA section 514(a) uses that statutory term because they are completely voluntary from the employer’s perspective, the state program would be entirely subject to ERISA, and state law would not impose any outside regulatory requirements beyond ERISA. They do not require employers to establish ERISA-covered plans, forbid any type of plan or restrict employers’ choices with respect to benefit structures or their administration. These laws would merely offer a program that employers could accept or reject. See Dillingham, 519 U.S. at 325-28.


In addition, none of the state approaches described above resemble the state laws that the Court held preempted in its pre-Travelers “reference to” cases. Those laws targeted ERISA plans as a class with affirmative requirements or special exemptions. See, e.g., District of Columbia v. Greater Wash. Bd. of Trade, 506 U.S. 125, 128, 129-133 (1992) (workers’ compensation law that required employee benefits “set by reference to [ERISA] plans”) (citation omitted); Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 135-136, 140 (1990) (common law claim for wrongful discharge to prevent attainment of ERISA benefits); Mackey v. Lanier Collection Agency & Serv., Inc., 486 U.S. 825, 828 & n.2, 829-830 (1988) (exemption from garnishment statute for ERISA plans). In the case of the state actions outlined above, any restriction on private economic activity arises, not from state regulatory actions, but from the application of ERISA requirements to the plans, service providers, and investment products, that the state, as any other private sector participant in the market, selects in deciding what it is willing to offer.


Finally, it is worth noting that even if the state laws implementing these approaches “relate to” ERISA plans in some sense of that term, it is only because they create or authorize arrangements that are fully governed by ERISA’s requirements. By embracing ERISA in this way, the state would not on that basis be running afoul of section 514(a) because ERISA fully applies to the arrangement and there is nothing in the state law for ERISA to “supersede.” In this regard, section 514(a) of ERISA, in relevant part, provides that Title I of ERISA “shall supersede any and all state laws insofar as they may now or hereafter relate to any employee benefit plan . . . .” To the extent that the state makes plan design decisions in fashioning its prototype plan or state sponsored plan, or otherwise adopts rules necessary to run the plan, those actions would be the same as any other prototype plan provider or employer sponsor of any ERISA-covered plan, and the arrangement would be fully and equally subject to ERISA.


This conclusion is supported by the Department’s position regarding state governmental participation in ERISA plans in another context. Pursuant to section 4(b)(1) of ERISA, the provisions of Title I of ERISA do not apply to a plan that a state government establishes for its own employees, which ERISA section 3(32) defines as a “governmental plan.” The Department has long held the view, however, that if a plan covering governmental employees fails to qualify as a governmental plan, it would still be subject to Title I of ERISA.
18
In these circumstances, the failure to qualify as a governmental plan does not prohibit a governmental employer from providing benefits through, and making contributions to, an ERISA-covered employee benefit plan.
19
Thus, the effect of ERISA is not to prohibit the state from offering benefits, but rather to make those benefits subject to ERISA. Here too, ERISA does not supersede state law to the extent it merely creates an arrangement that is fully governed by ERISA.




18 See, e.g., Advisory Opinion 2004-04A.




19 See Information Letter to Michael T. Scaraggi and James M. Steinberg from John J. Canary (April 12, 2004).


[80 FR 71937, Nov. 18, 2015]


§ 2509.2022-01 Interpretive bulletin relating to guidance on independence of accountant retained by employee benefit plan.

This section provides guidance for determining when a qualified public accountant is independent for purposes of auditing and rendering an opinion on the financial information required to be included in the annual report (Form 5500 Annual Return/Report of Employee Benefit Plan) filed with the Department of Labor (Department).


(a) In general. Section 103(a)(3)(A) of the Employee Retirement Income Security Act of 1974 (ERISA) and 29 CFR 2520.103-1(b)(5) of the Department’s implementing regulations require that the accountant retained by an employee benefit plan be “independent” for purposes of examining plan financial information and rendering an opinion on the financial statements and schedules required to be contained in the annual report. Under section 103(a)(3)(A) of ERISA the Department will not recognize any person as an independent qualified public accountant who is in fact not independent with respect to the employee benefit plan upon which that accountant renders an opinion in the annual report filed with the Department. In determining whether an accountant or accounting firm is not independent, the Department will give appropriate consideration to all relevant circumstances, including evidence bearing on all relationships between the accountant or accounting firm and that of the plan sponsor or any affiliate thereof, and will not confine itself to the relationships existing in connection with the filing of annual reports with the Department of Labor.


(b) Examples. The following examples are intended to illustrate how the Department would apply paragraph (a) of this section in certain common financial and business relationships. The Department in enforcing the Form 5500 annual reporting requirements will not consider an accountant to be independent with respect to a plan if:


(1)(i) During the period of professional engagement to examine the financial statements being reported, at the date of the opinion, or during the period covered by the financial statements, the accountant, the accountant’s firm or a member thereof had, or was committed to acquire, any direct financial interest or any material indirect financial interest in such plan, or the plan sponsor as that term is defined in section 3(16)(B) of ERISA;


(ii) An accountant will not be deemed to have failed the independence requirement under paragraph (b)(1)(i) of this section as a result of any holding of publicly traded securities of the plan sponsor during the period covered by the financial statements if:


(A) The accountant did not audit the client’s financial statements for the immediately preceding fiscal year; and


(B) The accountant, the accounting firm, a partner, shareholder employee, or professional employee of the accounting firm, and their immediate family disposed of any holding of publicly traded securities of the plan sponsor before the earlier of:


(1) Signing an initial engagement letter or other agreement to provide audit, review, or attest services to the audit client; or


(2) Commencing any audit, review, or attest procedures (including planning the audit of the client’s financial statements); and


(iii) For purposes of paragraph (b)(1)(ii) of this section, publicly traded securities are securities listed on a registered stock exchange in which quotations are published on a daily basis, securities regularly traded in a national or regional over-the-counter market for which published quotations are available, or securities traded on a foreign national securities exchange that is officially recognized, sanctioned, or supervised by a governmental authority and where the security is deemed by the U.S. Securities and Exchange Commission (SEC) as having a ready market under applicable SEC rules;


(2) During the period of professional engagement to examine the financial statements being reported, at the date of the opinion, or during the period covered by the financial statements, the accountant, the accountant’s firm, or a member thereof was connected as a promoter, underwriter, investment advisor, voting trustee, director, officer, or employee of the plan or plan sponsor, except that a firm will not be deemed not independent in regard to a particular plan if a former officer or employee of such plan or plan sponsor is employed by the firm and such individual has completely disassociated himself from the plan or plan sponsor and does not participate in auditing financial statements of the plan covering any period of his or her employment by the plan or plan sponsor; or


(3) An accountant or a member of an accounting firm maintains financial records for the employee benefit plan.


(c) Effect of certain other services to the plan or plan sponsors. (1) Subject to paragraph (c)(2) of this section, an accountant will not fail to be recognized as independent solely on the basis that at or during the period of the accountant’s professional engagement with the employee benefit plan:


(i) The accountant or the accountant’s firm is retained or engaged on a professional basis by the plan sponsor, as that term is defined in section 3(16)(B) of ERISA; or


(ii) An actuary associated with the accountant or accounting firm renders actuarial services to the plan or plan sponsor.


(2) However, to retain recognition of independence, the prohibitions against recognition of independence in paragraph (b)(1), (2), or (3) of this section must not be violated. Further, the rendering of multiple services to a plan by a firm may give rise to circumstances indicating a lack of independence with respect to the employee benefit plan (e.g., result in the accountant or firm providing services that are subject to audit procedures as part of the plan’s audit), and, in accordance with paragraph (a) of this section, in determining whether an accountant or accounting firm is not, in fact, independent with respect to a particular plan, the Department will give appropriate consideration to all relevant circumstances, including evidence bearing on all relationships between the accountant or accounting firm and that of the plan sponsor or any affiliate thereof.


(3) Rendering multiple services to a plan by a firm also may involve prohibited transactions under ERISA and requirements to comply with conditions in prohibited transaction exemptions such as prohibited transaction exemption in ERISA section 408(b)(2) for ERISA section 406(a)(1)(C) service provider transactions.


(d) Definitions. For purposes of this section:


(1) Member means all partners or shareholder employees in the firm and all professional employees participating in the audit or located in an office of the firm participating in a significant portion of the audit; the firm’s employee benefit plans; or an entity whose operating, financial, or accounting policies can be controlled by any of the individuals or entities described in this paragraph (d)(1) or by two or more such individuals or entities acting together.


(2) Office means a reasonably distinct subgroup within a firm, whether constituted by formal organization or informal practice, in which personnel who make up the subgroup generally serve the same group of clients or work on the same categories of matters regardless of the physical location of the individuals who comprise such subgroup. Substance should govern the office classification, and the expected regular personnel interactions and assigned reporting channels of an individual may well be more important than an individual’s physical location.


(3) Period of professional engagement means the period beginning when an accountant either signs an initial engagement letter or other agreement to perform the audit or begins to perform any audit, review or attest procedures (including planning the audit of the plan’s financial statements), whichever is earlier, and ending with the formal notification, either by the member or client, of the termination of the professional relationship or the issuance of the audit report for which the accountant was engaged, whichever is later. In the case of an auditor that performs a plan’s audit for two or more years, in evaluating independence, the Department would not view the period of professional engagement as ending with the issuance of each year’s audit report and recommencing with the beginning of the following year’s audit engagement.


[87 FR 54372, Sept. 6, 2022]


SUBCHAPTER B—DEFINITIONS AND COVERAGE UNDER THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974

PART 2510—DEFINITION OF TERMS USED IN SUBCHAPTERS C, D, E, F, G, AND L OF THIS CHAPTER


Authority:29 U.S.C. 1002(1), 1002(2), 1002(3), 1002(5), 1002(16), 1002(21), 1002(37), 1002(38), 1002(40), 1002(42), 1002(43), 1002(44), 1031, and 1135; Secretary of Labor’s Order No. 1-2011, 77 FR 1088 (Jan. 9, 2012); Sec. 2510.3-101 and 2510.3-102 also issued under sec. 102 of Reorganization Plan No. 4 of 1978, 5 App. (E.O. 12108, 44 FR 1065 (Jan. 3, 1979)) and 29 U.S.C. 1135 note. Sec. 2510.3-38 is also issued under sec. 1, Pub. L. 105-72, 111 Stat. 1457 (1997).

Link to an amendment published at 89 FR 34127, Apr. 30, 2024.
Link to an amendment published at 89 FR 32256, Apr. 25, 2024.

§ 2510.3-1 Employee welfare benefit plan.

(a) General. (1) The purpose of this section is to clarify the definition of the terms “employee welfare benefit plan” and “welfare plan” for purposes of title I of the Act and this chapter by identifying certain practices which do not constitute employee welfare benefit plans for those purposes. In addition, the practices listed in this section do not constitute employee pension benefit plans within the meaning of section 3(2) of the Act, and, therefore, do not constitute employee benefit plans within the meaning of section 3(3). Since under section 4(a) of the Act, only employee benefit plans within the meaning of section 3(3) are subject to title I of the Act, the practices listed in this section are not subject to title I.


(2) The terms “employee welfare benefit plan” and “welfare plan” are defined in section 3(1) of the Act to include plans providing “(i) medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits, apprenticeship or other training programs, or day care centers, scholarship funds, or prepaid legal services, or (ii) any benefit described in section 302(c) of the Labor Management Relations Act, 1947 (other than pensions on retirement or death, and insurance to provide such pensions).” Under this definition, only plans which provide benefits described in section 3(1)(A) of the Act or in section 302(c) of the Labor-Management Relations Act, 1947 (hereinafter “the LMRA”) (other than pensions on retirement or death) constitute welfare plans. For example, a system of payroll deductions by an employer for deposit in savings accounts owned by its employees is not an employee welfare benefit plan within the meaning of section 3(1) of the Act because it does not provide benefits described in section 3(1)(A) of the Act or section 302(c) of the LMRA. (In addition, if each employee has the right to withdraw the balance in his or her account at any time, such a payroll savings plan does not meet the requirements for a pension plan set forth in section 3(2) of the Act and, therefore, is not an employee benefit plan within the meaning of section 3(3) of the Act).


(3) Section 302(c) of the LMRA lists exceptions to the restrictions contained in subsections (a) and (b) of that section on payments and loans made by an employer to individuals and groups representing employees of the employer. Of these exceptions, only those contained in paragraphs (5), (6), (7) and (8) describe benefits provided through employee benefit plans. Moreover, only paragraph (6) describes benefits not described in section 3(1)(A) of the Act. The benefits described in section 302(c)(6) of the LMRA but not in section 3(1)(A) of the Act are “* * * holiday, severance or similar benefits”. Thus, the effect of section 3(1)(B) of the Act is to include within the definition of “welfare plan” those plans which provide holiday and severance benefits, and benefits which are similar (for example, benefits which are in substance severance benefits, although not so characterized).


(4) Some of the practices listed in this section as excluded from the definition of “welfare plan” or mentioned as examples of general categories of excluded practices are inserted in response to questions received by the Department of Labor and, in the Department’s judgment, do not represent borderline cases under the definition in section 3(1) of the Act. Therefore, this section should not be read as implicitly indicating the Department’s views on the possible scope of section 3(1).


(b) Payroll practices. For purposes of title I of the Act and this chapter, the terms “employee welfare benefit plan” and “welfare plan” shall not include—


(1) Payment by an employer of compensation on account of work performed by an employee, including compensation at a rate in excess of the normal rate of compensation on account of performance of duties under other than ordinary circumstances, such as—


(i) Overtime pay,


(ii) Shift premiums,


(iii) Holiday premiums,


(iv) Weekend premiums;


(2) Payment of an employee’s normal compensation, out of the employer’s general assets, on account of periods of time during which the employee is physically or mentally unable to perform his or her duties, or is otherwise absent for medical reasons (such as pregnancy, a physical examination or psychiatric treatment); and


(3) Payment of compensation, out of the employer’s general assets, on account of periods of time during which the employee, although physically and mentally able to perform his or her duties and not absent for medical reasons (such as pregnancy, a physical examination or psychiatric treatment) performs no duties; for example—


(i) Payment of compensation while an employee is on vacation or absent on a holiday, including payment of premiums to induce employees to take vacations at a time favorable to the employer for business reasons,


(ii) Payment of compensation to an employee who is absent while on active military duty,


(iii) Payment of compensation while an employee is absent for the purpose of serving as a juror or testifying in official proceedings,


(iv) Payment of compensation on account of periods of time during which an employee performs little or no productive work while engaged in training (whether or not subsidized in whole or in part by Federal, State or local government funds), and


(v) Payment of compensation to an employee who is relieved of duties while on sabbatical leave or while pursuing further education.


(c) On-premises facilities. For purposes of title I of the Act and this chapter, the terms “employee welfare benefit plan” and “welfare plan” shall not include—


(1) The maintenance on the premises of an employer or of an employee organization of recreation, dining or other facilities (other than day care centers) for use by employees or members; and


(2) The maintenance on the premises of an employer of facilities for the treatment of minor injuries or illness or rendering first aid in case of accidents occurring during working hours.


(d) Holiday gifts. For purposes of title I of the Act and this chapter the terms “employee welfare benefit plan” and “welfare plan” shall not include the distribution of gifts such as turkeys or hams by an employer to employees at Christmas and other holiday seasons.


(e) Sales to employees. For purposes of title I of the Act and this chapter, the terms “employee welfare benefit plan” and “welfare plan” shall not include the sale by an employer to employees of an employer, whether or not at prevailing market prices, of articles or commodities of the kind which the employer offers for sale in the regular course of business.


(f) Hiring halls. For purposes of title I of the Act and this chapter, the terms “employee welfare benefit plan” and “welfare plan” shall not include the maintenance by one or more employers, employee organizations, or both, of a hiring hall facility.


(g) Remembrance funds. For purposes of title I of the Act and this chapter, the terms “employee welfare benefit plan” and “welfare plan” shall not include a program under which contributions are made to provide remembrances such as flowers, an obituary notice in a newspaper or a small gift on occasions such as the sickness, hospitalization, death or termination of employment of employees, or members of an employee organization, or members of their families.


(h) Strike funds. For purposes of title I of the Act and this chapter, the terms “employee welfare benefit plan” and “welfare plan” shall not include a fund maintained by an employee organization to provide payments to its members during strikes and for related purposes.


(i) Industry advancement programs. For purposes of title I of the Act and this chapter, the terms “employee welfare benefit plan” and “welfare plan” shall not include a program maintained by an employer or group or association of employers, which has no employee participants and does not provide benefits to employees or their dependents, regardless of whether the program serves as a conduit through which funds or other assets are channelled to employee benefit plans covered under title I of the Act.


(j) Certain group or group-type insurance programs. For purposes of title I of the Act and this chapter, the terms “employee welfare benefit plan” and “welfare plan” shall not include a group or group-type insurance program offered by an insurer to employees or members of an employee organization, under which


(1) No contributions are made by an employer or employee organization;


(2) Participation the program is completely voluntary for employees or members;


(3) The sole functions of the employer or employee organization with respect to the program are, without endorsing the program, to permit the insurer to publicize the program to employees or members, to collect premiums through payroll deductions or dues checkoffs and to remit them to the insurer; and


(4) The employer or employee organization receives no consideration in the form of cash or otherwise in connection with the program, other than reasonable compensation, excluding any profit, for administrative services actually rendered in connection with payroll deductions or dues checkoffs.


(k) Unfunded scholarship programs. For purposes of title I of the Act and this chapter, the terms “employe welfare benefit plan” and “welfare plan” shall not include a scholarship program, including a tuition and education expense refund program, under which payments are made solely from the general assets of an employer or employee organization.


(l) Safe harbor for health reimbursement arrangements (HRAs) and certain other arrangements that reimburse individual health insurance coverage. For purposes of title I of the Act and this chapter, the terms “employee welfare benefit plan” and “welfare plan” shall not include individual health insurance coverage the premiums of which are reimbursed by a health reimbursement arrangement (HRA) (or other account-based group health plan), including an HRA or other account-based group health plan integrated with individual health insurance coverage (as described in § 2590.702-2 of this chapter), an HRA that covers fewer than two current employees (as described in § 2590.732(b) of this chapter) and that reimburses premiums for individual health insurance coverage, a qualified small employer health reimbursement arrangement (QSEHRA), as defined in section 9831(d)(2) of the Code, or an arrangement under which an employer allows employees to pay the portion of the premium for individual health insurance coverage that is not covered by an HRA or other account-based group health plan with which the coverage is integrated by using a salary reduction arrangement in a cafeteria plan under section 125 of the Code (supplemental salary reduction arrangement), if all the conditions of this paragraph (l) are satisfied.


(1) The purchase of any individual health insurance coverage is completely voluntary for participants and beneficiaries. The fact that a plan sponsor requires such coverage to be purchased as a condition for participation in an HRA or supplemental salary reduction arrangement does not make the purchase involuntary.


(2) The employer, employee organization, or other plan sponsor does not select or endorse any particular issuer or insurance coverage. In contrast, providing general contact information regarding availability of health insurance in a state (such as providing information regarding www.HealthCare.gov or contact information for a state insurance commissioner’s office) or providing general health insurance educational information (such as the uniform glossary of health coverage and medical terms available at: https://www.dol.gov/sites/default/files/ebsa/laws-and-regulations/laws/affordable-care-act/for-employers-and-advisers/sbc-uniform-glossary-of-coverage-and-medical-terms-final.pdf) is permitted.


(3) Reimbursement for non-group health insurance premiums is limited solely to individual health insurance coverage (as defined in § 2590.701-2 of this chapter) that does not consist solely of excepted benefits (as defined in § 2590.732(c) of this chapter).


(4) The employer, employee organization, or other plan sponsor receives no consideration in the form of cash or otherwise in connection with the employee’s selection or renewal of any individual health insurance coverage.


(5) Each plan participant is notified annually that the individual health insurance coverage is not subject to title I of ERISA. For an HRA that is integrated with individual health insurance coverage, the notice must satisfy the notice requirement set forth in § 2590.702-2(c)(6) of this chapter. A QSEHRA or an HRA not subject to the notice requirement set forth in § 2590.702-2(c)(6) of this chapter may use the following language to satisfy this condition: “The individual health insurance coverage that is paid for by this plan, if any, is not subject to the rules and consumer protections of the Employee Retirement Income Security Act. You should contact your state insurance department for more information regarding your rights and responsibilities if you purchase individual health insurance coverage.” A supplemental salary reduction arrangement is not required to provide this notice as the notice will be provided by the HRA that such an arrangement supplements.


[40 FR 34530, Aug. 15, 1975, as amended at 84 FR 29000, June 20, 2019]


§ 2510.3-2 Employee pension benefit plan.

(a) General. This section clarifies the limits of the defined terms “employee pension benefit plan” and “pension plan” for purposes of Title I of the Act and this chapter by identifying certain specific plans, funds and programs which do not constitute employee pension benefit plans for those purposes. To the extent that these plans, funds and programs constitute employee welfare benefit plans within the meaning of section 3(1) of the Act and § 2510.3-1, they will be covered under Title I; however, they will not be subject to parts 2 and 3 of Title I of the Act.


(b) Severance pay plans. (1) For purposes of title I of the Act and this chapter, an arrangement shall not be deemed to constitute an employee pension benefit plan or pension plan solely by reason of the payment of severance benefits on account of the termination of an employee’s service, provided that:


(i) Such payments are not contingent, directly or indirectly, upon the employee’s retiring;


(ii) The total amount of such payments does not exceed the equivalent of twice the employee’s annual compensation during the year immediately preceding the termination of his service; and


(iii) All such payments to any employee are completed,


(A) In the case of an employee whose service is terminated in connection with a limited program of terminations, within the later of 24 months after the termination of the employee’s service, or 24 months after the employee reaches normal retirement age; and


(B) In the case of all other employees, within 24 months after the termination of the employee’s service.


(2) For purposes of this paragraph (b),


(i) “Annual compensation” means the total of all compensation, including wages, salary, and any other benefit of monetary value, whether paid in the form of cash or otherwise, which was paid as consideration for the employee’s service during the year, or which would have been so paid at the employee’s usual rate of compensation if the employee had worked a full year.


(ii) “Limited program of terminations” means a program of terminations:


(A) Which, when begun, was scheduled to be completed upon a date certain or upon the occurrence of one or more specified events;


(B) Under which the number, percentage or class or classes of employees whose services are to be terminated is specified in advance; and


(C) Which is described in a written document which is available to the Secretary upon request, and which contains information sufficient to demonstrate that the conditions set forth in paragraphs (b)(2)(ii)(A) and (B) of this section have been met.


(c) Bonus program. For purposes of title I of the Act and this chapter, the terms “employee pension benefit plan” and “pension plan” shall not include payments made by an employer to some or all of its employees as bonuses for work performed, unless such payments are systematically deferred to the termination of covered employment or beyond, or so as to provide retirement income to employees.


(d) Individual Retirement Accounts. (1) For purposes of title I of the Act and this chapter, the terms “employee pension benefit plan” and “pension plan” shall not include an individual retirement account described in section 408(a) of the Code, an individual retirement annuity described in section 408(b) of the Internal Revenue Code of 1954 (hereinafter “the Code”) and an individual retirement bond described in section 409 of the Code, provided that—


(i) No contributions are made by the employer or employee association;


(ii) Participation is completely voluntary for employees or members;


(iii) The sole involvement of the employer or employee organization is without endorsement to permit the sponsor to publicize the program to employees or members, to collect contributions through payroll deductions or dues checkoffs and to remit them to the sponsor; and


(iv) The employer or employee organization receives no consideration in the form of cash or otherwise, other than reasonable compensation for services actually rendered in connection with payroll deductions or dues checkoffs.


(e) Gratuitous payments to pre-Act retirees. For purposes of title I of the Act and this chapter the terms “employee pension benefit plan” and “pension plan” shall not include voluntary, gratuitous payments by an employer to former employees who separated from the service of the employer if:


(1) Payments are made out of the general assets of the employer,


(2) Former employees separated from the service of the employer prior to September 2, 1974,


(3) Payments made to such employees commenced prior to September 2, 1974, and


(4) Each former employee receiving such payments is notified annually that the payments are gratuitous and do not constitute a pension plan.


(f) Tax sheltered annuities. For the purpose of title I of the Act and this chapter, a program for the purchase of an annuity contract or the establishment of a custodial account described in section 403(b) of the Internal Revenue Code of 1954 (the Code), pursuant to salary reduction agreements or agreements to forego an increase in salary, which meets the requirements of 26 CFR 1.403(b)-1(b)(3) shall not be “established or maintained by an employer” as that phrase is used in the definition of the terms “employee pension benefit plan” and “pension plan” if


(1) Participation is completely voluntary for employees;


(2) All rights under the annuity contract or custodial account are enforceable solely by the employee, by a beneficiary of such employee, or by any authorized representative of such employee or beneficiary;


(3) The sole involvement of the employer, other than pursuant to paragraph (f)(2) of this section, is limited to any of the following:


(i) Permitting annuity contractors (which term shall include any agent or broker who offers annuity contracts or who makes available custodial accounts within the meaning of section 403(b)(7) of the Code) to publicize their products to employees,


(ii) Requesting information concerning proposed funding media, products or annuity contractors;


(iii) Summarizing or otherwise compiling the information provided with respect to the proposed funding media or products which are made available, or the annuity contractors whose services are provided, in order to facilitate review and analysis by the employees;


(iv) Collecting annuity or custodial account considerations as required by salary reduction agreements or by agreements to forego salary increases, remitting such considerations to annuity contractors and maintaining records of such considerations;


(v) Holding in the employer’s name one or more group annuity contracts covering its employees;


(vi) Before February 7, 1978, to have limited the funding media or products available to employees, or the annuity contractors who could approach employees, to those which, in the judgment of the employer, afforded employees appropriate investment opportunities; or


(vii) After February 6, 1978, limiting the funding media or products available to employees, or the annuity contractors who may approach employees, to a number and selection which is designed to afford employees a reasonable choice in light of all relevant circumstances. Relevant circumstances may include, but would not necessarily be limited to, the following types of factors:


(A) The number of employees affected,


(B) The number of contractors who have indicated interest in approaching employees,


(C) The variety of available products,


(D) The terms of the available arrangements,


(E) The administrative burdens and costs to the employer, and


(F) The possible interference with employee performance resulting from direct solicitation by contractors; and


(4) The employer receives no direct or indirect consideration or compensation in cash or otherwise other than reasonable compensation to cover expenses properly and actually incurred by such employer in the performance of the employer’s duties pursuant to the salary reduction agreements or agreements to forego salary increases described in this paragraph (f) of this section.


(g) Supplemental payment plans—(1) General rule. Generally, an arrangement by which a payment is made by an employer to supplement retirement income is a pension plan. Supplemental payments made on or after September 26, 1980, shall be treated as being made under a welfare plan rather than a pension plan for purposes of title I of the Act if all of the following conditions are met:


(i) Payment is made for the purpose of supplementing the pension benefits of a participant or his or her beneficiary out of:


(A) The general assets of the employer, or


(B) A separate trust fund established and maintained solely for that purpose.


(ii) The amount payable under the supplemental payment plan to a participant or his or her beneficiary with respect to a month does not exceed the payee’s supplemental payment factor (“SPF,” as defined in paragraph (g)(3)(i) of this section) for that month, provided however that unpaid monthly amounts may be cumulated and paid in subsequent months to the participant or his or her beneficiary.


(iii) The payment is not made before the last day of the month with respect to which it is computed.


(2) Safe harbor for arrangements concerning pre-1977 retirees. (i) Notwithstanding paragraph (g)(1) of this section, effective January 1, 1975 an arrangement by which a payment is made by an employer to supplement the retirement income of a former employee who separated from the service of the employer prior to January 1, 1977 shall be deemed not to have been made under an employee benefit plan if all of the following conditions are met:


(A) The employer is not obligated to make the payment or similar payments for more than twelve months at a time.


(B) The payment is made out of the general assets of the employer.


(C) The former employee is notified in writing at least once each year in which a payment is made that the payments are not part of an employee benefit plan subject to the protections of the Act.


(D) The former employee is notified in writing at least once each year in which a payment is made of the extent of the employer’s obligation, if any, to continue the payments.


(ii) A person who receives a payment on account of his or her relationship to a former employee who retired prior to January 1, 1977 is considered to be a former employee for purposes of this paragraph (g)(2).


(3) Definitions and special rules. For purposes of this paragraph (g)—


(i) The term “supplemental payment factor” (SPF) is, for any particular month, the product of:


(A) The individual’s pension benefit amount (as defined in paragraph (g)(3)(ii) of this section), and


(B) The cost of living increase (as defined in paragraph (g)(3)(v) of this section) for that month.


(ii)(A) The term “pension benefit amount” (PBA) means, with regard to a retiree, the amount of pension benefits payable, in the form of the annuity chosen by the retiree, for the first full month that he or she is in pay status under a pension plan (as defined in paragraph (g)(3)(iii) of this section) sponsored by his or her employer or under a multiemployer plan in which his or her employer participates. If the retiree has received a lump-sum distribution from the plan, the PBA for the retiree shall be determined as follows:


(1) If the plan provides an annuity option at the time of the distribution, the PBA shall be computed as if the distribution had been applied on that date to the purchase from the plan of a level straight annuity for the life of the participant if the participant was unmarried at the time of the distribution or a joint and survivor annuity if the participant was married at the time of distribution.


(2) If the plan does not provide an annuity option at the time of the distribution, the PBA shall be computed as if the distribution had been applied on that date to the purchase from an insurance company qualified to do business in a State of a commercially available level straight annuity for the life of the participant if the participant was then single, or a joint and survivor annuity if the participant was then married, based upon the assumption that the participant and beneficiary are standard mortality risks.


(B) If the retiree has received from the plan a series of distributions which do not constitute a lump-sum distribution or an annuity, the PBA for the retiree shall be determined with respect to each distribution according to paragraph (g)(3)(ii)(A) of this section, or in accordance with a reasonably equivalent method.


(C) The term PBA, with regard to the beneficiary of a plan participant, means:


(1) The amount of pension benefits, payable in the form of a survivor annuity to the beneficiary, for the first full month that he or she begins to receive the survivor annuity, reduced by:


(2) Any increases which have been incorporated as part of the survivor annuity under the plan since the participant entered pay status or, if the participant died before the commencement of pension benefits, since the participant’s date of death.


(D) Where a plan participant has commenced to receive his or her pension benefits in the form of a straight-life annuity, or another form of an annuity that does not continue after the participant’s death in the form of a survivor annuity, no beneficiary of the participant will have a PBA.


(iii) The term “pension plan” means, for purposes of this paragraph (g), a pension plan as defined in section 3(2) of the Act, but not including a plan described in section 4(b), 201(2), or 301(a)(3) of the Act. The term also does not include an arrangement meeting all the conditions of paragraph (g)(1) or (g)(2) of this section or of an arrangement described in § 2510.3-2(e). In the case of a controlled group of corporations within the meaning of section 407(d)(5) of the Act, all pension plans sponsored by members of the group shall be considered to be one pension plan.


(iv) The term “employer” means, for purposes of paragraph (g) of this section, the former employer making the supplemental payment. In the case of a contolled group of corporations within the meaning of section 407(d)(7) of the Act, all members of the controlled group shall be considered to be one employer for purposes of this paragraph (g).


(v) The term “cost of living increase” (CLI) means, as to any month, a percentage equal to the following fraction:





where a = the CPIU for the month for which a payment is being computed, and b= the CPIU for the first full month the retiree was in pay status. Where the CLI is calculated for the beneficiary of a plan participant, “b” continues to be equal to the CPIU for the first full month the retiree was in pay status. If, however, the participant dies before the commencement of pension benefits, “b” is equal to the CPIU for the first full month the survivor is in pay status.

(vi) The term “CPIU” means the U.S. City Average All Items Consumer Price Index for all Urban Consumers, published by the U.S. Department of Labor, Bureau of Labor Statistics. Data concerning the CPIU for a particular period can be obtained from the U.S. Department of Labor, Bureau of Labor Statistics, Division of Consumer Prices and Price Indexes, Washington, DC 20212.


(vii) Where an employer does not pay to a retiree the full amount of the supplemental payments which would be permitted under paragraph (g)(1) of this section, any unpaid amounts may be cumulated and paid in subsequent months to either the retiree or the beneficiary of the retiree. The beneficiary need not be the recipient of a survivor annuity in order to be paid these cumulated supplemental payments.


(5) Examples. The following examples illustrate how this paragraph (g) works. As referred to in these examples, the CPIU’s for July through November of 1980 are as follows:



July 1980: 247.8

August 1980: 249.4

September 1980: 251.7

October 1980: 253.9

November 1980: 256.2


Example (1)(a).E is an employer. R received monthly benefits of $600 under a straight-life annuity under E’s defined benefit pension plan after R retired from E and entered pay status on July 1, 1980. The amount that E may pay to R as supplemental payments under a welfare rather than pension plan with respect to the months of July through September of 1980 is computed as follows:

SPF for July 1980:



SPF for August 1980:



SPF for September 1980:



No supplemental payment may be made to R as a welfare plan payment with respect to July 1980, the month of retirement. The $3.87 that may be paid with respect to August 1980 may be paid at any time after August 31, 1980. The $9.44 that may be paid with respect to September 1980 may be paid at any time after September 30, 1980.


Example (1)(b).S is the beneficiary of R. Because R received pension benefits under a straight-life annuity, S will receive no survivor annuity from E after R’s death. S thus will have no PBA after R’s death and will not be eligible to receive any supplemental payments from E based on S’s PBA. To the extent, however, that R did not receive supplemental payments from E to the maximum limit allowable under paragraph (g)(1), any amounts not paid to R may be cumulated and paid to S after R’s death.


Example (2)(a).E is an employer. Q received monthly benefits of $500 in the form of a joint and survivor annuity under E’s defined benefit pension plan since retirement from E on July 1, 1980. The amount that E may pay to Q as welfare rather than pension plan payments with respect to the months of July through September of 1980 is computed as follows:

SPF for July 1980:



SPF for August 1980:



SPF for September 1980:



No supplemental payment may be made as a welfare plan payment with respect to July 1980, the month of retirement. The $3.23 that may be paid with respect to August 1980 may be paid at any time after August 31, 1980. The $7.87 that may be paid with respect to September 1980 may be paid at any time after September 30, 1980.


Example (2)(b).Q dies on October 15, 1980 without having received any supplemental payments from E. T is the beneficiary of Q. E pays T a survivor’s annuity of $300 beginning in November of 1980. The amount payable to T as a survivor annuity under the plan has not been increased since Q began to receive pension benefits. Thus, T’s PBA is $300. The amount that E may pay to T as welfare rather than pension plan payments with respect to the months of July through November 1980 is computed as follows:

SPF for July 1980 = $0.00

SPF for August 1980 = $3.23

SPF for September 1980 = $7.87

SPF for October 1980:



(Note that T’s “b” is equal to Q’s “b”.)

SPF for November 1980:



Total that may be paid to T

The maximum E may pay T with respect to the months of July through November 1980 as welfare rather than pension plan payments is the sum of those months’ SPFs, which is $33.58.


Example (3).Assume the same facts as in Example (1)(a), except that R elected to receive a lump-sum distribution rather than a straight-life annuity. If R is unmarried on July 1, 1980, R’s PBA is $600 for the remainder of R’s life. If R is married to S on July 1, 1980, the PBAs of R and S are based on the annuity that would have been paid under an election to receive a joint and survivor annuity. See paragraph (g)(3)(ii)(A)(1) of this section.

[40 FR 34530, Aug. 15, 1975, as amended at 44 FR 11763, Mar. 2, 1979; 44 FR 23527, Apr. 20, 1979; 47 FR 50240, Nov. 5, 1982; 47 FR 56847, Dec. 21, 1982; 81 FR 59476, Aug. 30, 2016; 81 FR 92653, Dec. 20, 2016; 82 FR 29237, June 28, 2017]


Editorial Note:At 82 FR 29236, June 28, 2017, as required by the Congressional Review Act and Public Law 115-35 and Public Law 115-24, the Employee Benefits Security Administration removed all amendments to § 2510.3-2 published at 81 FR 59464, Aug. 30, 2016 and at 81 FR 92639, Dec. 20, 2016.

§ 2510.3-3 Employee benefit plan.

Link to an amendment published at 89 FR 34127, Apr. 30, 2024.

(a) General. This section clarifies the definition in section 3(3) of the term “employee benefit plan” for purposes of title I of the Act and this chapter. It states a general principle which can be applied to a large class of plans to determine whether they constitute employee benefit plans within the meaning of section 3(3) of the Act. Under section 4(a) of the Act, only employee benefit plans within the meaning of section 3(3) are subject to title I.


(b) Plans without employees. For purposes of title I of the Act and this chapter, the term “employee benefit plan” shall not include any plan, fund or program, other than an apprenticeship or other training program, under which no employees are participants covered under the plan, as defined in paragraph (d) of this section. For example, a so-called “Keogh” or “H.R. 10” plan under which only partners or only a sole proprietor are participants covered under the plan will not be covered under title I. However, a Keogh plan under which one or more common law employees, in addition to the self-employed individuals, are participants covered under the plan, will be covered under title I. Similarly, partnership buyout agreements described in section 736 of the Internal Revenue Code of 1954 will not be subject to title I.


(c) Employees. For purposes of this section and except as provided in §§ 2510.3-5(e) and 2510.3-55(d):


(1) An individual and his or her spouse shall not be deemed to be employees with respect to a trade or business, whether incorporated or unincorporated, which is wholly owned by the individual or by the individual and his or her spouse, and


(2) A partner in a partnership and his or her spouse shall not be deemed to be employees with respect to the partnership.


(d) Participant covered under the plan. (1)(i) An individual becomes a participant covered under an employee welfare benefit plan on the earlier of—


(A) The date designated by the plan as the date on which the individual begins participation in the plan;


(B) The date on which the individual becomes eligible under the plan for a benefit subject only to occurrence of the contingency for which the benefit is provided; or


(C) The date on which the individual makes a contribution to the plan, whether voluntary or mandatory.


(ii) An individual becomes a participant covered under an employee pension plan—


(A) In the case of a plan which provides for employee contributions or defines participation to include employees who have not yet retired, on the earlier of—


(1) The date on which the individual makes a contribution, whether voluntary or mandatory, or


(2) The date designated by the plan as the date on which the individual has satisfied the plan’s age and service requirements for participation, and


(B) In the case of a plan which does not provide for employee contributions and does not define participation to include employees who have not yet retired, the date on which the individual completes the first year of employment which may be taken into account in determining—


(1) Whether the individual is entitled to benefits under the plan, or


(2) The amount of benefits to which the individual is entitled,


whichever results in earlier participation.

(2)(i) An individual is not a participant covered under an employee welfare plan on the earliest date on which the individual—


(A) Is ineligible to receive any benefit under the plan even if the contingency for which such benefit is provided should occur, and


(B) Is not designated by the plan as a participant.


(ii) An individual is not a participant covered under an employee pension plan or a beneficiary receiving benefits under an employee pension plan if—


(A) The entire benefit rights of the individual—


(1) Are fully guaranteed by an insurance company, insurance service or insurance organization licensed to do business in a State, and are legally enforceable by the sole choice of the individual against the insurance company, insurance service or insurance organization; and


(2) A contract, policy or certificate describing the benefits to which the individual is entitled under the plan has been issued to the individual; or


(B) The individual has received from the plan a lump-sum distribution or a series of distributions of cash or other property which represents the balance of his or her credit under the plan.


(3)(i) In the case of an employee pension benefit plan, an individual who, under the terms of the plan, has incurred a one-year break in service after having become a participant covered under the plan, and who has acquired no vested right to a benefit before such break in service is not a participant covered under the plan until the individual has completed a year of service after returning to employment covered by the plan.


(ii) For purposes of paragraph (d)(3)(i) of this section, in the case of an employee pension benefit plan which is subject to section 203 of the Act the term “year of service” shall have the same meaning as in section 203(b)(2)(A) of the Act and any regulations issued under the Act and the term “one-year break in service” shall have the same meaning as in section 203(b)(3)(A) of the Act and any regulations issued under the Act.


[40 FR 34530, Aug. 15, 1975, as amended at 83 FR 28961, June 21, 2018; 84 FR 37543, July 31, 2019]


§ 2510.3-5 Definition of employer—Association Health Plans.

Link to an amendment published at 89 FR 34127, Apr. 30, 2024.

(a) In general. The purpose of this section is to clarify which persons may act as an “employer” within the meaning of section 3(5) of the Act in sponsoring a multiple employer group health plan. Section 733(a)(1) defines the term “group health plan,” in relevant part, as an employee welfare benefit plan to the extent that the plan provides medical care to employees or their dependents through insurance, reimbursement, or otherwise. The Act defines an “employee welfare benefit plan” in section 3(1), in relevant part, as any plan, fund, or program established or maintained by an employer, employee organization, or by both an employer and an employee organization, for the purpose of providing certain listed welfare benefits to participants or their beneficiaries. For purposes of being able to establish and maintain a welfare benefit plan, an “employer” under section 3(5) of the Act includes any person acting directly as an employer, or any person acting indirectly in the interest of an employer in relation to an employee benefit plan. A group or association of employers is specifically identified in section 3(5) of the Act as a person able to act directly or indirectly in the interest of an employer, including for purposes of establishing or maintaining an employee welfare benefit plan. A bona fide group or association shall be deemed to be able to act in the interest of an employer within the meaning of section 3(5) of the Act by satisfying the criteria set forth in paragraphs (b) through (e) of this section. This section does not invalidate any existing advisory opinions, or preclude future advisory opinions, from the Department under section 3(5) of the Act that address other circumstances in which the Department will view a person as able to act directly or indirectly in the interest of direct employers in sponsoring an employee welfare benefit plan that is a group health plan.


(b) Bona fide group or association of employers. For purposes of Title I of the Act and this chapter, a bona fide group or association of employers capable of establishing a group health plan that is an employee welfare benefit plan shall include a group or association of employers that meets the following requirements:


(1) The primary purpose of the group or association may be to offer and provide health coverage to its employer members and their employees; however, the group or association also must have at least one substantial business purpose unrelated to offering and providing health coverage or other employee benefits to its employer members and their employees. For purposes of satisfying the standard of this paragraph (b)(1), as a safe harbor, a substantial business purpose is considered to exist if the group or association would be a viable entity in the absence of sponsoring an employee benefit plan. For purposes of this paragraph (b)(1), a business purpose includes promoting common business interests of its members or the common economic interests in a given trade or employer community, and is not required to be a for-profit activity;


(2) Each employer member of the group or association participating in the group health plan is a person acting directly as an employer of at least one employee who is a participant covered under the plan,


(3) The group or association has a formal organizational structure with a governing body and has by-laws or other similar indications of formality,


(4) The functions and activities of the group or association are controlled by its employer members, and the group’s or association’s employer members that participate in the group health plan control the plan. Control must be present both in form and in substance,


(5) The employer members have a commonality of interest as described in paragraph (c) of this section,


(6)(i) The group or association does not make health coverage through the group’s or association’s group health plan available other than to:


(A) An employee of a current employer member of the group or association;


(B) A former employee of a current employer member of the group or association who became eligible for coverage under the group health plan when the former employee was an employee of the employer; and


(C) A beneficiary of an individual described in paragraph (b)(6)(i)(A) or (b)(6)(i)(B) of this section (e.g., spouses and dependent children).


(ii) Notwithstanding paragraph (b)(6)(i)(B) of this section, coverage may not be made available to any individual (or beneficiaries of the individual) for any plan year following the plan year in which the plan determines pursuant to reasonable monitoring procedures that the individual ceases to meet the conditions in paragraph (e)(2) of this section (unless the individual again meets those conditions), except as may be required by section 601 of the Act.


(7) The group or association and health coverage offered by the group or association complies with the nondiscrimination provisions of paragraph (d) of this section.


(8) The group or association is not a health insurance issuer described in section 733(b)(2) of the Act, or owned or controlled by such a health insurance issuer or by a subsidiary or affiliate of such a health insurance issuer, other than to the extent such entities participate in the group or association in their capacity as employer members of the group or association.


(c) Commonality of interest. (1) Employer members of a group or association will be treated as having a commonality of interest if the standards of either paragraph (c)(1)(i) or (c)(1)(ii) of this section are met, provided these standards are not implemented in a manner that is subterfuge for discrimination as is prohibited under paragraph (d) of this section:


(i) The employers are in the same trade, industry, line of business or profession; or


(ii) Each employer has a principal place of business in the same region that does not exceed the boundaries of a single State or a metropolitan area (even if the metropolitan area includes more than one State).


(2) In the case of a group or association that is sponsoring a group health plan under this section and that is itself an employer member of the group or association, the group or association will be deemed for purposes of paragraph (c)(1)(i) of this section to be in the same trade, industry, line of business, or profession, as applicable, as the other employer members of the group or association.


(d) Nondiscrimination. A bona fide group or association, and any health coverage offered by the bona fide group or association, must comply with the nondiscrimination provisions of this paragraph (d).


(1) The group or association must not condition employer membership in the group or association on any health factor, as defined in § 2590.702(a) of this chapter, of any individual who is or may become eligible to participate in the group health plan sponsored by the group or association.


(2) The group health plan sponsored by the group or association must comply with the rules of § 2590.702(b) of this chapter with respect to nondiscrimination in rules for eligibility for benefits, subject to paragraph (d)(4) of this section.


(3) The group health plan sponsored by the group or association must comply with the rules of § 2590.702(c) of this chapter with respect to nondiscrimination in premiums or contributions required by any participant or beneficiary for coverage under the plan, subject to paragraph (d)(4) of this section.


(4) In applying the nondiscrimination provisions of paragraphs (d)(2) and (3) of this section, the group or association may not treat the employees of different employer members of the group or association as distinct groups of similarly-situated individuals based on a health factor of one or more individuals, as defined in § 2590.702(a) of this chapter.


(5) The rules of this paragraph (d) are illustrated by the following examples:



Example 1.(i) Facts. Association A offers group health coverage to all members. According to the bylaws of Association A, membership is subject to the following criteria: All members must be restaurants located in a specified area. Restaurant B, which is located within the specified area, has several employees with large health claims. Restaurant B applies for membership in Association A, and is denied membership based on the claims experience of its employees.

(ii) Conclusion. In this Example 1, Association A’s exclusion of Restaurant B from Association A discriminates on the basis of claims history, which is a health factor under § 2590.702(a)(1) of this chapter. Accordingly, Association A does not satisfy the requirement in paragraph (d)(1) of this section, and, therefore would not meet the definition of a bona fide group or association of employers under paragraph (b) of this section.



Example 2.(i) Facts. Association C offers group health coverage to all members. According to the bylaws of Association C, membership is subject to the following criteria: All members must have a principal place of business in a specified metropolitan area. Individual D is a sole proprietor whose principal place of business is within the specified area. As part of the membership application process, Individual D provides certain health information to Association C. After learning that Individual D has diabetes, based on D’s diabetes, Association C denies Individual D’s membership application.

(ii) Conclusion. In this Example 2, Association C’s exclusion of Individual D because D has diabetes is a decision that discriminates on the basis of a medical condition, which is a health factor under § 2590.702(a)(1) of this chapter. Accordingly, Association C does not satisfy the requirement in paragraph (d)(1) of this section and would not meet the definition of a bona fide group or association of employers under paragraph (b) of this section.



Example 3.(i) Facts. Association F offers group health coverage to all plumbers working for plumbing companies in a State, if the plumbing company employer chooses to join the association. Plumbers employed by a plumbing company on a full-time basis (which is defined under the terms of the arrangement as regularly working at least 30 hours a week) are eligible for health coverage without a waiting period. Plumbers employed by a plumbing company on a part-time basis (which is defined under the terms of the arrangement as regularly working at least 10 hours per week, but less than 30 hours per week) are eligible for health coverage after a 60-day waiting period.

(ii) Conclusion. In this Example 3, making a distinction between part-time versus full-time employment status is a permitted distinction between similarly-situated individuals under § 2590.702(d) of this chapter, provided the distinction is not directed at individuals under § 2590.702(d)(3) of this chapter. Accordingly, the requirement that plumbers working part time must satisfy a waiting period for coverage is a rule for eligibility that does not violate § 2590.702(b) and, as a consequence, satisfies paragraph (d)(2) of this section.



Example 4.(i) Facts. Association G sponsors a group health plan, available to all employers doing business in Town H. Association G charges Business I more for premiums than it charges other members because Business I employs several individuals with chronic illnesses.

(ii) Conclusion. In this Example 4, the employees of Business I cannot be treated as a separate group of similarly-situated individuals from other members based on a health factor of one or more individuals under paragraph (d)(4) of this section. Therefore, charging Business I more for premiums based on one or more health factors of the employees of Business I does not satisfy the requirements in paragraph (d)(4) of this section.



Example 5.(i) Facts. Association J sponsors a group health plan that is available to all members. According to the bylaws of Association J, membership is open to any entity whose principal place of business is in State K, which has only one major metropolitan area, the capital city of State K. Members whose principal place of business is in the capital city of State K are charged more for premiums than members whose principal place of business is outside of the capital city.

(ii) Conclusion. In this Example 5, making a distinction between members whose principal place of business is in the capital city of State K, as compared to some other area in State K, is a permitted distinction between similarly-situated individuals under § 2590.702(d) of this chapter, provided the distinction is not directed at individuals under § 2590.702(d)(3) of this chapter. Accordingly, Association J’s rule for charging different premiums based on principal place of business satisfies paragraph (d)(3) and (d)(4) of this section.



Example 6.(i) Facts. Association L sponsors a group health plan, available to all its members. According to the bylaws of Association L, membership is open to any entity whose principal place of business is in State M. Sole Proprietor N’s principal place of business is in City O, within State M. It is the only member whose principal place of business is in City O, and it is otherwise similarly situated with respect to all other members of the association. After learning that Sole Proprietor N has been diagnosed with cancer, based on the cancer diagnosis, Association L changes its premium structure to charge higher premiums for members whose principal place of business is in City O.

(ii) Conclusion. In this Example 6, cancer is a health factor under § 2590.702(a) of this chapter. Making a distinction between groups of otherwise similarly situated individuals that on its face is based on geography (which is not a health factor), but that is directed at one or more individuals based on a health factor (cancer), is in this case a distinction directed at an individual under § 2590.702(d)(3) of this chapter and is not a permitted distinction. Accordingly, by charging higher premiums to members whose principal place of business is City O, Association L violates § 2590.702(c) of this chapter and, consequently, the conditions of paragraphs (d)(3) and (d)(4) of this section are not satisfied.



Example 7.(i) Facts. Association P is an agriculture industry association. It sponsors a group health plan that charges employers different premiums based on their primary agriculture subsector, defined under the terms of the plan as: Crop farming, livestock, fishing and aquaculture, and forestry. The distinction is not directed at individual participants or beneficiaries based on a health factor.

(ii) Conclusion. In this Example 7, the premium distinction between members is permitted under paragraphs (d)(3) and (d)(4) because it is not based on a health factor and is not directed at individual participants and beneficiaries based on a health factor.



Example 8.(i) Facts. Association Q is a retail industry association. It sponsors a group health plan that charges employees of employers different premiums based on their occupation: Cashier, stockers, and sales associates. The distinction is not directed at individual participants or beneficiaries based on a health factor.

(ii) Conclusion. In this Example 8, the premium distinction is permitted under paragraph (d)(3) and (d)(4) of this section because it is not based on a health factor and is not directed at individual participants and beneficiaries based on a health factor.



Example 9.(i) Facts. Association R sponsors a group health plan that is available to all employers with a principal place of business in State S. Employers are charged different premiums based on their industry subsector, defined under the terms of the plan as: Construction, education, health, financial services, information services, leisure and hospitality, manufacturing, transportation, natural resources, and other. In addition, within any employer, employees are charged different premiums based on part-time versus full-time status (part time status is defined, under the terms of the plan, as regularly working at least 40 hours, but less than 120 hours, per month). These distinctions are not directed at individual participants or beneficiaries based on a health factor.

(ii) Conclusion. In this Example 9, the premium distinctions between employer members of a State AHP based on industry, and between employees of employer members who are working part-time versus full-time, are permitted under paragraphs (d)(3) and (d)(4) of this section because these distinctions are not based on a health factor or directed at individual participants and beneficiaries based on a health factor.



Example 10.(i) Facts. Association T sponsors a group health plan that offers a premium discount to participants who participate in a wellness program that complies with section 2590.702(f) of this chapter.

(ii) Conclusion. In this Example 10, providing a reward (such as a premium discount or rebate, a waiver of all or part of a cost-sharing mechanism, an additional benefit, or any financial or other incentive, as well as avoiding a penalty such as the absence of a premium surcharge or other financial or nonfinancial disincentive) in return for adherence to a wellness program that satisfies conditions of § 2590.702(f) of this chapter is permissible under this paragraph (d).


(e) Dual treatment of working owners as employers and employees. (1) A working owner of a trade or business without common law employees may qualify as both an employer and as an employee of the trade or business for purposes of the requirements in paragraph (b) of this section, including the requirement in paragraph (b)(2) that each employer member of the group or association participating in the group health plan must be a person acting directly as an employer of one or more employees who are participants covered under the plan, and the requirement in paragraph (b)(6) that the group or association does not make health coverage offered to employer members through the association available other than to certain employees and former employees and their beneficiaries.


(2) The term “working owner” as used in this paragraph (e) of this section means any person who a responsible plan fiduciary reasonably determines is an individual:


(i) Who has an ownership right of any nature in a trade or business, whether incorporated or unincorporated, including a partner and other self-employed individual;


(ii) Who is earning wages or self-employment income from the trade or business for providing personal services to the trade or business; and


(iii) Who either:


(A) Works on average at least 20 hours per week or at least 80 hours per month providing personal services to the working owner’s trade or business, or


(B) Has wages or self-employment income from such trade or business that at least equals the working owner’s cost of coverage for participation by the working owner and any covered beneficiaries in the group health plan sponsored by the group or association in which the individual is participating.


(3) The determination under this paragraph must be made when the working owner first becomes eligible for coverage under the group health plan and continued eligibility must be periodically confirmed pursuant to reasonable monitoring procedures.


(f) Applicability dates. (1) This section is applicable on September 1, 2018, for employee welfare benefit plans that are fully insured and that meet the requirements for being an association health plan sponsored by a bona fide group or association of employers pursuant to paragraphs (b) through (e) of this section.


(2) This section is applicable on January 1, 2019, for any employee welfare benefit plan that is not fully insured, is in existence on June 21, 2018, meets the requirements that applied before June 21, 2018, and chooses to become an association health plan sponsored by a bona fide group or association of employers pursuant to paragraphs (b) through (e) of this section (e.g., in order to expand to a broader group of individuals, such as working owners without employees).


(3) This section is applicable on April 1, 2019, for any other employee welfare benefit plan established to be and operated as an association health plan sponsored by a bona fide group or association of employers pursuant to pursuant to paragraphs (b) through (e) of this section.


(g) Severability. If any provision of this section is held to be invalid or unenforceable by its terms, or as applied to any person or circumstance, or stayed pending further agency action, the provision shall be construed so as to continue to give the maximum effect to the provision permitted by law, unless such holding shall be one of utter invalidity or unenforceability, in which event the provision shall be severable from this section and shall not affect the remainder thereof.


[83 FR 28961, June 21, 2018]


§ 2510.3-16 Definition of “plan administrator.”

(a) In general. The term “plan administrator” or “administrator” means the person specifically so designated by the terms of the instrument under which the plan is operated. If an administrator is not so designated, the plan administrator is the plan sponsor, as defined in section 3(16)(B) of ERISA.


(b) In the case of a self-insured group health plan established or maintained by an eligible organization, as defined in § 2590.715-2713A(a) of this chapter, if the eligible organization provides a copy of the self-certification of its objection to administering or funding any contraceptive benefits in accordance with § 2590.715-2713A(b)(1)(ii) of this chapter to a third party administrator, the self-certification shall be an instrument under which the plan is operated, shall be treated as a designation of the third party administrator as the plan administrator under section 3(16) of ERISA for any contraceptive services required to be covered under § 2590.715-2713(a)(1)(iv) of this chapter to which the eligible organization objects on religious grounds, and shall supersede any earlier designation. If, instead, the eligible organization notifies the Secretary of Health and Human Services of its objection to administering or funding any contraceptive benefits in accordance with § 2590.715-2713A(b)(1)(ii) of this chapter, the Department of Labor, working with the Department of Health and Human Services, shall separately provide notification to each third party administrator that such third party administrator shall be the plan administrator under section 3(16) of ERISA for any contraceptive services required to be covered under § 2590.715-2713(a)(1)(iv) of this chapter to which the eligible organization objects on religious grounds, with respect to benefits for contraceptive services that the third party administrator would otherwise manage. Such notification from the Department of Labor shall be an instrument under which the plan is operated and shall supersede any earlier designation.


(c) A third party administrator that becomes a plan administrator pursuant to this section shall be responsible for—


(1) Complying with section 2713 of the Public Health Service Act (42 U.S.C. 300gg-13) (as incorporated into section 715 of ERISA) and § 2590.715-2713 of this chapter with respect to coverage of contraceptive services. To the extent the plan contracts with different third party administrators for different classifications of benefits (such as prescription drug benefits versus inpatient and outpatient benefits), each third party administrator is responsible for providing contraceptive coverage that complies with section 2713 of the Public Health Service Act (as incorporated into section 715 of ERISA) and § 2590.715-2713 of this chapter with respect to the classification or classifications of benefits subject to its contract.


(2) Establishing and operating a procedure for determining such claims for contraceptive services in accordance with § 2560.503-1 of this chapter.


(3) Complying with disclosure and other requirements applicable to group health plans under Title I of ERISA with respect to such benefits.


[78 FR 39894, July 2, 2013, as amended at 79 FR 51099, Aug. 27, 2014]


§ 2510.3-21 Definition of “Fiduciary.”

Link to an amendment published at 89 FR 32256, Apr. 25, 2024.

(a)-(b) [Reserved]


(c) Investment advice. (1) A person shall be deemed to be rendering “investment advice” to an employee benefit plan, within the meaning of section 3(21)(A)(ii) of the Employee Retirement Income Security Act of 1974 (the Act) and this paragraph, only if:


(i) Such person renders advice to the plan as to the value of securities or other property, or makes recommendation as to the advisability of investing in, purchasing, or selling securities or other property; and


(ii) Such person either directly or indirectly (e.g., through or together with any affiliate)—


(A) Has discretionary authority or control, whether or not pursuant to agreement, arrangement or understanding, with respect to purchasing or selling securities or other property for the plan; or


(B) Renders any advice described in paragraph (c)(1)(i) of this section on a regular basis to the plan pursuant to a mutual agreement, arrangement or understanding, written or otherwise, between such person and the plan or a fiduciary with respect to the plan, that such services will serve as a primary basis for investment decisions with respect to plan assets, and that such person will render individualized investment advice to the plan based on the particular needs of the plan regarding such matters as, among other things, investment policies or strategy, overall portfolio composition, or diversification of plan investments.


(2) A person who is a fiduciary with respect to a plan by reason of rendering investment advice (as defined in paragraph (c)(1) of this section) for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or having any authority or responsibility to do so, shall not be deemed to be a fiduciary regarding any assets of the plan with respect to which such person does not have any discretionary authority, discretionary control or discretionary responsibility, does not exercise any authority or control, does not render investment advice (as defined in paragraph (c)(1) of this section) for a fee or other compensation, and does not have any authority or responsibility to render such investment advice, provided that nothing in this paragraph shall be deemed to:


(i) Exempt such person from the provisions of section 405(a) of the Act concerning liability for fiduciary breaches by other fiduciaries with respect to any assets of the plan; or


(ii) Exclude such person from the definition of the term “party in interest” (as set forth in section 3(14)(B) of the Act) with respect to any assets of the plan.


(d) Execution of securities transactions. (1) A person who is a broker or dealer registered under the Securities Exchange Act of 1934, a reporting dealer who makes primary markets in securities of the United States Government or of an agency of the United States Government and reports daily to the Federal Reserve Bank of New York its positions with respect to such securities and borrowings thereon, or a bank supervised by the United States or a State, shall not be deemed to be a fiduciary, within the meaning of section 3(21)(A) of the Act, with respect to an employee benefit plan solely because such person executes transactions for the purchase or sale of securities on behalf of such plan in the ordinary course of its business as a broker, dealer, or bank, pursuant to instructions of a fiduciary with respect to such plan, if:


(i) Neither the fiduciary nor any affiliate of such fiduciary is such broker, dealer, or bank; and


(ii) The instructions specify (A) the security to be purchased or sold, (B) a price range within which such security is to be purchased or sold, or, if such security is issued by an open-end investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80a-1, et seq.), a price which is determined in accordance with Rule 22c-1 under the Investment Company Act of 1940 (17 CFR 270.22c-1), (C) a time span during which such security may be purchased or sold (not to exceed five business days), and (D) the minimum or maximum quantity of such security which may be purchased or sold within such price range, or, in the case of a security issued by an open-end investment company registered under the Investment Company Act of 1940, the minimum or maximum quantity of such security which may be purchased or sold, or the value of such security in dollar amount which may be purchased or sold, at the price referred to in paragraph (d)(1)(ii)(B) of this section.


(2) A person who is a broker-dealer, reporting dealer, or bank which is a fiduciary with respect to an employee benefit plan solely by reason of the possession or exercise of discretionary authority or discretionary control in the management of the plan or the management or disposition of plan assets in connection with the execution of a transaction or transactions for the purchase or sale of securities on behalf of such plan which fails to comply with the provisions of paragraph (d)(1) of this section, shall not be deemed to be a fiduciary regarding any assets of the plan with respect to which such broker-dealer, reporting dealer or bank does not have any discretionary authority, discretionary control or discretionary responsibility, does not exercise any authority or control, does not render investment advice (as defined in paragraph (c)(1) of this section) for a fee or other compensation, and does not have any authority or responsibility to render such investment advice, provided that nothing in this paragraph shall be deemed to:


(i) Exempt such broker-dealer, reporting dealer, or bank from the provisions of section 405(a) of the Act concerning liability for fiduciary breaches by other fiduciaries with respect to any assets of the plan; or


(ii) Exclude such broker-dealer, reporting dealer, or bank from the definition, of the term “party in interest” (as set forth in section 3(14)(B) of the Act) with respect to any assets of the plan.


(e) Affiliate and control. (1) For purposes of paragraphs (c) and (d) of this section, an “affiliate” of a person shall include:


(i) Any person directly or indirectly, through one or more intermediaries, controlling, controlled by, or under common control with such person;


(ii) Any officer, director, partner, employee or relative (as defined in section 3(15) of the Act) of such person; and


(iii) Any corporation or partnership of which such person is an officer, director or partner.


(2) For purposes of this paragraph, the term “control” means the power to exercise a controlling influence over the management or policies of a person other than an individual.


[85 FR 40593, July 7, 2020]


§ 2510.3-37 Multiemployer plan.

(a) General. Section 3(37) of the Act contains in paragraphs (a)(i)-(iv) a number of criteria which an employee benefit plan must meet in order to be a multiemployer plan under the Act. Section 3(37) also provides that the Secretary may prescribe by regulation other requirements in addition to those contained in paragraphs (a)(i)-(iv). The purpose of this regulation is to establish such requirements.


(b) Plans in existence before the effective date. (1) A plan in existence before September 2, 1974, will be considered a multiemployer plan if it satisfies the requirements of section 3(37)(A)(i)-(iv) of the Act.


(2) For purposes of this section, a plan is considered to be in existence if:


(i)(A) The plan was reduced to writing and adopted by the participating employers and the employee organization (including, in the case of a corporate employer, formal approval by an employer’s board of directors or shareholders, if required), even though no amounts had been contributed under the plan, and


(B) The plan has not been terminated; or


(ii)(A) There was a legally enforceable agreement to establish such a plan signed by the employers and the employee organization, and


(B) The contributions to be made to the plan were set forth in the agreement.


(iii) If a plan was in existence within the meaning of paragraph (b)(2)(i) or (ii) of this section, any other plan with which such existing plan is merged or consolidated shall also be considered to be in existence.


(c) Plans not in existence before the effective date. In addition to the provisions of section 3(37)(A)(i)-(iv) of the Act, a multiemployer plan established on or after September 2, 1974, must meet the requirement that it was established for a substantial business purpose. A substantial business purpose includes the interest of a labor organization in securing an employee benefit plan for its members. The following factors are relevant in determining whether a substantial business purpose existed for the establishment of a plan; any single factor may be sufficient to constitute a substantial business purpose:


(1) The extent to which the plan is maintained by a substantial number of unaffiliated contributing employers and covers a substantial portion of the trade, craft or industry in terms of employees or a substantial number of the employees in the trade, craft or industry in a locality or geographic area;


(2) The extent to which the plan provides benefits more closely related to years of service within the trade, craft or industry rather than with an employer, reflecting the fact that an employee’s relationship with an employer maintaining the plan is generally short-term although service in the trade, craft or industry is generally long-term;


(3) The extent to which collective bargaining takes place on matters other than employee benefit plans between the employee organization and the employers maintaining the plan; and


(4) The extent to which the administrative burden and expense of providing benefits through single employer plans would be greater than through a multiemployer plan.


[40 FR 52008, Nov. 7, 1975]


§ 2510.3-38 Filing requirements for State registered investment advisers to be investment managers.

(a) General. Section 3(38) of the Act sets forth the criteria for a fiduciary to be an investment manager for purposes of section 405 of the Act. Subparagraph (B)(ii) of section 3(38) of the Act provides that, in the case of a fiduciary who is not registered under the Investment Advisers Act of 1940 by reason of paragraph (1) of section 203A(a) of such Act, the fiduciary must be registered as an investment adviser under the laws of the State in which it maintains its principal office and place of business, and, at the time the fiduciary files registration forms with such State to maintain the fiduciary’s registration under the laws of such State, also files a copy of such forms with the Secretary of Labor. The purpose of this section is to set forth the exclusive means for investment advisers to satisfy the filing obligation with the Secretary described in subparagraph (B)(ii) of section 3(38) of the Act.


(b) Filing requirement. To satisfy the filing requirement with the Secretary in section 3(38)(B)(ii) of the Act, a fiduciary must be registered as an investment adviser with the State in which it maintains its principal office and place of business and file through the Investment Adviser Registration Depository (IARD), in accordance with applicable IARD requirements, the information required to be registered and maintain the fiduciary’s registration as an investment adviser in such State. Submitting to the Secretary investment adviser registration forms filed with a State does not constitute compliance with the filing requirement in section 3(38)(B)(ii) of the Act.


(c) Definitions. For purposes of this section, the term “Investment Adviser Registration Depository” or “IARD” means the centralized electronic depository described in 17 CFR 275.203-1.


(d) Cross reference. Information for investment advisers on how to file through the IARD is available on the Securities and Exchange Commission website at www.sec.gov/iard.


[69 FR 52125, Aug. 24, 2004]


§ 2510.3-40 Plans Established or Maintained Under or Pursuant to Collective Bargaining Agreements Under Section 3(40)(A) of ERISA.

(a) Scope and purpose. Section 3(40)(A) of the Employee Retirement Income Security Act of 1974 (ERISA) provides that the term “multiple employer welfare arrangement” (MEWA) does not include an employee welfare benefit plan that is established or maintained under or pursuant to one or more agreements that the Secretary of Labor (the Secretary) finds to be collective bargaining agreements. This section sets forth criteria that represent a finding by the Secretary whether an arrangement is an employee welfare benefit plan established or maintained under or pursuant to one or more collective bargaining agreements. A plan is established or maintained under or pursuant to collective bargaining if it meets the criteria in this section. However, even if an entity meets the criteria in this section, it will not be an employee welfare benefit plan established or maintained under or pursuant to a collective bargaining agreement if it comes within the exclusions in the section. Nothing in or pursuant to this section shall constitute a finding for any purpose other than the exception for plans established or maintained under or pursuant to one or more collective bargaining agreements under section 3(40) of ERISA. In a particular case where there is an attempt to assert state jurisdiction or the application of state law with respect to a plan or other arrangement that allegedly is covered under Title I of ERISA, the Secretary has set forth a procedure for obtaining individualized findings at 29 CFR part 2570, subpart H.


(b) General criteria. The Secretary finds, for purposes of section 3(40) of ERISA, that an employee welfare benefit plan is “established or maintained under or pursuant to one or more agreements which the Secretary finds to be collective bargaining agreements” for any plan year in which the plan meets the criteria set forth in paragraphs (b)(1), (2), (3), and (4) of this section, and is not excluded under paragraph (c) of this section.


(1) The entity is an employee welfare benefit plan within the meaning of section 3(1) of ERISA.


(2) At least 85% of the participants in the plan are:


(i) Individuals employed under one or more agreements meeting the criteria of paragraph (b)(3) of this section, under which contributions are made to the plan, or pursuant to which coverage under the plan is provided;


(ii) Retirees who either participated in the plan at least five of the last 10 years preceding their retirement, or


(A) Are receiving benefits as participants under a multiemployer pension benefit plan that is maintained under the same agreements referred to in paragraph (b)(3) of this section, and


(B) Have at least five years of service or the equivalent under that multiemployer pension benefit plan;


(iii) Participants on extended coverage under the plan pursuant to the requirements of a statute or court or administrative agency decision, including but not limited to the continuation coverage requirements of the Consolidated Omnibus Budget Reconciliation Act of 1985, sections 601-609, 29 U.S.C. 1169, the Family and Medical Leave Act, 29 U.S.C. 2601 et seq., the Uniformed Services Employment and Reemployment Rights Act of 1994, 38 U.S.C. 4301 et seq., or the National Labor Relations Act, 29 U.S.C. 158(a)(5);


(iv) Participants who were active participants and whose coverage is otherwise extended under the terms of the plan, including but not limited to extension by reason of self-payment, hour bank, long or short-term disability, furlough, or temporary unemployment, provided that the charge to the individual for such extended coverage is no more than the applicable premium under section 604 of the Act;


(v) Participants whose coverage under the plan is maintained pursuant to a reciprocal agreement with one or more other employee welfare benefit plans that are established or maintained under or pursuant to one or more collective bargaining agreements and that are multiemployer plans;


(vi) Individuals employed by:


(A) An employee organization that sponsors, jointly sponsors, or is represented on the association, committee, joint board of trustees, or other similar group of representatives of the parties who sponsor the plan;


(B) The plan or associated trust fund;


(C) Other employee benefit plans or trust funds to which contributions are made pursuant to the same agreement described in paragraph (b)(3) of this section; or


(D) An employer association that is the authorized employer representative that actually engaged in the collective bargaining that led to the agreement that references the plan as described in paragraph (b)(3) of this section;


(vii) Individuals who were employed under an agreement described in paragraph (b)(3) of this section, provided that they are employed by one or more employers that are parties to an agreement described in paragraph (b)(3) and are covered under the plan on terms that are generally no more favorable than those that apply to similarly situated individuals described in paragraph (b)(2)(i) of this section;


(viii) Individuals (other than individuals described in paragraph (b)(2)(i) of this section) who are employed by employers that are bound by the terms of an agreement described in paragraph (b)(3) of this section and that employ personnel covered by such agreement, and who are covered under the plan on terms that are generally no more favorable than those that apply to such covered personnel. For this purpose, such individuals in excess of 10% of the total population of participants in the plan are disregarded;


(ix) Individuals who are, or were for a period of at least three years, employed under one or more agreements between or among one or more “carriers” (including “carriers by air”) and one or more “representatives” of employees for collective bargaining purposes and as defined by the Railway Labor Act, 45 U.S.C. 151 et seq., providing for such individuals’ current or subsequent participation in the plan, or providing for contributions to be made to the plan by such carriers; or


(x) Individuals who are licensed marine pilots operating in United States ports as a state-regulated enterprise and are covered under an employee welfare benefit plan that meets the definition of a qualified merchant marine plan, as defined in section 415(b)(2)(F) of the Internal Revenue Code (26 U.S.C.).


(3) The plan is incorporated or referenced in a written agreement between one or more employers and one or more employee organizations, which agreement, itself or together with other agreements among the same parties:


(i) Is the product of a bona fide collective bargaining relationship between the employers and the employee organization(s);


(ii) Identifies employers and employee organization(s) that are parties to and bound by the agreement;


(iii) Identifies the personnel, job classifications, and/or work jurisdiction covered by the agreement;


(iv) Provides for terms and conditions of employment in addition to coverage under, or contributions to, the plan; and


(v) Is not unilaterally terminable or automatically terminated solely for non-payment of benefits under, or contributions to, the plan.


(4) For purposes of paragraph (b)(3)(i) of this section, the following factors, among others, are to be considered in determining the existence of a bona fide collective bargaining relationship. In any proceeding initiated under 29 CFR part 2570 subpart H, the existence of a bona fide collective bargaining relationship under paragraph (b)(3)(i) shall be presumed where at least four of the factors set out in paragraphs (b)(4)(i) through (viii) of this section are established. In such a proceeding, the Secretary may also consider whether other objective or subjective indicia of actual collective bargaining and representation are present as set out in paragraph (b)(4)(ix) of this section.


(i) The agreement referred to in paragraph (b)(3) of this section provides for contributions to a labor-management trust fund structured according to section 302(c)(5), (6), (7), (8), or (9) of the Taft-Hartley Act, 29 U.S.C. 186(c)(5), (6), (7), (8) or (9), or to a plan lawfully negotiated under the Railway Labor Act;


(ii) The agreement referred to in paragraph (b)(3) of this section requires contributions by substantially all of the participating employers to a multiemployer pension plan that is structured in accordance with section 401 of the Internal Revenue Code (26 U.S.C.) and is either structured in accordance with section 302(c)(5) of the Taft-Hartley Act, 29 U.S.C. 186(c)(5), or is lawfully negotiated under the Railway Labor Act, and substantially all of the active participants covered by the employee welfare benefit plan are also eligible to become participants in that pension plan;


(iii) The predominant employee organization that is a party to the agreement referred to in paragraph (b)(3) of this section has maintained a series of agreements incorporating or referencing the plan since before January 1, 1983;


(iv) The predominant employee organization that is a party to the agreement referred to in paragraph (b)(3) of this section has been a national or international union, or a federation of national and international unions, or has been affiliated with such a union or federation, since before January 1, 1983;


(v) A court, government agency, or other third-party adjudicatory tribunal has determined, in a contested or adversary proceeding, or in a government-supervised election, that the predominant employee organization that is a party to the agreement described in paragraph (b)(3) of this section is the lawfully recognized or designated collective bargaining representative with respect to one or more bargaining units of personnel covered by such agreement;


(vi) Employers who are parties to the agreement described in paragraph (b)(3) of this section pay at least 75% of the premiums or contributions required for the coverage of active participants under the plan or, in the case of a retiree-only plan, the employers pay at least 75% of the premiums or contributions required for the coverage of the retirees. For this purpose, coverage under the plan for dental or vision care, coverage for excepted benefits under 29 CFR 2590.732(b), and amounts paid by participants and beneficiaries as co-payments or deductibles in accordance with the terms of the plan are disregarded;


(vii) The predominant employee organization that is a party to the agreement described in paragraph (b)(3) of this section provides, sponsors, or jointly sponsors a hiring hall(s) and/or a state-certified apprenticeship program(s) that provides services that are available to substantially all active participants covered by the plan;


(viii) The agreement described in paragraph (b)(3) of this section has been determined to be a bona fide collective bargaining agreement for purposes of establishing the prevailing practices with respect to wages and supplements in a locality, pursuant to a prevailing wage statute of any state or the District of Columbia.


(ix) There are other objective or subjective indicia of actual collective bargaining and representation, such as that arm’s-length negotiations occurred between the parties to the agreement described in paragraph (b)(3) of this section; that the predominant employee organization that is party to such agreement actively represents employees covered by such agreement with respect to grievances, disputes, or other matters involving employment terms and conditions other than coverage under, or contributions to, the employee welfare benefit plan; that there is a geographic, occupational, trade, organizing, or other rationale for the employers and bargaining units covered by such agreement; that there is a connection between such agreement and the participation, if any, of self-employed individuals in the employee welfare benefit plan established or maintained under or pursuant to such agreement.


(c) Exclusions. An employee welfare benefit plan shall not be deemed to be “established or maintained under or pursuant to one or more agreements which the Secretary finds to be collective bargaining agreements” for any plan year in which:


(1) The plan is self-funded or partially self-funded and is marketed to employers or sole proprietors


(i) By one or more insurance producers as defined in paragraph (d) of this section;


(ii) By an individual who is disqualified from, or ineligible for, or has failed to obtain, a license to serve as an insurance producer to the extent that the individual engages in an activity for which such license is required; or


(iii) By individuals (other than individuals described in paragraphs (c)(1)(i) and (ii) of this section) who are paid on a commission-type basis to market the plan.


(iv) For the purposes of this paragraph (c)(1):


(A) “Marketing” does not include administering the plan, consulting with plan sponsors, counseling on benefit design or coverage, or explaining the terms of coverage available under the plan to employees or union members;


(B) “Marketing” does include the marketing of union membership that carries with it plan participation by virtue of such membership, except for membership in unions representing insurance producers themselves;


(2) The agreement under which the plan is established or maintained is a scheme, plan, stratagem, or artifice of evasion, a principal intent of which is to evade compliance with state law and regulations applicable to insurance; or


(3) There is fraud, forgery, or willful misrepresentation as to the factors relied on to demonstrate that the plan satisfies the criteria set forth in paragraph (b) of this section.


(d) Definitions. (1) Active participant means a participant who is not retired and who is not on extended coverage under paragraphs (b)(2)(iii) or (b)(2)(iv) of this section.


(2) Agreement means the contract embodying the terms and conditions mutually agreed upon between or among the parties to such agreement. Where the singular is used in this section, the plural is automatically included.


(3) Individual employed means any natural person who furnishes services to another person or entity in the capacity of an employee under common law, without regard to any specialized definitions or interpretations of the terms “employee,” “employer,” or “employed” under federal or state statutes other than ERISA.


(4) Insurance producer means an agent, broker, consultant, or producer who is an individual, entity, or sole proprietor that is licensed under the laws of the state to sell, solicit, or negotiate insurance.


(5) Predominant employee organization means, where more than one employee organization is a party to an agreement, either the organization representing the plurality of individuals employed under such agreement, or organizations that in combination represent the majority of such individuals.


(e) Examples. The operation of the provisions of this section may be illustrated by the following examples.



Example 1.Plan A has 500 participants, in the following 4 categories of participants under paragraph (b)(2) of this section:

Categories of

participants
Total

number
Nexus group
Non-nexus
1. Individuals working under CBAs335 (67%)335 (67%)0
2. Retirees50 (10%)50 (10%)0
3. “Special Class”—Non-CBA, non-CBA-alumni100 (20%)50 (10%)50 (10%)
4. Non-nexus participants15 (3%)0 15 (3%)
Total500 (100%)435 (87%)65 (13%)
In determining whether at least 85% of Plan A’s participant population is made up of individuals with the required nexus to the collective bargaining agreement as required by paragraph (b)(2) of this section, the Plan may count as part of the nexus group only 50 (10% of the total plan population) of the 100 individuals described in paragraph (b)(2)(viii) of this section. That is because the number of individuals meeting the category of individuals in paragraph (b)(2)(viii) exceeds 10% of the total participant population by 50 individuals. The paragraph specifies that of those individuals who would otherwise be deemed to be nexus individuals because they are the type of individuals described in paragraph (b)(2)(viii), the number in excess of 10% of the total plan population may not be counted in the nexus group. Here, 50 of the 100 individuals employed by signatory employers, but not covered by the collective bargaining agreement, are counted as nexus individuals and 50 are not counted as nexus individuals. Nonetheless, the Plan satisfies the 85% criterion under paragraph (b)(2) because a total of 435 (335 individuals covered by the collective bargaining agreement, plus 50 retirees, plus 50 individuals employed by signatory employers), or 87%, of the 500 participants in Plan A are individuals who may be counted as nexus participants under paragraph (b)(2). Beneficiaries (e.g., spouses, dependent children, etc.) are not counted to determine whether the 85% test has been met.


Example 2.(i) International Union MG and its Local Unions have represented people working primarily in a particular industry for over 60 years. Since 1950, most of their collective bargaining agreements have called for those workers to be covered by the National MG Health and Welfare Plan. During that time, the number of union-represented workers in the industry, and the number of active participants in the National MG Health and Welfare Plan, first grew and then declined. New Locals were formed and later were shut down. Despite these fluctuations, the National MG Health and Welfare Plan meets the factors described in paragraphs (b)(4)(iii) and (iv) of this section, as the plan has been in existence pursuant to collective bargaining agreements to which the International Union and its affiliates have been parties since before January 1, 1983.

(ii) Assume the same facts, except that on January 1, 1999, International Union MG merged with International Union RE to form International Union MRGE. MRGE and its Locals now represent the active participants in the National MG Health and Welfare Plan and in the National RE Health and Welfare Plan, which, for 45 years, had been maintained under collective bargaining agreements negotiated by International Union RE and its Locals. Since International Union MRGE is the continuation of, and successor to, the MG and RE unions, the two plans continue to meet the factors in paragraphs (b)(4)(iii) and (iv) of this section. This also would be true if the two plans were merged.

(iii) Assume the same facts as in paragraphs (i) and (ii) of this Example. In addition to maintaining the health and welfare plans described in those paragraphs, International Union MG also maintained the National MG Pension Plan and International Union RE maintained the National RE Pension Plan. When the unions merged and the health and welfare plans were merged, National MG Pension Plan and National RE Pension Plan were merged to form National MRGE Pension Plan. When the unions merged, the employees and retirees covered under the pre-merger plans continued to be covered under the post-merger plans pursuant to the collective bargaining agreements and also were given credit in the post-merger plans for their years of service and coverage in the pre-merger plans. Retirees who originally were covered under the pre-merger plans and continue to be covered under the post-merger plans based on their past service and coverage would be considered to be “retirees” for purposes of 2550.3-40(b)(2)(ii). Likewise, bargaining unit alumni who were covered under the pre-merger plans and continued to be covered under the post-merger plans based on their past service and coverage and their continued employment with employers that are parties to an agreement described in paragraph (b)(3) of this section would be considered to be bargaining unit alumni for purposes of 2550.3-40(b)(2)(vii).



Example 3.Assume the same facts as in paragraph (ii) of Example 2 with respect to International Union MG. However, in 1997, one of its Locals and the employers with which it negotiates agree to set up a new multiemployer health and welfare plan that only covers the individuals represented by that Local Union. That plan would not meet the factor in paragraph (b)(4)(iii) of this section, as it has not been incorporated or referenced in collective bargaining agreements since before January 1, 1983.


Example 4.(i) Pursuant to a collective bargaining agreement between various employers and Local 2000, the employers contribute $2 per hour to the Fund for every hour that a covered employee works under the agreement. The covered employees are automatically entitled to health and disability coverage from the Fund for every calendar quarter the employees have 300 hours of additional covered service in the preceding quarter. The employees do not need to make any additional contributions for their own coverage, but must pay $250 per month if they want health coverage for their dependent spouse and children. Because the employer payments cover 100% of the required contributions for the employees’ own coverage, the Local 2000 Employers Health and Welfare Fund meets the “75% employer payment” factor under paragraph (b)(4)(vi) of this section.

(ii) Assume, however, that the negotiated employer contribution rate was $1 per hour, and the employees could only obtain health coverage for themselves if they also elected to contribute $1 per hour, paid on a pre-tax basis through salary reduction. The Fund would not meet the 75% employer payment factor, even though the employees’ contributions are treated as employer contributions for tax purposes. Under ERISA, and therefore under this section, elective salary reduction contributions are treated as employee contributions. The outcome would be the same if a uniform employee contribution rate applied to all employees, whether they had individual or family coverage, so that the $1 per hour employee contribution qualified an employee for his or her own coverage and, if he or she had dependents, dependent coverage as well.



Example 5.Arthur is a licensed insurance broker, one of whose clients is Multiemployer Fund M, a partially self-funded plan. Arthur takes bids from insurance companies on behalf of Fund M for the insured portion of its coverage, helps the trustees to evaluate the bids, and places the Fund’s health insurance coverage with the carrier that is selected. Arthur also assists the trustees of Fund M in preparing material to explain the plan and its benefits to the participants, as well as in monitoring the insurance company’s performance under the contract. At the Trustees’ request, Arthur meets with a group of employers with which the union is negotiating for their employees’ coverage under Fund M, and he explains the cost structure and benefits that Fund M provides. Arthur is not engaged in marketing within the meaning of paragraph (c)(1) of this section, so the fact that he provides these administrative services and sells insurance to the Fund itself does not affect the plan’s status as a plan established or maintained under or pursuant to a collective bargaining agreement. This is the case whether or how he is compensated.


Example 6.Assume the same facts as Example 5, except that Arthur has a group of clients who are unrelated to the employers bound by the collective bargaining agreement, whose employees would not be “nexus group” members, and whose insurance carrier has withdrawn from the market in their locality. He persuades the client group to retain him to find them other coverage. The client group has no relationship with the labor union that represents the participants in Fund M. However, Arthur offers them coverage under Fund M and persuades the Fund’s Trustees to allow the client group to join Fund M in order to broaden Fund M’s contribution base. Arthur’s activities in obtaining coverage for the unrelated group under Fund M constitutes marketing through an insurance producer; Fund M is a MEWA under paragraph (c)(1) of this section.


Example 7.Union A represents thousands of construction workers in a three-state geographic region. For many years, Union A has maintained a standard written collective bargaining agreement with several hundred large and small building contractors, covering wages, hours, and other terms and conditions of employment for all work performed in Union A’s geographic territory. The terms of those agreements are negotiated every three years between Union A and a multiemployer Association, which signs on behalf of those employers who have delegated their bargaining authority to the Association. Hundreds of other employers—including both local and traveling contractors—have chosen to become bound to the terms of Union A’s standard area agreement for various periods of time and in various ways, such as by signing short-form binders or “me too” agreements, executing a single job or project labor agreement, or entering into a subcontracting arrangement with a signatory employer. All of these employ individuals represented by Union A and contribute to Plan A, a self-insured multiemployer health and welfare plan established and maintained under Union A’s standard area agreement. During the past year, the trustees of Plan A have brought lawsuits against several signatory employers seeking contributions allegedly owed, but not paid to the trust. In defending that litigation, a number of employers have sworn that they never intended to operate as union contractors, that their employees want nothing to do with Union A, that Union A procured their assent to the collective bargaining agreement solely by threats and fraudulent misrepresentations, and that Union A has failed to file certain reports required by the Labor Management Reporting and Disclosure Act. In at least one instance, a petition for a decertification election has been filed with the National Labor Relations Board. In this example, Plan A meets the criteria for a regulatory finding under this section that it is a multiemployer plan established and maintained under or pursuant to one or more collective bargaining agreements, assuming that its participant population satisfies the 85% test of paragraph (b)(2) of this section and that none of the disqualifying factors in paragraph (c) of this section is present. Plan A’s status for the purpose of this section is not affected by the fact that some of the employers who deal with Union A have challenged Union A’s conduct, or have disputed under labor statutes and legal doctrines other than ERISA section 3(40) the validity and enforceability of their putative contract with Union A, regardless of the outcome of those disputes.


Example 8.Assume the same facts as Example 7. Plan A’s benefits consultant recently entered into an arrangement with the Medical Consortium, a newly formed organization of health care providers, which allows the Plan to offer a broader range of health services to Plan A’s participants while achieving cost savings to the Plan and to participants. Union A, Plan A, and Plan A’s consultant each have added a page to their Web sites publicizing the new arrangement with the Medical Consortium. Concurrently, Medical Consortium’s Web site prominently publicizes its recent affiliation with Plan A and the innovative services it makes available to the Plan’s participants. Union A has mailed out informational packets to its members describing the benefit enhancements and encouraging election of family coverage. Union A has also begun distributing similar material to workers on hundreds of non-union construction job sites within its geographic territory. In this example, Plan A remains a plan established and maintained under or pursuant to one or more collective bargaining agreements under section 3(40) of ERISA. Neither Plan A’s relationship with a new organization of health care providers, nor the use of various media to publicize Plan A’s attractive benefits throughout the area served by Union A, alters Plan A’s status for purpose of this section.


Example 9.Assume the same facts as in Example 7. Union A undertakes an area-wide organizing campaign among the employees of all the health care providers who belong to the Medical Consortium. When soliciting individual employees to sign up as union members, Union A distributes Plan A’s information materials and promises to bargain for the same coverage. At the same time, when appealing to the employers in the Medical Consortium for voluntary recognition, Union A promises to publicize the Consortium’s status as a group of unionized health care service providers. Union A eventually succeeds in obtaining recognition based on its majority status among the employees working for Medical Consortium employers. The Consortium, acting on behalf of its employer members, negotiates a collective bargaining agreement with Union A that provides terms and conditions of employment, including coverage under Plan A. In this example, Plan A still meets the criteria for a regulatory finding that it is collectively bargained under section 3(40) of ERISA. Union A’s recruitment and representation of a new occupational category of workers unrelated to the construction trade, its promotion of attractive health benefits to achieve organizing success, and the Plan’s resultant growth, do not take Plan A outside the regulatory finding.


Example 10.Assume the same facts as in Example 7. The Medical Consortium, a newly formed organization, approaches Plan A with a proposal to make money for Plan A and Union A by enrolling a large group of employers, their employees, and self-employed individuals affiliated with the Medical Consortium. The Medical Consortium obtains employers’ signatures on a generic document bearing Union A’s name, labeled “collective bargaining agreement,” which provides for health coverage under Plan A and compliance with wage and hour statutes, as well as other employment laws. Employees of signatory employers sign enrollment documents for Plan A and are issued membership cards in Union A; their membership dues are regularly checked off along with their monthly payments for health coverage. Self-employed individuals similarly receive union membership cards and make monthly payments, which are divided between Plan A and the Union. Aside from health coverage matters, these new participants have little or no contact with Union A. The new participants enrolled through the Consortium amount to 18% of the population of Plan A during the current Plan Year. In this example, Plan A now fails to meet the criteria in paragraphs (b)(2) and (b)(3) of this section, because more than 15% of its participants are individuals who are not employed under agreements that are the product of a bona fide collective bargaining relationship and who do not fall within any of the other nexus categories set forth in paragraph (b)(2) of this section. Moreover, even if the number of additional participants enrolled through the Medical Consortium, together with any other participants who did not fall within any of the nexus categories, did not exceed 15% of the total participant population under the plan, the circumstances in this example would trigger the disqualification of paragraph (c)(2) of this section, because Plan A now is being maintained under a substantial number of agreements that are a “scheme, plan, stratagem or artifice of evasion” intended primarily to evade compliance with state laws and regulations pertaining to insurance. In either case, the consequence of adding the participants through the Medical Consortium is that Plan A is now a MEWA for purposes of section 3(40) of ERISA and is not exempt from state regulation by virtue of ERISA.

(f) Cross-reference. See 29 CFR part 2570, subpart H for procedural rules relating to proceedings seeking an Administrative Law Judge finding by the Secretary under section 3(40) of ERISA.


(g) Effect of proceeding seeking Administrative Law Judge Section 3(40) Finding.


(1) An Administrative Law Judge finding issued pursuant to the procedures in 29 CFR part 2570, subpart H will constitute a finding whether the entity in that proceeding is an employee welfare benefit plan established or maintained under or pursuant to an agreement that the Secretary finds to be a collective bargaining agreement for purposes of section 3(40) of ERISA.


(2) Nothing in this section or in 29 CFR part 2570, subpart H is intended to provide the basis for a stay or delay of a state administrative or court proceeding or enforcement of a subpoena.


[68 FR 17480, Apr. 9, 2003]


§ 2510.3-44 Registration requirement to serve as a pooled plan provider to pooled employer plans.

(a) General. Section 3(44) of the Act sets forth the criteria that a person must meet to be a pooled plan provider for pooled employer plans under section 3(43) of the Act.


(b) Registration requirement. Subparagraph (A)(ii) of section 3(44) requires the person to register as a pooled plan provider with the Department and provide such other information as the Department may require, before beginning operations as a pooled plan provider. For this purpose, “beginning operations as a pooled plan provider” means the initiation of operations of the first plan that the person operates as a pooled employer plan, as described in paragraph (b)(6) of this section. To meet the requirements to register with the Department under section 3(44) of the Act, a person intending to act as a pooled plan provider must:


(1) At least 30 days before beginning operations as a pooled plan provider, file with the Department the following information on a complete and accurate Form PR (Pooled Plan Provider Registration) in accordance with the form’s instructions.


(i) The legal business name and any trade name (doing business as) of such person.


(ii) The business mailing address and phone number of such person.


(iii) The employer identification number (EIN) assigned to such person by the Internal Revenue Service.


(iv) The address of any public website or websites of the pooled plan provider or any affiliates to be used to market any such person as a pooled plan provider to the public or to provide public information on the pooled employer plans operated by the pooled plan provider.


(v) Name, address, contact telephone number, and email address for the responsible compliance official of the pooled plan provider. For purposes of this paragraph (b)(1)(v), the term “responsible compliance official” means the person or persons, identified by name, title, or office, responsible for addressing questions regarding the pooled plan provider’s status under, or compliance with, applicable provisions of the Act and the Internal Revenue Code as pertaining to a pooled employer plan.


(vi) The agent for service of legal process for the pooled plan provider, and the address at which process may be served on such agent.


(vii) The approximate date when pooled plan operations are expected to commence.


(viii) An identification of the administrative, investment, and fiduciary services that will be offered or provided in connection with the pooled employer plans by the pooled plan provider or an affiliate. For purposes of this paragraph (b)(1)(viii), the term “affiliate” includes all persons who are treated as a single employer with the person intending to be a pooled plan provider under section 414(b), (c), (m), or (o) of the Internal Revenue Code who will provide services to pooled employer plans sponsored by the pooled plan provider and any officer, director, partner, employee, or relative (as defined in section 3(15) of the Act) of such person; and any corporation or partnership of which such person is an officer, director, or partner.


(ix) A statement disclosing any ongoing Federal or State criminal proceedings, or any Federal or State criminal conviction, related to the provision of services to, operation of, or investments of, any employee benefit plan, against the pooled plan provider, or any officer, director, or employee of the pooled plan provider, provided that any criminal conviction may be omitted if the conviction, or related term of imprisonment served, is outside ten years of the date of registration.


(x) A statement disclosing any ongoing civil or administrative proceedings in any court or administrative tribunal by the Federal or State government or other regulatory authority against the pooled plan provider, or any officer, director, or employee of the pooled plan provider, involving a claim of fraud or dishonesty with respect to any employee benefit plan, or involving the mismanagement of plan assets.


(2) No later than the initiation of operations of a plan as a pooled employer plan, as described in paragraph (b)(6) of this section, file with the Department a supplemental report using the Form PR containing the name and plan number that the pooled employer plan will use for annual reporting purposes, and the name, address, and EIN for the trustee for the plan.


(3) File with the Department a supplemental report using the Form PR within the later of 30 days after the calendar quarter in which the following reportable events occurred or 45 days after a following reportable event occurred:


(i) Any change in the information reported pursuant to paragraph (b)(1) or (2) of this section unless otherwise disclosed pursuant to paragraphs (b)(3)(iii) through (v) of this section.


(ii) Any significant change in corporate or business structure of the pooled plan provider, e.g., merger, acquisition, or initiation of bankruptcy, receivership, or other insolvency proceeding for the pooled plan provider or an affiliate that provides services to a pooled employer plan, or ceasing all operations as a pooled plan provider.


(iii) Receipt of written notice of the initiation of any administrative proceeding or civil enforcement action in any court or administrative tribunal by any Federal or State governmental agency or other regulatory authority against the pooled plan provider, or any officer, director, or employee of the pooled plan provider involving a claim of fraud or dishonesty with respect to any employee benefit plan, or involving the mismanagement of plan assets.


(iv) Receipt of written notice of a finding involving a claim of fraud or dishonesty with respect to any employee benefit plan, or involving the mismanagement of plan assets in any matter described in paragraph (b)(1)(x) or (b)(3)(iii) of this section.


(v) Receipt of written notice of the filing of any Federal or State criminal charges related to the provision of services to, operation of, or investments of any pooled employer plan or other employee benefit plan against the pooled plan provider or any officer, director, or employee of the pooled plan provider.


(4) Only one registration must be filed for each person intending to act as a pooled plan provider, regardless of the number of pooled employer plans it operates. A pooled plan provider must file updates for each pooled employer plan described in paragraph (b)(2) of this section, any change of previously reported information, and any change in circumstances listed in paragraph (b)(3) of this section, but may file a single statement to report multiple changes, as long as the timing requirements are met with respect to each reportable change.


(5) If a pooled plan provider has terminated and ceased operating all pooled employer plans, the pooled plan provider must file a final supplemental filing in accordance with instructions for the Form PR. For purposes of this section, a pooled employer plan is treated as having terminated and ceased operating when a resolution has been adopted terminating the plan, all assets under the plan (including insurance/annuity contracts) have been distributed to the participants and beneficiaries or legally transferred to the control of another plan, and a final Form 5500 has been filed for the plan.


(6) For purposes of this section, a person is treated as initiating operations of a plan as a pooled employer plan when the first employer executes or adopts a participation, subscription, or similar agreement for the plan specifying that it is a pooled employer plan, or, if earlier, when the trustee of the plan first holds any asset in trust.


(7) Registrations required under this section shall be filed with the Secretary electronically on the Form PR in accordance with the Form PR instructions published by the Department.


(8) For purposes of this section, the term “administrative proceeding” or “administrative proceedings” means a judicial-type proceeding of public record before an administrative law judge or similar decision-maker.


(9) For purposes of this section, the term “other regulatory authority” means Federal or State authorities and self-regulatory organizations authorized by law, but does not include any foreign regulatory authorities.


(10) For purposes of paragraphs (b)(1)(ix) and (x) and (b)(3)(iii) and (v) of this section, employees of the pooled plan provider include employees of the pooled employer plan, but only if they handle assets of the plan, within the meaning of section 412 of the Act, or if they are responsible for operations or investments of the pooled employer plan.


(c) Transition rule. Notwithstanding paragraph (b)(1) of this section, a person intending to act as a pooled plan provider may file the Form PR on or before beginning operations as a pooled plan provider (dispensing with the 30-day advance filing requirement) if the filing is made before February 1, 2021.


(d) Acquittals and removal of information. A pooled plan provider may file an update to remove any matter previously reported under paragraph (b)(1)(ix) or (b)(3)(v) of this section for which the defendant has received an acquittal. For this purpose, the term “acquittal” means a finding by a judge or jury that a defendant is not guilty or any other dismissal or judgment which the government may not appeal.


[85 FR 72955, Nov. 16, 2020]


§ 2510.3-55 Definition of employer—Association Retirement Plans and other multiple employer pension benefit plans.

(a) In general. The purpose of this section is to clarify which persons may act as an “employer” within the meaning of section 3(5) of the Act in sponsoring a multiple employer defined contribution pension plan (hereinafter “MEP”). The Act defines the term “employee pension benefit plan” in section 3(2), in relevant part, as any plan, fund, or program established or maintained by an employer, employee organization, or by both an employer and an employee organization, to the extent by its express terms or as a result of surrounding circumstances such plan, fund, or program provides retirement income to employees or results in a deferral of income by employees for periods extending to the termination of covered employment or beyond. For purposes of being able to establish and maintain an employee pension benefit plan within the meaning of section 3(2), an “employer” under section 3(5) of the Act includes any person acting directly as an employer, or any person acting indirectly in the interest of an employer in relation to an employee benefit plan. A group or association of employers is specifically identified in section 3(5) of the Act as a person able to act directly or indirectly in the interest of an employer, including for purposes of establishing or maintaining an employee benefit plan. A bona fide group or association of employers (as defined in paragraph (b) of this section) and a bona fide professional employer organization (as described in paragraph (c) of this section) shall be deemed to be able to act in the interest of an employer within the meaning of section 3(5) of the Act by satisfying the criteria set forth in paragraphs (b) and (c) of this section, respectively.


(b)(1) Bona fide group or association of employers. For purposes of title I of the Act and this chapter, a bona fide group or association of employers capable of establishing a MEP shall include a group or association of employers that meets the following requirements:


(i) The primary purpose of the group or association may be to offer and provide MEP coverage to its employer members and their employees; however, the group or association also must have at least one substantial business purpose unrelated to offering and providing MEP coverage or other employee benefits to its employer members and their employees. For purposes of satisfying the standard of this paragraph (b)(1)(i), as a safe harbor, a substantial business purpose is considered to exist if the group or association would be a viable entity in the absence of sponsoring an employee benefit plan. For purposes of this paragraph (b)(1)(i), a business purpose includes promoting common business interests of its members or the common economic interests in a given trade or employer community and is not required to be a for-profit activity;


(ii) Each employer member of the group or association participating in the plan is a person acting directly as an employer of at least one employee who is a participant covered under the plan;


(iii) The group or association has a formal organizational structure with a governing body and has by-laws or other similar indications of formality;


(iv) The functions and activities of the group or association are controlled by its employer members, and the group’s or association’s employer members that participate in the plan control the plan. Control must be present both in form and in substance;


(v) The employer members have a commonality of interest as described in paragraph (b)(2) of this section;


(vi) The group or association does not make plan participation through the association available other than to employees and former employees of employer members, and their beneficiaries; and


(vii) The group or association is not a bank or trust company, insurance issuer, broker-dealer, or other similar financial services firm (including a pension recordkeeper or third-party administrator), or owned or controlled by such an entity or any subsidiary or affiliate of such an entity, other than to the extent such an entity, subsidiary or affiliate participates in the group or association in its capacity as an employer member of the group or association.


(2) Commonality of interest. (i) Employer members of a group or association will be treated as having a commonality of interest if either:


(A) The employers are in the same trade, industry, line of business or profession; or


(B) Each employer has a principal place of business in the same region that does not exceed the boundaries of a single State or a metropolitan area (even if the metropolitan area includes more than one State).


(ii) In the case of a group or association that is sponsoring a MEP under this section and that is itself an employer member of the group or association, the group or association will be deemed for purposes of paragraph (b)(2)(i)(A) of this section to be in the same trade, industry, line of business, or profession, as applicable, as the other employer members of the group or association.


(c)(1) Bona fide professional employer organization. A professional employer organization (PEO) is a human-resource company that contractually assumes certain employer responsibilities of its client employers. For purposes of title I of the Act and this chapter, a bona fide PEO is capable of establishing a MEP. A bona fide PEO is an organization that meets the following requirements:


(i) The PEO performs substantial employment functions on behalf of its client employers that adopt the MEP, and maintains adequate records relating to such functions;


(ii) The PEO has substantial control over the functions and activities of the MEP, as the plan sponsor (within the meaning of section 3(16)(B) of the Act), the plan administrator (within the meaning of section 3(16)(A) of the Act), and a named fiduciary (within the meaning of section 402 of the Act), and continues to have employee-benefit-plan obligations to MEP participants after the client employer no longer contracts with the organization.


(iii) The PEO ensures that each client employer that adopts the MEP acts directly as an employer of at least one employee who is a participant covered under the MEP; and


(iv) The PEO ensures that participation in the MEP is available only to employees and former employees of the PEO and client employers, employees and former employees of former client employers who became participants during the contract period between the PEO and former client employers, and their beneficiaries.


(2) Safe harbor criteria for substantial employment functions. For purposes of paragraph (c)(1)(i) of this section, whether a PEO performs substantial employment functions on behalf of its client employers is determined on the basis of the facts and circumstances of the particular situation. As a safe harbor, a PEO shall be considered to perform substantial employment functions on behalf of its client-employers that adopt the MEP if it meets the following criteria with respect to each client-employer employee that participates in the MEP—


(i) The PEO assumes responsibility for and pays wages to employees of its client-employers that adopt the MEP, without regard to the receipt or adequacy of payment from those client employers;


(ii) The PEO assumes responsibility for and reports, withholds, and pays any applicable federal employment taxes for its client employers that adopt the MEP, without regard to the receipt or adequacy of payment from those client employers;


(iii) The PEO plays a definite and contractually specified role in recruiting, hiring, and firing workers of its client-employers that adopt the MEP, in addition to the client-employer’s responsibility for recruiting, hiring, and firing workers. A PEO is considered to satisfy this standard if it recruits, hires, and fires, assumes responsibility for recruiting, hiring, and firing, or retains the right to recruit, hire, and fire workers of its client-employers that adopt the MEP, in addition to the client-employer’s responsibility for recruiting, hiring, and firing workers; and


(iv) The PEO assumes responsibility for and has substantial control over the functions and activities of any employee benefits which the service contract may require the PEO to provide, without regard to the receipt or adequacy of payment from those client employers for such benefits.


(d) Dual treatment of working owners as employers and employees. (1) A working owner of a trade or business without common law employees may qualify as both an employer and as an employee of the trade or business for purposes of the requirements in paragraph (b) of this section, including the requirement in paragraph (b)(1)(ii) of this section that each employer member of the group or association adopting the MEP must be a person acting directly as an employer of one or more employees who are participants covered under the MEP, and the requirement in paragraph (b)(1)(vi) of this section that the group or association does not make participation through the group or association available other than to certain employees and former employees and their beneficiaries.


(2) The term “working owner” as used in this paragraph (d) means any person who a responsible plan fiduciary reasonably determines is an individual:


(i) Who has an ownership right of any nature in a trade or business, whether incorporated or unincorporated, including a partner or other self-employed individual;


(ii) Who is earning wages or self-employment income from the trade or business for providing personal services to the trade or business; and


(iii) Who either:


(A) Works on average at least 20 hours per week or at least 80 hours per month providing personal services to the working owner’s trade or business, or


(B) In the case of a MEP described in paragraph (b) of this section, if applicable, has wages or self-employment income from such trade or business that at least equals the working owner’s cost of coverage for participation by the working owner and any covered beneficiaries in any group health plan sponsored by the group or association in which the individual is participating or is eligible to participate.


(3) The determination under this paragraph (d) must be made when the working owner first becomes eligible for participation in the defined contribution MEP and continued eligibility must be periodically confirmed pursuant to reasonable monitoring procedures.


(e) Severability. (1) If any provision of this section is held to be invalid or unenforceable by its terms, or as applied to any person or circumstance, or stayed pending further agency action, the provision shall be construed so as to continue to give the maximum effect to the provision permitted by law, unless such holding shall be one of complete invalidity or unenforceability, in which event the provision shall be severable from this section and shall not affect the remainder thereof.


(2) Examples. (i) If any portion of paragraph (b)(1)(i) of this section (containing the substantial business purpose requirement) is found to be void in a manner contemplated by paragraph (e)(1) of this section, then the whole of paragraph (b)(1)(i) of this section shall be construed as follows: “The group or association must be a viable entity in the absence of offering and providing MEP coverage or other employee benefits to its employer members and their employees.”


(ii) If any portion of paragraph (d) of this section (containing the “working owner” provision) is found to be void in a manner contemplated by paragraph (e)(1) of this section, such a decision does not impact the ability of a bona fide group or association to meet the “commonality of interest” requirement in paragraph (b)(2) of this section by being located in the same geographic locale.


[84 FR 37543, July 31, 2019]


§ 2510.3-101 Definition of “plan assets”—plan investments.

(a) In general. (1) This section describes what constitute assets of a plan with respect to a plan’s investment in another entity for purposes of subtitle A, and parts 1 and 4 of subtitle B, of title I of the Act and section 4975 of the Internal Revenue Code. Paragraph (a)(2) of this section contains a general rule relating to plan investments. Paragraphs (b) through (f) of this section define certain terms that are used in the application of the general rule. Paragraph (g) of this section describes how the rules in this section are to be applied when a plan owns property jointly with others or where it acquires an equity interest whose value relates solely to identified assets of an issuer. Paragraph (h) of this section contains special rules relating to particular kinds of plan investments. Paragraph (i) describes the assets that a plan acquires when it purchases certain guaranteed mortgage certificates. Paragraph (j) of this section contains examples illustrating the operation of this section. The effective date of this section is set forth in paragraph (k) of this section.


(2) Generally, when a plan invests in another entity, the plan’s assets include its investment, but do not, solely by reason of such investment, include any of the underlying assets of the entity. However, in the case of a plan’s investment in an equity interest of an entity that is neither a publicly-offered security nor a security issued by an investment company registered under the Investment Company Act of 1940 its assets include both the equity interest and an undivided interest in each of the underlying assets of the entity, unless it is established that—


(i) The entity is an operating company, or


(ii) Equity participation in the entity by benefit plan investors is not significant.


Therefore, any person who exercises authority or control respecting the management or disposition of such underlying assets, and any person who provides investment advice with respect to such assets for a fee (direct or indirect), is a fiduciary of the investing plan.

(b) Equity interests and publicly-offered securities. (1) The term equity interest means any interest in an entity other than an instrument that is treated as indebtedness under applicable local law and which has no substantial equity features. A profits interest in a partnership, an undivided ownership interest in property and a beneficial interest in a trust are equity interests.


(2) A publicly-offered security is a security that is freely transferable, part of a class of securities that is widely held and either—


(i) Part of a class of securities registered under section 12(b) or 12(g) of the Securities Exchange Act of 1934, or


(ii) Sold to the plan as part of an offering of securities to the public pursuant to an effective registration statement under the Securities Act of 1933 and the class of securities of which such security is a part is registered under the Securities Exchange Act of 1934 within 120 days (or such later time as may be allowed by the Securities and Exchange Commission) after the end of the fiscal year of the issuer during which the offering of such securities to the public occurred.


(3) For purposes of paragraph (b)(2) of this section, a class of securities is “widely-held” only if it is a class of securities that is owned by 100 or more investors independent of the issuer and of one another. A class of securities will not fail to be widely-held solely because subsequent to the initial offering the number of independent investors falls below 100 as a result of events beyond the control of the issuer.


(4) For purposes of paragraph (b)(2) of this section, whether a security is “freely transferable” is a factual question to be determined on the basis of all relevant facts and circumstances. If a security is part of an offering in which the minimum investment is $10,000 or less, however, the following factors ordinarily will not, alone or in combination, affect a finding that such securities are freely transferable:


(i) Any requirement that not less than a minimum number of shares or units of such security be transferred or assigned by any investor, provided that such requirement does not prevent transfer of all of the then remaining shares or units held by an investor;


(ii) Any prohibition against transfer or assignment of such security or rights in respect thereof to an ineligible or unsuitable investor;


(iii) Any restriction on, or prohibition against, any transfer or assignment which would either result in a termination or reclassification of the entity for Federal or state tax purposes or which would violate any state or Federal statute, regulation, court order, judicial decree, or rule of law;


(iv) Any requirement that reasonable transfer or administrative fees be paid in connection with a transfer or assignment;


(v) Any requirement that advance notice of a transfer or assignment be given to the entity and any requirement regarding execution of documentation evidencing such transfer or assignment (including documentation setting forth representations from either or both of the transferor or transferee as to compliance with any restriction or requirement described in this paragraph (b)(4) of this section or requiring compliance with the entity’s governing instruments);


(vi) Any restriction on substitution of an assignee as a limited partner of a partnership, including a general partner consent requirement, provided that the economic benefits of ownership of the assignor may be transferred or assigned without regard to such restriction or consent (other than compliance with any other restriction described in this paragraph (b)(4)) of this section;


(vii) Any administrative procedure which establishes an effective date, or an event, such as the completion of the offering, prior to which a transfer or assignment will not be effective; and


(viii) Any limitation or restriction on transfer or assignment which is not created or imposed by the issuer or any person acting for or on behalf of such issuer.


(c) Operating company. (1) An “operating company” is an entity that is primarily engaged, directly or through a majority owned subsidiary or subsidiaries, in the production or sale of a product or service other than the investment of capital. The term “operating company” includes an entity which is not described in the preceding sentence, but which is a “venture capital operating company” described in paragraph (d) or a “real estate operating company” described in paragraph (e).


(2) [Reserved]


(d) Venture capital operating company. (1) An entity is a “venture capital operating company” for the period beginning on an initial valuation date described in paragraph (d)(5)(i) and ending on the last day of the first “annual valuation period” described in paragraph (d)(5)(ii) (in the case of an entity that is not a venture capital operating company immediately before the determination) or for the 12 month period following the expiration of an “annual valuation period” described in paragraph (d)(5)(ii) (in the case of an entity that is a venture capital operating company immediately before the determination) if—


(i) On such initial valuation date, or at any time within such annual valuation period, at least 50 percent of its assets (other than short-term investments pending long-term commitment or distribution to investors), valued at cost, are invested in venture capital investments described in paragraph (d)(3)(i) or derivative investments described in paragraph (d)(4); and


(ii) During such 12 month period (or during the period beginning on the initial valuation date and ending on the last day of the first annual valuation period), the entity, in the ordinary course of its business, actually exercises management rights of the kind described in paragraph (d)(3)(ii) with respect to one or more of the operating companies in which it invests.


(2)(i) A venture capital operating company described in paragraph (d)(1) shall continue to be treated as a venture capital operating company during the “distribution period” described in paragraph (d)(2)(ii). An entity shall not be treated as a venture capital operating company at any time after the end of the distribution period.


(ii) The “distribution period” referred to in paragraph (d)(2)(i) begins on a date established by a venture capital operating company that occurs after the first date on which the venture capital operating company has distributed to investors the proceeds of at least 50 percent of the highest amount of its investments (other than short-term investments made pending long-term commitment or distribution to investors) outstanding at any time from the date it commenced business (determined on the basis of the cost of such investments) and ends on the earlier of—


(A) The date on which the company makes a “new portfolio investment”, or


(B) The expiration of 10 years from the beginning of the distribution period.


(iii) For purposes of paragraph (d)(2)(ii)(A), a “new portfolio investment” is an investment other than—


(A) An investment in an entity in which the venture capital operating company had an outstanding venture capital investment at the beginning of the distribution period which has continued to be outstanding at all times during the distribution period, or


(B) A short-term investment pending long-term commitment or distribution to investors.


(3)(i) For purposes of this paragraph (d) a “venture capital investment” is an investment in an operating company (other than a venture capital operating company) as to which the investor has or obtains management rights.


(ii) The term “management rights” means contractual rights directly between the investor and an operating company to substantially participate in, or substantially influence the conduct of, the management of the operating company.


(4)(i) An investment is a “derivative investment” for purposes of this paragraph (d) if it is—


(A) A venture capital investment as to which the investor’s management rights have ceased in connection with a public offering of securities of the operating company to which the investment relates, or


(B) An investment that is acquired by a venture capital operating company in the ordinary course of its business in exchange for an existing venture capital investment in connection with:


(1) A public offering of securities of the operating company to which the existing venture capital investment relates, or


(2) A merger or reorganization of the operating company to which the existing venture capital investment relates, provided that such merger or reorganization is made for independent business reasons unrelated to extinguishing management rights.


(ii) An investment ceases to be a derivative investment on the later of:


(A) 10 years from the date of the acquisition of the original venture capital investment to which the derivative investment relates, or


(B) 30 months from the date on which the investment becomes a derivative investment.


(5) For purposes of this paragraph (d) and paragraph (e)—


(i) An “initial valuation date” is the later of—


(A) Any date designated by the company within the 12 month period ending with the effective date of this section, or


(B) The first date on which an entity makes an investment that is not a short-term investment of funds pending long-term commitment.


(ii) An “annual valuation period” is a preestablished annual period, not exceeding 90 days in duration, which begins no later than the anniversary of an entity’s initial valuation date. An annual valuation period, once established may not be changed except for good cause unrelated to a determination under this paragraph (d) or paragraph (e).


(e) Real estate operating company. An entity is a “real estate operating company” for the period beginning on an initial valuation date described in paragraph (d)(5)(i) and ending on the last day of the first “annual valuation period” described in paragraph (d)(5)(ii) (in the case of an entity that is not a real estate operating company immediately before the determination) or for the 12 month period following the expiration of an annual valuation period described in paragraph (d)(5)(ii) (in the case of an entity that is a real estate operating company immediately before the determination) if:


(1) On such initial valuation date, or on any date within such annual valuation period, at least 50 percent of its assets, valued at cost (other than short-term investments pending long-term commitment or distribution to investors), are invested in real estate which is managed or developed and with respect to which such entity has the right to substantially participate directly in the management or development activities; and


(2) During such 12 month period (or during the period beginning on the initial valuation date and ending on the last day of the first annual valuation period) such entity in the ordinary course of its business is engaged directly in real estate management or development activities.


(f) Participation by benefit plan investors. (1) Equity participation in an entity by benefit plan investors is “significant” on any date if, immediately after the most recent acquisition of any equity interest in the entity, 25 percent or more of the value of any class of equity interests in the entity is held by benefit plan investors (as defined in paragraph (f)(2)). For purposes of determinations pursuant to this paragraph (f), the value of any equity interests held by a person (other than a benefit plan investor) who has discretionary authority or control with respect to the assets of the entity or any person who provides investment advice for a fee (direct or indirect) with respect to such assets, or any affiliate of such a person, shall be disregarded.


(2) A “benefit plan investor” is any of the following—


(i) Any employee benefit plan (as defined in section 3(3) of the Act), whether or not it is subject to the provisions of title I of the Act,


(ii) Any plan described in section 4975(e)(1) of the Internal Revenue Code,


(iii) Any entity whose underlying assets include plan assets by reason of a plan’s investment in the entity.


(3) An “affiliate” of a person includes any person, directly or indirectly, through one or more intermediaries, controlling, controlled by, or under common control with the person. For purposes of this paragraph (f)(3), “control”, with respect to a person other than an individual, means the power to exercise a controlling influence over the management or policies of such person.


(g) Joint ownership. For purposes of this section, where a plan jointly owns property with others, or where the value of a plan’s equity interest in an entity relates solely to identified property of the entity, such property shall be treated as the sole property of a separate entity.


(h) Specific rules relating to plan investments. Notwithstanding any other provision of this section—


(1) Except where the entity is an investment company registered under the Investment Company Act of 1940, when a plan acquires or holds an interest in any of the following entities its assets include its investment and an undivided interest in each of the underlying assets of the entity:


(i) A group trust which is exempt from taxation under section 501(a) of the Internal Revenue Code pursuant to the principles of Rev. Rul. 81-100, 1981-1 C.B. 326,


(ii) A common or collective trust fund of a bank,


(iii) A separate account of an insurance company, other than a separate account that is maintained solely in connection with fixed contractual obligations of the insurance company under which the amounts payable, or credited, to the plan and to any participant or beneficiary of the plan (including an annuitant) are not affected in any manner by the investment performance of the separate account.


(2) When a plan acquires or holds an interest in any entity (other than an insurance company licensed to do business in a State) which is established or maintained for the purpose of offering or providing any benefit described in section 3(1) or section 3(2) of the Act to participants or beneficiaries of the investing plan, its assets will include its investment and an undivided interest in the underlying assets of that entity.


(3) When a plan or a related group of plans owns all of the outstanding equity interests (other than director’s qualifying shares) in an entity, its assets include those equity interests and all of the underlying assets of the entity. This paragraph (h)(3) does not apply, however, where all of the outstanding equity interests in an entity are qualifying employer securities described in section 407(d)(5) of the Act, owned by one or more eligible individual account plan(s) (as defined in section 407(d)(3) of the Act) maintained by the same employer, provided that substantially all of the participants in the plan(s) are, or have been, employed by the issuer of such securities or by members of a group of affiliated corporations (as determined under section 407(d)(7) of the Act) of which the issuer is a member.


(4) For purposes of paragraph (h)(3), a “related group” of employee benefit plans consists of every group of two or more employee benefit plans—


(i) Each of which receives 10 percent or more of its aggregate contributions from the same employer or from members of the same controlled group of corporations (as determined under section 1563(a) of the Internal Revenue Code, without regard to section 1563(a)(4) thereof); or


(ii) Each of which is either maintained by, or maintained pursuant to a collective bargaining agreement negotiated by, the same employee organization or affiliated employee organizations. For purposes of this paragraph, an “affiliate” of an employee organization means any person controlling, controlled by, or under common control with such organization, and includes any organization chartered by the same parent body, or governed by the same constitution and bylaws, or having the relation of parent and subordinate.


(i) Governmental mortgage pools. (1) Where a plan acquires a guaranteed governmental mortgage pool certificate, as defined in paragraph (i)(2), the plan’s assets include the certificate and all of its rights with respect to such certificate under applicable law, but do not, solely by reason of the plan’s holding of such certificate, include any of the mortgages underlying such certificate.


(2) A “guaranteed governmental mortgage pool certificate” is a certificate backed by, or evidencing an interest in, specified mortgages or participation interests therein and with respect to which interest and principal payable pursuant to the certificate is guaranteed by the United States or an agency or instrumentality thereof. The term “guaranteed governmental mortgage pool certificate” includes a mortgage pool certificate with respect to which interest and principal payable pursuant to the certificate is guaranteed by:


(i) The Government National Mortgage Association;


(ii) The Federal Home Loan Mortgage Corporation; or


(iii) The Federal National Mortgage Association.


(j) Examples. The principles of this section are illustrated by the following examples:



(1) A plan, P, acquires debentures issued by a corporation, T, pursuant to a private offering. T is engaged primarily in investing and reinvesting in precious metals on behalf of its shareholders, all of which are benefit plan investors. By its terms, the debenture is convertible to common stock of T at P’s option. At the time of P’s acquisition of the debentures, the conversion feature is incidental to T’s obligation to pay interest and principal. Although T is not an operating company, P’s assets do not include an interest in the underlying assets of T because P has not acquired an equity interest in T. However, if P exercises its option to convert the debentures to common stock, it will have acquired an equity interest in T at that time and (assuming that the common stock is not a publicly-offered security and that there has been no change in the composition of the other equity investors in T) P’s assets would then include an undivided interest in the underlying assets of T.


(2) A plan, P, acquires a limited partnership interest in a limited partnership, U, which is established and maintained by A, a general partner in U. U has only one class of limited partnership interests. U is engaged in the business of investing and reinvesting in securities. Limited partnership interests in U are offered privately pursuant to an exemption from the registration requirements of the Securities Act of 1933. P acquires 15 percent of the value of all the outstanding limited partnership interests in U, and, at the time of P’s investment, a governmental plan owns 15 percent of the value of those interests. U is not an operating company because it is engaged primarily in the investment of capital. In addition, equity participation by benefit plan investors is significant because immediately after P’s investment such investors hold more than 25 percent of the limited partnership interests in U. Accordingly, P’s assets include an undivided interest in the underlying assets of U, and A is a fiduciary of P with respect to such assets by reason of its discretionary authority and control over U’s assets. Although the governmental plan’s investment is taken into account for purposes of determining whether equity participation by benefit plan investors is significant, nothing in this section imposes fiduciary obligations on A with respect to that plan.


(3) Assume the same facts as in paragraph (j)(2), except that P acquires only 5 percent of the value of all the outstanding limited partnership interests in U, and that benefit plan investors in the aggregate hold only 10 percent of the value of the limited partnership interests in U. Under these facts, there is no significant equity participation by benefit plan investors in U, and, accordingly, P’s assets include its limited partnership interest in U, but do not include any of the underlying assets of U. Thus, A would not be a fiduciary of P by reason of P’s investment.


(4) Assume the same facts as in paragraph (j)(3) and that the aggregate value of the outstanding limited partnership interests in U is $10,000 (and that the value of the interests held by benefit plan investors is thus $1000). Also assume that an affiliate of A owns limited partnership interests in U having a value of $6500. The value of the limited partnership interests held by A’s affiliate are disregarded for purposes of determining whether there is significant equity participation in U by benefit plan investors. Thus, the percentage of the aggregate value of the limited partnership interests held by benefit plan investors in U for purposes of such a determination is approximately 28.6% ($1000/$3500). Therefore there is significant benefit plan investment in T.


(5) A plan, P, invests in a limited partnership, V, pursuant to a private offering. There is significant equity participation by benefit plan investors in V. V acquires equity positions in the companies in which it invests, and, in connection with these investments, V negotiates terms that give it the right to participate in or influence the management of those companies. Some of these investments are in publicly-offered securities and some are in securities acquired in private offerings. During its most recent valuation period, more than 50 percent of V’s assets, valued at cost, consisted of investments with respect to which V obtained management rights of the kind described above. V’s managers routinely consult informally with, and advise, the management of only one portfolio company with respect to which it has management rights, although it devotes substantial resources to its consultations with that company. With respect to the other portfolio companies, V relies on the managers of other entities to consult with and advise the companies’ management. V is a venture capital operating company and therefore P has acquired its limited partnership investment, but has not acquired an interest in any of the underlying assets of V. Thus, none of the managers of V would be fiduciaries with respect to P solely by reason of its investment. In this situation, the mere fact that V does not participate in or influence the management of all its portfolio companies does not affect its characterization as a venture capital operating company.


(6) Assume the same facts as in paragraph (j)(5) and the following additional facts: V invests in debt securities as well as equity securities of its portfolio companies. In some cases V makes debt investments in companies in which it also has an equity investment; in other cases V only invests in debt instruments of the portfolio company. V’s debt investments are acquired pursuant to private offerings and V negotiates covenants that give it the right to substantially participate in or to substantially influence the conduct of the management of the companies issuing the obligations. These covenants give V more significant rights with respect to the portfolio companies’ management than the covenants ordinarily found in debt instruments of established, creditworthy companies that are purchased privately by institutional investors. V routinely consults with and advises the management of its portfolio companies. The mere fact that V’s investments in portfolio companies are debt, rather than equity, will not cause V to fail to be a venture capital operating company, provided it actually obtains the right to substantially participate in or influence the conduct of the management of its portfolio companies and provided that in the ordinary course of its business it actually exercises those rights.


(7) A plan, P, invests (pursuant to a private offering) in a limited partnership, W, that is engaged primarily in investing and reinvesting assets in equity positions in real property. The properties acquired by W are subject to long-term leases under which substantially all management and maintenance activities with respect to the property are the responsibility of the lessee. W is not engaged in the management or development of real estate merely because it assumes the risks of ownership of income-producing real property, and W is not a real estate operating company. If there is significant equity participation in W by benefit plan investors, P will be considered to have acquired an undivided interest in each of the underlying assets of W.


(8) Assume the same facts as in paragraph (j)(7) except that W owns several shopping centers in which individual stores are leased for relatively short periods to various merchants (rather than owning properties subject to long-term leases under which substantially all management and maintenance activities are the responsibility of the lessee). W retains independent contractors to manage the shopping center properties. These independent contractors negotiate individual leases, maintain the common areas and conduct maintenance activities with respect to the properties. W has the responsibility to supervise and the authority to terminate the independent contractors. During its most recent valuation period more than 50 percent of W’s assets, valued at cost, are invested in such properties. W is a real estate operating company. The fact that W does not have its own employees who engage in day-to-day management and development activities is only one factor in determining whether it is actively managing or developing real estate. Thus, P’s assets include its interest in W, but do not include any of the underlying assets of W.


(9) A plan, P, acquires a limited partnership interest in X pursuant to a private offering. There is significant equity participation in X by benefit plan investors. X is engaged in the business of making “convertible loans” which are structured as follows: X lends a specified percentage of the cost of acquiring real property to a borrower who provides the remaining capital needed to make the acquisition. This loan is secured by a mortgage on the property. Under the terms of the loan, X is entitled to receive a fixed rate of interest payable out of the initial cash flow from the property and is also entitled to that portion of any additional cash flow which is equal to the percentage of the acquisition cost that is financed by its loan. Simultaneously with the making of the loan, the borrower also gives X an option to purchase an interest in the property for the original principal amount of the loan at the expiration of its initial term. X’s percentage interest in the property, if it exercises this option, would be equal to the percentage of the acquisition cost of the property which is financed by its loan. The parties to the transaction contemplate that the option ordinarily will be exercised at the expiration of the loan term if the property has appreciated in value. X and the borrower also agree that, if the option is exercised, they will form a limited partnership to hold the property. X negotiates loan terms which give it rights to substantially influence, or to substantially participate in, the management of the property which is acquired with the proceeds of the loan. These loan terms give X significantly greater rights to participate in the management of the property than it would obtain under a conventional mortgage loan. In addition, under the terms of the loan, X and the borrower ratably share any capital expenditures relating to the property. During its most recent valuation period, more than 50 percent of the value of X’s assets valued at cost consisted of real estate investments of the kind described above. X, in the ordinary course of its business, routinely exercises its management rights and frequently consults with and advises the borrower and the property manager. Under these facts, X is a real estate operating company. Thus, P’s assets include its interest in X, but do not include any of the underlying assets of X.


(10) In a private transaction, a plan, P, acquires a 30 percent participation in a debt instrument that is held by a bank. Since the value of the participation certificate relates solely to the debt instrument, that debt instrument is, under paragraph (g), treated as the sole asset of a separate entity. Equity participation in that entity by benefit plan investors is significant since the value of the plan’s participation exceeds 25 percent of the value of the instrument. In addition, the hypothetical entity is not an operating company because it is primarily engaged in the investment of capital (i.e., holding the debt instrument). Thus, P’s assets include the participation and an undivided interest in the debt instrument, and the bank is a fiduciary of P to the extent it has discretionary authority or control over the debt instrument.


(11) In a private transaction, a plan, P, acquires 30% of the value of a class of equity securities issued by an operating company, Y. These securities provide that dividends shall be paid solely out of earnings attributable to certain tracts of undeveloped land that are held by Y for investment. Under paragraph (g), the property is treated as the sole asset of a separate entity. Thus, even though Y is an operating company, the hypothetical entity whose sole assets are the undeveloped tracts of land is not an operating company. Accordingly, P is considered to have acquired an undivided interest in the tracts of land held by Y. Thus, Y would be a fiduciary of P to the extent it exercises discretionary authority or control over such property.


(12) A medical benefit plan, P, acquires a beneficial interest in a trust, Z, that is not an insurance company licensed to do business in a State. Under this arrangement, Z will provide the benefits to the participants and beneficiaries of P that are promised under the terms of the plan. Under paragraph (h)(2), P’s assets include its beneficial interest in Z and an undivided interest in each of its underlying assets. Thus, persons with discretionary authority or control over the assets of Z would be fiduciaries of P.


(k) Effective date and transitional rules. (1) In general, this section is effective for purposes of identifying the assets of a plan on or after March 13, 1987. Except as a defense, this section shall not apply to investments in an entity in existence on March 13, 1987, if no plan subject to title I of the Act or plan described in section 4975(e)(1) of the Code (other than a plan described in section 4975(g)(2) or (3)) acquires an interest in the entity from an issuer or underwriter at any time on or after March 13, 1987 except pursuant to a contract binding on the plan in effect on March 13, 1987 with an issuer or underwriter to acquire an interest in the entity.


(2) Notwithstanding paragraph (k)(1), this section shall not, except as a defense, apply to a real estate entity described in section 11018(a) of Pub. L. 99-272.


[51 FR 41280, Nov. 13, 1986, as amended at 51 FR 47226, Dec. 31, 1986]


§ 2510.3-102 Definition of “plan assets”—participant contributions.

(a)(1) General rule. For purposes of subtitle A and parts 1 and 4 of subtitle B of title I of ERISA and section 4975 of the Internal Revenue Code only (but without any implication for and may not be relied upon to bar criminal prosecutions under 18 U.S.C. 664), the assets of the plan include amounts (other than union dues) that a participant or beneficiary pays to an employer, or amounts that a participant has withheld from his wages by an employer, for contribution or repayment of a participant loan to the plan, as of the earliest date on which such contributions or repayments can reasonably be segregated from the employer’s general assets.


(2) Safe harbor. (i) For purposes of paragraph (a)(1) of this section, in the case of a plan with fewer than 100 participants at the beginning of the plan year, any amount deposited with such plan not later than the 7th business day following the day on which such amount is received by the employer (in the case of amounts that a participant or beneficiary pays to an employer), or the 7th business day following the day on which such amount would otherwise have been payable to the participant in cash (in the case of amounts withheld by an employer from a participant’s wages), shall be deemed to be contributed or repaid to such plan on the earliest date on which such contributions or participant loan repayments can reasonably be segregated from the employer’s general assets.


(ii) This paragraph (a)(2) sets forth an optional alternative method of compliance with the rule set forth in paragraph (a)(1) of this section. This paragraph (a)(2) does not establish the exclusive means by which participant contribution or participant loan repayment amounts shall be considered to be contributed or repaid to a plan by the earliest date on which such contributions or repayments can reasonably be segregated from the employer’s general assets.


(b) Maximum time period for pension benefit plans. (1) Except as provided in paragraph (b)(2) of this section, with respect to an employee pension benefit plan as defined in section 3(2) of ERISA, in no event shall the date determined pursuant to paragraph (a)(1) of this section occur later than the 15th business day of the month following the month in which the participant contribution or participant loan repayment amounts are received by the employer (in the case of amounts that a participant or beneficiary pays to an employer) or the 15th business day of the month following the month in which such amounts would otherwise have been payable to the participant in cash (in the case of amounts withheld by an employer from a participant’s wages).


(2) With respect to a SIMPLE plan that involves SIMPLE IRAs (i.e., Simple Retirement Accounts, as described in section 408(p) of the Internal Revenue Code), in no event shall the date determined pursuant to paragraph (a)(1) of this section occur later than the 30th calendar day following the month in which the participant contribution amounts would otherwise have been payable to the participant in cash.


(c) Maximum time period for welfare benefit plans. With respect to an employee welfare benefit plan as defined in section 3(1) of ERISA, in no event shall the date determined pursuant to paragraph (a)(1) of this section occur later than 90 days from the date on which the participant contribution amounts are received by the employer (in the case of amounts that a participant or beneficiary pays to an employer) or the date on which such amounts would otherwise have been payable to the participant in cash (in the case of amounts withheld by an employer from a participant’s wages).


(d) Extension of maximum time period for pension plans. (1) With respect to participant contributions received or withheld by the employer in a single month, the maximum time period provided under paragraph (b) of this section shall be extended for an additional 10 business days for an employer who—


(i) Provides a true and accurate written notice, distributed in a manner reasonably designed to reach all the plan participants within 5 business days after the end of such extension period, stating—


(A) That the employer elected to take such extension for that month;


(B) That the affected contributions have been transmitted to the plan; and


(C) With particularity, the reasons why the employer cannot reasonably segregate the participant contributions within the time period described in paragraph (b) of this section;


(ii) Prior to such extension period, obtains a performance bond or irrevocable letter of credit in favor of the plan and in an amount of not less than the total amount of participant contributions received or withheld by the employer in the previous month; and


(iii) Within 5 business days after the end of such extension period, provides a copy of the notice required under paragraph (d)(1)(i) of this section to the Secretary, along with a certification that such notice was provided to the participants and that the bond or letter of credit required under paragraph (d)(1)(ii) of this section was obtained.


(2) The performance bond or irrevocable letter of credit required in paragraph (d)(1)(ii) of this section shall be guaranteed by a bank or similar institution that is supervised by the Federal government or a State government and shall remain in effect for 3 months after the month in which the extension expires.


(3)(i) An employer may not elect an extension under this paragraph (d) more than twice in any plan year unless the employer pays to the plan an amount representing interest on the participant contributions that were subject to all the extensions within such plan year.


(ii) The amount representing interest in paragraph (d)(3)(i) of this section shall be the greater of—


(A) The amount that otherwise would have been earned on the participant contributions from the date on which such contributions were paid to, or withheld by, the employer until such money is transmitted to the plan had such contributions been invested during such period in the investment alternative available under plan which had the highest rate of return; or


(B) Interest at a rate equal to the underpayment rate defined in section 6621(a)(2) of the Internal Revenue Code from the date on which such contributions were paid to, or withheld by, the employer until such money is fully restored to the plan.


(e) Definition. For purposes of this section, the term business day means any day other than a Saturday, Sunday or any day designated as a holiday by the Federal Government.


(f) Examples. The requirements of this section are illustrated by the following examples:


(1) Employer A sponsors a 401(k) plan. There are 30 participants in the 401(k) plan. A has one payroll period for its employees and uses an outside payroll processing service to pay employee wages and process deductions. A has established a system under which the payroll processing service provides payroll deduction information to A within 1 business day after the issuance of paychecks. A checks this information for accuracy within 5 business days and then forwards the withheld employee contributions to the plan. The amount of the total withheld employee contributions is deposited with the trust that is maintained under the plan on the 7th business day following the date on which the employees are paid. Under the safe harbor in paragraph (a)(2) of this section, when the participant contributions are deposited with the plan on the 7th business day following a pay date, the participant contributions are deemed to be contributed to the plan on the earliest date on which such contributions can reasonably be segregated from A’s general assets.


(2) Employer B is a large national corporation which sponsors a 401(k) plan with 600 participants. B has several payroll centers and uses an outside payroll processing service to pay employee wages and process deductions. Each payroll center has a different pay period. Each center maintains separate accounts on its books for purposes of accounting for that center’s payroll deductions and provides the outside payroll processor the data necessary to prepare employee paychecks and process deductions. The payroll processing service issues the employees’ paychecks and deducts all payroll taxes and elective employee deductions. The payroll processing service forwards the employee payroll deduction data to B on the date of issuance of paychecks. B checks this data for accuracy and transmits this data along with the employee 401(k) deferral funds to the plan’s investment firm within 3 business days. The plan’s investment firm deposits the employee 401(k) deferral funds into the plan on the day received from B. The assets of B’s 401(k) plan would include the participant contributions no later than 3 business days after the issuance of paychecks.


(3) Employer C sponsors a self-insured contributory group health plan with 90 participants. Several former employees have elected, pursuant to the provisions of ERISA section 602, 29 U.S.C. 1162, to pay C for continuation of their coverage under the plan. These checks arrive at various times during the month and are deposited in the employer’s general account at bank Z. Under paragraphs (a) and (c) of this section, the assets of the plan include the former employees’ payments as soon after the checks have cleared the bank as C could reasonably be expected to segregate the payments from its general assets, but in no event later than 90 days after the date on which the former employees’ participant contributions are received by C. If, however, C deposits the former employees’ payments with the plan no later than the 7th business day following the day on which they are received by C, the former employees’ participant contributions will be deemed to be contributed to the plan on the earliest date on which such contributions can reasonably be segregated from C’s general assets.


(g) Effective date. This section is effective February 3, 1997.


(h) Applicability date for collectively-bargained plans. (1) Paragraph (b) of this section applies to collectively bargained plans no sooner than the later of—


(i) February 3, 1997; or


(ii) The first day of the plan year that begins after the expiration of the last to expire of any applicable bargaining agreement in effect on August 7, 1996.


(2) Until paragraph (b) of this section applies to a collectively bargained plan, paragraph (c) of this section shall apply to such plan as if such plan were an employee welfare benefit plan.


(i) Optional postponement of applicability. (1) The application of paragraph (b) of this section shall be postponed for up to an additional 90 days beyond the effective date described in paragraph (g) of this section for an employer who, prior to February 3, 1997—


(i) Provides a true and accurate written notice, distributed in a manner designed to reach all the plan participants before the end of February 3, 1997, stating—


(A) That the employer elected to postpone such applicability;


(B) The date that the postponement will expire; and


(C) With particularity the reasons why the employer cannot reasonably segregate the participant contributions within the time period described in paragraph (b) of this section, by February 3, 1997;


(ii) Obtains a performance bond or irrevocable letter of credit in favor of the plan and in an amount of not less than the total amount of participant contributions received or withheld by the employer in the previous 3 months;


(iii) Provides a copy of the notice required under paragraph (i)(1)(i) of this section to the Secretary, along with a certification that such notice was provided to the participants and that the bond or letter of credit required under paragraph (i)(1)(ii) of this section was obtained; and


(iv) For each month during which such postponement is in effect, provides a true and accurate written notice to the plan participants indicating the date on which the participant contributions received or withheld by the employer during such month were transmitted to the plan.


(2) The notice required in paragraph (i)(1)(iv) of this section shall be distributed in a manner reasonably designed to reach all the plan participants within 10 days after transmission of the affected participant contributions.


(3) The bond or letter of credit required under paragraph (i)(1)(ii) shall be guaranteed by a bank or similar institution that is supervised by the Federal government or a State government and shall remain in effect for 3 months after the month in which the postponement expires.


(4) During the period of any postponement of applicability with respect to a plan under this paragraph (i), paragraph (c) of this section shall apply to such plan as if such plan were an employee welfare benefit plan.


[61 FR 41233, Aug. 7, 1996, as amended at 62 FR 62936, Nov. 25, 1997; 75 FR 2076, Jan. 14, 2010]


SUBCHAPTER C—REPORTING AND DISCLOSURE UNDER THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974

PART 2520—RULES AND REGULATIONS FOR REPORTING AND DISCLOSURE


Authority:29 U.S.C. 1002(44), 1021-1025, 1027, 1029-31, 1059, 1134, and 1135; and Secretary of Labor’s Order 1-2011, 77 FR 1088. Sec. 2520.101-2 also issued under 29 U.S.C. 1132, 1181-1183, 1181 note, 1185, 1185a-b, 1191, and 1191a-c. Sec. 2520.101-5 also issued under 29 U.S.C. 1021 note; sec. 501, Pub. L. 109-280, 120 Stat. 780; sec. 105(a), Pub. L. 110-458, 122 Stat. 5092. Secs. 2520.102-3, 2520.104b-1, and 2520.104b-3 also issued under 29 U.S.C. 1003, 1181-1183, 1181 note, 1185, 1185a-b, 1191, and 1191a-c. Secs. 2520.104b-1 and 2520.107 also issued under 26 U.S.C. 401 note; sec. 1510, Pub. L. 105-34, 111 Stat. 1068.

Link to an amendment published at 89 FR 43657, May 17, 2024.


Effective Date Note:At 89 FR 43657, May 17, 2024, part 2520 was amended by revising the authority citation, effective July 16, 2024. For the convenience of the user, the revised text is set forth as follows:



Authority:29 U.S.C. 1021-1025, 1027, 1029-31, 1059, 1134 and 1135; and Secretary of Labor’s Order 1-2011, 77 FR 1088 (Jan. 9, 2012). Sec. 2520.101-2 also issued under 29 U.S.C. 1132, 1181-1183, 1181 note, 1185, 1185a-b, 1191, and 1191a-c. Sec. 2520.101-5 also issued under 29 U.S.C. 1021(f). Sec. 2520.101-6 also issued under 29 U.S.C. 1021(k). Sec. 2520.103-13 also issued under 29 U.S.C. 1023. Secs. 2520.102-3, 2520.104b-1, 2520.104b-3, and 2520.104b-31 also issued under 29 U.S.C. 1003, 1181-1183, 1181 note, 1185, 1185a-b, 1191, and 1191a-c. Secs. 2520.104b-1 and 2520.107 also issued under 26 U.S.C. 401 note, 111 Stat. 788.

Subpart A—General Reporting and Disclosure Requirements

§ 2520.101-1 Duty of reporting and disclosure.

The procedures for implementing the plan administrator’s duty of reporting to the Secretary of Labor and disclosing information to participants and beneficiaries are located in subparts D, E and F of this part.


(Approved by the Office of Management and Budget under control number 1210-0016)

[41 FR 16962, Apr. 23, 1976, as amended at 46 FR 62845, Dec. 29, 1981]


§ 2520.101-2 Filing by multiple employer welfare arrangements and certain other related entities.

(a) Basis and scope. Section 101(g) of the Employee Retirement Income Security Act (ERISA), as amended by the Patient Protection and Affordable Care Act, requires the Secretary of Labor (the Secretary) to establish, by regulation, a requirement that multiple employer welfare arrangements (MEWAs) providing benefits that consist of medical care (as described in paragraph (b)(6) of this section), which are not group health plans, to register with the Secretary prior to operating in a State. Section 101(g) also permits the Secretary to require, by regulation, such MEWAs to report, not more frequently than annually, in such form and manner as the Secretary may require, for the purpose of determining the extent to which the requirements of part 7 of subtitle B of title I of ERISA (part 7) are being carried out in connection with such benefits. Section 734 of ERISA provides that the Secretary may promulgate such regulations as may be necessary or appropriate to carry out the provisions of part 7. This section sets out requirements for reporting by MEWAs that provide benefits that consist of medical care and by certain entities that claim not to be a MEWA solely due to the exception in section 3(40)(A)(i) of ERISA (referred to in this section as Entities Claiming Exception or ECEs). The reporting requirements apply regardless of whether the MEWA or ECE is a group health plan.


(b) Definitions. As used in this section, the following definitions apply:


(1) Administrator means—(i) The person specifically so designated by the terms of the instrument under which the MEWA or ECE is operated;


(ii) If the MEWA or ECE is a group health plan and the administrator is not so designated, the plan sponsor (as defined in section 3(16)(B) of ERISA); or


(iii) In the case of a MEWA or ECE for which an administrator is not designated and a plan sponsor cannot be identified, jointly and severally, the person or persons actually responsible (whether or not so designated under the terms of the instrument under which the MEWA or ECE is operated) for the control, disposition, or management of the cash or property received by or contributed to the MEWA or ECE, irrespective of whether such control, disposition, or management is exercised directly by such person or persons or indirectly through an agent, custodian, or trustee designated by such person or persons.


(2) Entity Claiming Exception (ECE) means an entity that claims it is not a MEWA on the basis that the entity is established or maintained pursuant to one or more agreements that the Secretary finds to be collective bargaining agreements within the meaning of section 3(40)(A)(i) of ERISA and § 2510.3-40.


(3) Excepted benefits means excepted benefits within the meaning of section 733(c) of ERISA and § 2590.701-2 of this chapter.


(4) Group health plan means a group health plan within the meaning of section 733(a) of ERISA and § 2590.701-2 of this chapter.


(5) Health insurance issuer means a health insurance issuer within the meaning of section 733(b)(2) of ERISA and § 2590.701-2 of this chapter.


(6) Medical care means medical care within the meaning of section 733(a)(2) of ERISA and § 2590.701-2 of this chapter.


(7) Multiple employer welfare arrangement (MEWA) means a multiple employer welfare arrangement within the meaning of section 3(40) of ERISA.


(8) Operating means any activity including but not limited to marketing, soliciting, providing, or offering to provide benefits consisting of medical care.


(9) Origination means, with regard to an ECE, the occurrence of any of the following events (an ECE is considered to have been originated only when an event described below occurs)—


(i) The ECE begins operating with regard to the employees of two or more employers (including one or more self-employed individuals);


(ii) The ECE begins operating following a merger with another ECE (unless all of the ECEs that participate in the merger previously were last originated at least three years prior to the merger); or


(iii) The number of employees receiving coverage for medical care under the ECE is at least 50 percent greater than the number of such employees on the last day of the previous calendar year (unless the increase is due to a merger with another ECE under which all ECEs that participate in the merger were last originated at least three years prior to the merger).


(10) Reporting or to report means to file the Form M-1 as required pursuant to sections 101(g) of ERISA; § 2520.101-2; or the instructions to the Form M-1.


(11) Special filing event means, with regard to an ECE—


(i) The ECE begins knowingly operating in any additional State or States that were not indicated on a previous report filed pursuant to paragraph (e)(1)(i) or (f)(2)(i) of this section; or


(ii) The ECE experiences a material change as defined in the Form M-1 instructions.


(12) State means State within the meaning of § 2590.701-2 of this chapter.


(c) Persons required to report—(1) General rule. Except as provided in paragraph (c)(2) of this section, the following persons are required to report under this section:


(i) The administrator of a MEWA regardless of whether the entity is a group health plan; and


(ii) The administrator of an ECE during the three-year period following an event described in paragraph (b)(9) of this section.


(2) Exceptions. (i) Nothing in this paragraph (c) shall be construed to require reporting under this section by the administrator of a MEWA or ECE described under this paragraph (c)(2)(i).


(A) A MEWA or ECE licensed or authorized to operate as a health insurance issuer in every State in which it offers or provides coverage for medical care to employees;


(B) A MEWA or ECE that provides coverage that consists solely of excepted benefits, which are not subject to ERISA part 7. If the MEWA or ECE provides coverage that consists of both excepted benefits and other benefits for medical care that are not excepted benefits, the administrator of the MEWA or ECE is required to report under this section;


(C) A MEWA or ECE that is a group health plan not subject to ERISA, including a governmental plan, church plan, or a plan maintained solely for the purpose of complying with workmen’s compensation laws, within the meaning of sections 4(b)(1), 4(b)(2), or 4(b)(3) of ERISA, respectively; or


(D) A MEWA or ECE that provides coverage only through group health plans that are not covered by ERISA, including governmental plans, church plans, or plans maintained solely for the purpose of complying with workmen’s compensation laws within the meaning of sections 4(b)(1), 4(b)(2), or 4(b)(3) of ERISA, respectively (or other arrangements not covered by ERISA, such as health insurance coverage offered to individuals other than in connection with a group health plan, known as individual market coverage).


(ii) Nothing in this paragraph (c) shall be construed to require reporting under this section by the administrator of an entity that would not constitute a MEWA or ECE but for the following circumstances under this paragraph (c)(2)(ii).


(A) The entity provides coverage to the employees of two or more trades or businesses that share a common control interest of at least 25 percent at any time during the plan year, applying principles similar to the principles of section 414(c) of the Internal Revenue Code;


(B) The entity provides coverage to the employees of two or more employers due to a change in control of businesses (such as a merger or acquisition) that occurs for a purpose other than avoiding Form M-1 filing and is temporary in nature. For purposes of this paragraph, “temporary” means the MEWA or ECE does not extend beyond the end of the plan year following the plan year in which the change in control occurs; or


(C) The entity provides coverage to persons (excluding spouses and dependents) who are not employees or former employees of the plan sponsor, such as non-employee members of the board of directors or independent contractors, and the number of such persons who are not employees or former employees does not exceed one percent of the total number of employees or former employees covered under the arrangement, determined as of the last day of the year to be reported or, determined as of the 60th day following the date the MEWA or ECE began operating in a manner such that a filing is required pursuant to paragraph (e)(1)(i), (2), or (3) of this section.


(3) Examples. The rules of this paragraph (c) are illustrated by the following examples:



Example 1.(i) Facts. MEWA A begins operating by offering coverage to the employees of two or more employers on August 1, 2013. MEWA A is licensed or authorized to operate as a health insurance issuer in every State in which it offers coverage for medical care to employees.

(ii) Conclusion. In this Example 1, the administrator of MEWA A is not required to report via Form M-1. MEWA A meets the exception to the filing requirement in paragraph (c)(2)(i)(A) of this section because it is licensed or authorized to operate as a health insurance issuer in every State in which it offers coverage for medical care to employees.



Example 2.(i) Facts. Company B maintains a group health plan that provides benefits for medical care for its employees (and their dependents). Company B establishes a joint venture in which it has a 25 percent stock ownership interest, determined by applying the principles similar to the principles under section 414(c) of the Internal Revenue Code, and transfers some of its employees to the joint venture. Company B continues to cover these transferred employees under its group health plan.

(ii) Conclusion. In this Example 2, the administrator is not required to file the Form M-1 because Company B’s group health plan meets the exception to the filing requirement in paragraph (c)(2)(ii)(A) of this section. This is because Company B’s group health plan would not constitute a MEWA but for the fact that it provides coverage to two or more trades or businesses that share a common control interest of at least 25 percent.



Example 3.(i) Facts. Company C maintains a group health plan that provides benefits for medical care for its employees. The plan year of Company C’s group health plan is the fiscal year for Company C, which is October 1st—September 30th. Therefore, October 1, 2012—September 30, 2013 is the 2013 plan year. Company C decides to sell a portion of its business, Division Z, to Company D. Company C signs an agreement with Company D under which Division Z will be transferred to Company D, effective September 30, 2013. The change in control of Division Z therefore occurs on September 30, 2013. Under the terms of the agreement, Company C agrees to continue covering all of the employees that formerly worked for Division Z under its group health plan until Company D has established a new group health plan to cover these employees. Under the terms of the agreement, it is anticipated that Company C will not be required to cover the employees of Division Z under its group health plan beyond the end of the 2014 plan year, which is the plan year following the plan year in which the change in control of Division Z occurred.

(ii) Conclusion. In this Example 3, the administrator of Company C’s group health plan is not required to report via the Form M-1 on March 1, 2014 for fiscal year 2013 because it is subject to the exception to the filing requirement in paragraph (c)(2)(ii)(B) of this section for an entity that would not constitute a MEWA but for the fact that it is created by a change in control of businesses that occurs for a purpose other than to avoid filing the Form M-1 and is temporary in nature. Under the exception, “temporary” means the MEWA does not extend beyond the end of the plan year following the plan year in which the change in control occurs. The administrator is not required to file the 2013 Form M-1 annual report because it is anticipated that Company C will not be required to cover the employees of Division Z under its group health plan beyond the end of the 2014 plan year, which is the plan year following the plan year in which the change in control of businesses occurred.



Example 4.(i) Facts. Company E maintains a group health plan that provides benefits for medical care for its employees (and their dependents) as well as certain independent contractors who are self-employed individuals. The plan is therefore a MEWA. The administrator of Company E’s group health plan uses calendar year data to report for purposes of the Form M-1. The administrator of Company E’s group health plan determines that the number of independent contractors covered under the group health plan as of the last day of calendar year 2013 is less than one percent of the total number of employees and former employees covered under the plan determined as of the last day of calendar year 2013.

(ii) Conclusion. In this Example 4, the administrator of Company E’s group health plan is not required to report via the Form M-1 for calendar year 2013 (a filing that is otherwise due by March 1, 2014) because it is subject to the exception to the filing requirement provided in paragraph (c)(2)(ii)(C) of this section for entities that cover a very small number of persons who are not employees or former employees of the plan sponsor.


(d) Information to be reported. (1) Any reporting required by this section shall consist of a completed copy of the Form M-1 Report for Multiple Employer Welfare Arrangements (MEWAs) and Certain Entities Claiming Exception (ECEs) (Form M-1) and any additional statements required pursuant to the instructions for the Form M-1.


(2) Rejected filings.—The Secretary may reject any filing under this section if the Secretary determines that the filing is incomplete, in accordance with § 2560.502c-5 of this chapter.


(3) If the Secretary rejects a filing under paragraph (d)(2) of this section, and if a revised filing satisfactory to the Secretary is not submitted within 45 days after the notice of rejection, the Secretary may bring a civil action for such relief as may be appropriate (including penalties under section 502(c)(5) of ERISA and § 2560.502c-5 of this chapter).


(e) Origination, registration, and other non-annual reporting requirements and timing—(1) General rule for ECEs. (i) Except as provided in paragraph (e)(1)(ii) of this section, and subject to the limitations established by paragraph (c)(1)(ii) of this section, when an ECE experiences an event described in paragraphs (b)(9) or (b)(11) of this section, the administrator of the ECE shall file Form M-1 by the 30th day following the date of the event.


(ii) Exception. Paragraph (e)(1)(i) of this section does not apply to ECEs that experience an origination as described in paragraph (b)(9)(i) of this section. Such entities are required, subject to the limitations established by paragraph (c)(1)(ii) of this section, to file the Form M-1 30 days prior to the date of the event.


(2) General rule for MEWAs—(i) In general. Except as provided in paragraph (e)(2)(ii) of this section, the administrator of the MEWA is required to register with the Secretary by filing the Form M-1 30 days prior to operating in any State.


(ii) Exception. Paragraph (e)(2)(i) of this section does not apply to MEWAs that, prior to the effective date of this section, were already in operation in a State (or States). Such entities are required to submit an annual filing pursuant to annual reporting rules described in paragraph (f)(2)(i) of this section for that State (or those States).


(3) Special rule requiring MEWAs to make additional filings. Subsequent to registering with the Secretary pursuant to paragraph (e)(2)(i) of this section, the administrator of a MEWA shall file the Form M-1:


(i) Within 30 days of knowingly operating in any additional State or States that were not indicated on a previous report filed pursuant to paragraph (e)(2)(i) or (f)(2)(i) of this section;


(ii) Within 30 days of the MEWA operating with regard to the employees of an additional employer (or employers, including one or more self-employed individuals) after a merger with another MEWA;


(iii) Within 30 days of the date the number of employees receiving coverage for medical care under the MEWA is at least 50 percent greater than the number of such employees on the last day of the previous calendar year; or


(iv) Within 30 days of experiencing a material change as defined in the Form M-1 instructions.


(4) Anti-abuse rule. If a MEWA or ECE neither offers nor provides benefits consisting of medical care within a State during the calendar year immediately following the year in which a filing is made by the ECE pursuant to paragraph (e)(1) of this section (due to an event described in paragraph (b)(9)(i) or (b)(11)(i) of this section) or a filing is made by the MEWA pursuant to paragraph (e)(2) or (3) of this section, with respect to operating in such State, such filing will be considered to have lapsed.


(5) Multiple filings not required in certain circumstances. If multiple filings are required under this paragraph (e), a single filing will satisfy this section so long as the filing is timely for each required filing.


(6) Extensions. (i) An extension may be granted for filing a report required by paragraph (e)(1), (2), or (3) of this section if the administrator complies with the extension procedure prescribed in the instructions to the Form M-1.


(ii) If the filing deadline set forth in this paragraph (e) is a Saturday, Sunday, or federal holiday, the form must be filed no later than the next business day.


(f) Annual reporting requirements and timing—(1) Period for which reporting is required. A completed copy of the Form M-1 is required to be filed for each calendar year during all or part of which the MEWA is operating and for each of the three calendar years following an origination during all or part of which the ECE is operating.


(2) Filing deadline—(i) General March 1 filing due date for annual filings. Except as provided in paragraph (f)(2)(ii) of this section, a completed copy of the Form M-1 is required to be filed on or before each March 1 that follows a period for which reporting is required (as described in paragraph (f)(1) of this section).


(ii) Exception. Paragraph (f)(2)(i) of this section does not apply to ECEs and MEWAs if, between October 1 and December 31, the entity is required to make a filing pursuant to paragraph (e)(1), (2), or (3) of this section and makes that filing timely.


(3) Extensions. (i) An extension may be granted for filing a report required by paragraph (f)(2)(i) of this section if the administrator complies with the extension procedure prescribed in the instructions to the Form M-1.


(ii) If the filing deadline set forth in this paragraph (f) is a Saturday, Sunday, or federal holiday, the form must be filed no later than the next business day.


(4) Examples. The rules of paragraphs (e) and (f) of this section are illustrated by the following examples:



Example 1.(i) Facts. MEWA A began offering coverage for medical care to the employees of two or more employers on July 1, 2003 (and continues to offer such coverage). MEWA A has satisfied all filing requirements to date.

(ii) Conclusion. In this Example 1, the administrator of MEWA A must continue to file a timely completed Form M-1 annual report each year, but the administrator is not required to register with the Secretary because MEWA A meets the exception to the registration requirement in paragraph (e)(2)(ii) of this section and has not experienced any event described in paragraph (e)(3) that would require registering with the Secretary.



Example 2.(i) Facts. On August 25, 2013, MEWA B is operating in State P and has made all appropriate filings related to those operations. On December 22, 2013 one of the employers that participates in MEWA B is awarded a new contract in State Q. The employer adds an office in State Q and the employees there are eligible to access its group health plan.

(ii) Conclusion. In this Example 2, the administrator of MEWA B must report the addition of State Q by filing the Form M-1 within 30 days of knowing that it is operating in State Q.



Example 3.(i) Facts. As of July 1, 2013, MEWA C is preparing to operate in States Y and Z. MEWA C is not licensed or authorized to operate as a health insurance issuer in any State and does not meet any of the other exceptions set forth in paragraph (c)(2) of this section.

(ii) Conclusion. In this Example 3, the administrator of MEWA C is required to register with the Secretary by filing a completed Form M-1 30 days prior to operating in States Y or Z. The administrator of MEWA C must also report by filing the Form M-1 annually by every March 1 thereafter.



Example 4.(i) Facts. As of July 28, 2013, MEWA D is operating in States V and W. MEWA D has satisfied the requirements of (e)(2) and, if applicable, (e)(3) with respect to those States. MEWA D is not licensed or authorized to operate as a health insurance issuer in any State and does not meet any of the other exceptions set forth in (c)(2) of this section. On August 5, 2013 MEWA D knowingly begins operating in State X.

(ii) Conclusion. In this Example 4, the administrator of MEWA D is required to make an additional registration filing with the Secretary by September 4, 2013 (within 30 days of knowingly operating in State X). Additionally, the administrator of MEWA D must continue to file the Form M-1 annually by every March 1 thereafter.



Example 5.(i) Facts. ECE A began offering coverage for medical care to the employees of two or more employers on January 1, 2007 and ECE A has not been involved in any mergers or experienced any other origination as described in paragraph (b)(9) of this section.

(ii) Conclusion. In this Example 5, ECE A was originated on January 1, 2007 and has not been originated since then. Therefore, the administrator of ECE A is not required to file a 2012 Form M-1 because the last time the ECE A was originated was January 1, 2007 which is more than three years prior. Further, the ECE has satisfied its reporting requirements by making three timely annual filings after its origination.



Example 6.(i) Facts. ECE B wants to begin offering coverage for medical care to the employees of two or more employers on July 1, 2013.

(ii) Conclusion. In this Example 6, the administrator of ECE B must file a completed Form M-1 on or before June 1, 2013 (which is 30 days prior to the origination date). In addition, the administrator of ECE B must file an updated copy of the Form M-1 by March 1, 2014 because the last date ECE B was originated was July 1, 2013 (which is less than three years prior to the March 1, 2014 due date). Furthermore, the administrator of ECE B must file the Form M-1 by March 1, 2015 and again by March 1, 2016 (because July 1, 2013 is less than three years prior to March 1, 2015 and March 1, 2016, respectively). However, if ECE B is not involved in any mergers and does not experience any other origination as described in paragraph (b)(9) of this section, there would not be a new origination date and no Form M-1 is required to be filed after March 1, 2016.



Example 7.(i) Facts. ECE D, which currently operates in State A and is still within the three-year window following its origination and the timely filing related thereto, is making preparations to operate in State B beginning on November 1, 2013.

(ii) Conclusion. In this Example 7, by operating in State B, ECE D experiences a special event within the three-year window following its origination and must make a filing by December 2, 2013.



Example 8.(i) Facts. Same facts as Example 7. ECE D satisfied its special filing requirement but is unsure about its annual filing requirements.

(ii) Conclusion. ECE D is exempt from the next annual filing due March 1, 2014 pursuant to the filing deadline exception under (f)(2)(ii) of this section. However, ECE D must continue making annual filings for the remainder of the three years following its origination.



Example 9.(i) Facts. MEWA E begins distributing marketing materials on August 31, 2013.

(ii) Conclusion. In this Example 8, because MEWA E began operating on August 31, 2013, the administrator of MEWA E must register with the Secretary by filing a completed Form M-1 on or before August 1, 2013 (30 days prior to operating in any State). In addition, the administrator of MEWA E must file the Form M-1 annually by every March 1 thereafter.



Example 10.(i) Facts. Same facts as Example 9, but MEWA E registers on or before August 1, 2013 by filing a Form M-1 indicating it will begin operating in every State. However, in the calendar year immediately following the filing, MEWA E only offered or provided benefits consisting of medical care to participants in State Z.

(ii) Conclusion. In this Example 10, the registration for all States (other than State Z) have lapsed under (e)(4) because MEWA E only offered or provided benefits consisting of medical care to participants in State Z in the calendar year immediately following the filing. If subsequently, MEWA E begins offering or providing benefits consisting of medical care to participants in any additional State (or States), it must make a new registration filing pursuant to (e)(3) of this section.


(g) Electronic filing. A completed Form M-1 is filed with the Secretary by submitting it electronically as prescribed in the instructions to the Form M-1.


(h) Penalties—(1) Civil penalties and procedures. For information on civil penalties under section 502(c)(5) of ERISA for persons who fail to file the information required under this section, see § 2560.502c-5 of this chapter. For information relating to administrative hearings and appeals in connection with the assessment of civil penalties under section 502(c)(5) of ERISA, see §§ 2570.90 through 2570.101 of this chapter.


(2) Criminal penalties and procedures. For information on criminal penalties under section 519 of ERISA for persons who knowingly make false statements or false representation of fact with regards to the information required under this section, see section 501(b) of ERISA.


(3) Cease and desist and summary seizure orders. For information on the Secretary’s authority to issue a cease and desist or summary seizure order under section 521 of ERISA, see § 2560.521.


[78 FR 13792, Mar. 1, 2013]


§ 2520.101-3 Notice of blackout periods under individual account plans.

(a) In general. In accordance with section 101(i) of the Act, the administrator of an individual account plan, within the meaning of paragraph (d)(2) of this section, shall provide notice of any blackout period, within the meaning of paragraph (d)(1) of this section, to all participants and beneficiaries whose rights under the plan will be temporarily suspended, limited, or restricted by the blackout period (the “affected participants and beneficiaries”) and to issuers of employer securities subject to such blackout period in accordance with this section.


(b) Notice to participants and beneficiaries—(1) Content. The notice required by paragraph (a) of this section shall be written in a manner calculated to be understood by the average plan participant and shall include—


(i) The reasons for the blackout period;


(ii) A description of the rights otherwise available to participants and beneficiaries under the plan that will be temporarily suspended, limited or restricted by the blackout period (e.g., right to direct or diversify assets in individual accounts, right to obtain loans from the plan, right to obtain distributions from the plan), including identification of any investments subject to the blackout period;


(iii) The length of the blackout period by reference to:


(A) The expected beginning date and ending date of the blackout period; or


(B) The calendar week during which the blackout period is expected to begin and end, provided that during such weeks information as to whether the blackout period has begun or ended is readily available, without charge, to affected participants and beneficiaries, such as via a toll-free number or access to a specific web site, and the notice describes how to access the information;


(iv) In the case of investments affected, a statement that the participant or beneficiary should evaluate the appropriateness of their current investment decisions in light of their inability to direct or diversify assets in their accounts during the blackout period (a notice that includes the advisory statement contained in paragraph 4. of the model notice in paragraph (e)(2) of this section will satisfy this requirement);


(v) In any case in which the notice required by paragraph (a) of this section is not furnished at least 30 days in advance of the last date on which affected participants and beneficiaries could exercise affected rights immediately before the commencement of the blackout period, except for a notice furnished pursuant to paragraph (b)(2)(ii)(C) of this section:


(A) A statement that Federal law generally requires that notice be furnished to affected participants and beneficiaries at least 30 days in advance of the last date on which participants and beneficiaries could exercise the affected rights immediately before the commencement of a blackout period (a notice that includes the statement contained in paragraph 5. of the model notice in paragraph (e)(2) of this section will satisfy this requirement), and


(B) An explanation of the reasons why at least 30 days advance notice could not be furnished; and


(vi) The name, address and telephone number of the plan administrator or other contact responsible for answering questions about the blackout period.


(2) Timing. (i) The notice described in paragraph (a) of this section shall be furnished to all affected participants and beneficiaries at least 30 days, but not more than 60 days, in advance of the last date on which such participants and beneficiaries could exercise the affected rights immediately before the commencement of any blackout period.


(ii) The requirement to give at least 30 days advance notice contained in paragraph (b)(2)(i) of this section shall not apply in any case in which—


(A) A deferral of the blackout period in order to comply with paragraph (b)(2)(i) of this section would result in a violation of the requirements of section 404(a)(1)(A) or (B) of the Act, and a fiduciary of the plan reasonably so determines in writing;


(B) The inability to provide the advance notice of a blackout period is due to events that were unforeseeable or circumstances beyond the reasonable control of the plan administrator, and a fiduciary of the plan reasonably so determines in writing; or


(C) The blackout period applies only to one or more participants or beneficiaries solely in connection with their becoming, or ceasing to be, participants or beneficiaries of the plan as a result of a merger, acquisition, divestiture, or similar transaction involving the plan or plan sponsor.


(iii) In any case in which paragraph (b)(2)(ii) of this section applies, the administrator shall furnish the notice described in paragraph (a) of this section to all affected participants and beneficiaries as soon as reasonably possible under the circumstances, unless such notice in advance of the termination of the blackout period is impracticable.


(iv) Determinations under paragraph (b)(2)(ii)(A) and (B) of this section must be dated and signed by the fiduciary.


(3) Form and manner of furnishing notice. The notice required by paragraph (a) of this section shall be in writing and furnished to affected participants and beneficiaries in any manner consistent with the requirements of § 2520.104b-1 of this chapter, including § 2520.104b-1(c) or § 2520.104b-31 of this chapter relating to the use of electronic media.


(4) Changes in length of blackout period. If, following the furnishing of a notice pursuant to this section, there is a change in the length of the blackout period (specified in such notice pursuant to paragraph (b)(1)(iii) of this section), the administrator shall furnish all affected participants and beneficiaries an updated notice explaining the reasons for the change and identifying all material changes in the information contained in the prior notice. Such notice shall be furnished to all affected participants and beneficiaries as soon as reasonably possible, unless such notice in advance of the termination of the blackout period is impracticable.


(c) Notice to issuer of employer securities. (1) The notice required by paragraph (a) of this section shall be furnished to the issuer of any employer securities held by the plan and subject to the blackout period. Such notice shall contain the information described in paragraph (b)(1)(i), (ii), (iii) and (vi) of this section and shall be furnished in accordance with the time frames prescribed in paragraph (b)(2) of this section. In the event of a change in the length of the blackout period specified in such notice, the plan administrator shall furnish an updated notice to the issuer in accordance with the requirements of paragraph (b)(4) of this section.


(2) For purposes of this section, notice to the agent for service of legal process for the issuer shall constitute notice to the issuer, unless the issuer has provided the plan administrator with the name of another person for service of notice, in which case the plan administrator shall furnish notice to such person. Such notice shall be in writing, except that the notice may be in electronic or other form to the extent the person to whom notice must be furnished consents to receive the notice in such form.


(3) If the issuer designates the plan administrator as the person for service of notice pursuant to paragraph (c)(2) of this section, the issuer shall be deemed to have been furnished notice on the same date as notice is furnished to affected participants and beneficiaries pursuant to paragraph (b) of this section.


(d) Definitions. For purposes of this section—


(1) Blackout period—(i) General. The term “blackout period” means, in connection with an individual account plan, any period for which any ability of participants or beneficiaries under the plan, which is otherwise available under the terms of such plan, to direct or diversify assets credited to their accounts, to obtain loans from the plan, or to obtain distributions from the plan is temporarily suspended, limited, or restricted, if such suspension, limitation, or restriction is for any period of more than three consecutive business days.


(ii) Exclusions. The term “blackout period” does not include a suspension, limitation, or restriction—


(A) Which occurs by reason of the application of the securities laws (as defined in section 3(a)(47) of the Securities Exchange Act of 1934);


(B) Which is a regularly scheduled suspension, limitation, or restriction under the plan (or change thereto), provided that such suspension, limitation or restriction (or change) has been disclosed to affected plan participants and beneficiaries through the summary plan description, a summary of material modifications, materials describing specific investment alternatives under the plan and limits thereon or any changes thereto, participation or enrollment forms, or any other documents and instruments pursuant to which the plan is established or operated that have been furnished to such participants and beneficiaries;


(C) Which occurs by reason of a qualified domestic relations order or by reason of a pending determination (by the plan administrator, by a court of competent jurisdiction or otherwise) whether a domestic relations order filed (or reasonably anticipated to be filed) with the plan is a qualified order within the meaning of section 206(d)(3)(B)(i) of the Act; or


(D) Which occurs by reason of an act or a failure to act on the part of an individual participant or by reason of an action or claim by a party unrelated to the plan involving the account of an individual participant.


(2) Individual account plan. The term “individual account plan” shall have the meaning provided such term in section 3(34) of the Act, except that such term shall not include a “one-participant retirement plan” within the meaning of paragraph (d)(3) of this section.


(3) One-participant retirement plan. The term “one-participant retirement plan” means a one-participant retirement plan as defined in section 101(i)(8)(B) of the Act.


(4) Issuer. The term “issuer” means an issuer as defined in section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c), the securities of which are registered under section 12 of the Securities Exchange Act of 1934, or that is required to file reports under section 15(d) of the Securities Exchange Act of 1934, or files or has filed a registration statement that has not yet become effective under the Securities Act of 1933 (15 U.S.C. 77a et seq.), and that it has not withdrawn.


(5) Calendar week. For purposes of paragraph (b)(1)(iii)(B), the term “calendar week” means a seven day period beginning on Sunday and ending on Saturday.


(e) Model notice—(1) General. The model notice set forth in paragraph (e)(2) of this section is intended to assist plan administrators in discharging their notice obligations under this section. Use of the model notice is not mandatory. However, a notice that uses the statements provided in paragraphs 4. and 5.(A) of the model notice will be deemed to satisfy the notice content requirements of paragraph (b)(1)(iv) and (b)(1)(v)(A), respectively, of this section. With regard to all other information required by paragraph (b)(1) of this section, compliance with the notice content requirements will depend on the facts and circumstances pertaining to the particular blackout period and plan.


(2) Form and content of model notice.



Important Notice Concerning Your Rights

Under The [Enter Name of Individual Account Plan]

[Enter date of notice]

1. This notice is to inform you that the [enter name of plan] will be [enter reasons for blackout period, as appropriate: changing investment options, changing recordkeepers, etc.].


2. As a result of these changes, you temporarily will be unable to [enter as appropriate: direct or diversify investments in your individual accounts (if only specific investments are subject to the blackout, those investments should be specifically identified), obtain a loan from the plan, or obtain a distribution from the plan]. This period, during which you will be unable to exercise these rights otherwise available under the plan, is called a “blackout period.” Whether or not you are planning retirement in the near future, we encourage you to carefully consider how this blackout period may affect your retirement planning, as well as your overall financial plan.


3. The blackout period for the plan [enter the following as appropriate: is expected to begin on [enter date] and end [enter date]/is expected to begin during the week of [enter date] and end during the week of [enter date]. During these weeks, you can determine whether the blackout period has started or ended by [enter instructions for use toll-free number or accessing web site].


4. [In the case of investments affected by the blackout period, add the following: During blackout period you will be unable to direct or diversify the assets held in your plan account. For this reason, it is very important that you review and consider the appropriateness of your current investments in light of your inability to direct or diversify those investments during the blackout period. For your long-term retirement security, you should give careful consideration to the importance of a well-balanced and diversified investment portfolio, taking into account all your assets, income and investments.] [If the plan permits investments in individual securities, add the following: You should be aware that there is a risk to holding substantial portions of your assets in the securities of any one company, as individual securities tend to have wider price swings, up and down, in short periods of time, than investments in diversified funds. Stocks that have wide price swings might have a large loss during the blackout period, and you would not be able to direct the sale of such stocks from your account during the blackout period.]


5. [If timely notice cannot be provided (see paragraph (b)(1)(v) of this section) enter: (A) Federal law generally requires that you be furnished notice of a blackout period at least 30 days in advance of the last date on which you could exercise your affected rights immediately before the commencement of any blackout period in order to provide you with sufficient time to consider the effect of the blackout period on your retirement and financial plans. (B) [Enter explanation of reasons for inability to furnish 30 days advance notice.]]


6. If you have any questions concerning this notice, you should contact [enter name, address and telephone number of the plan administrator or other contact responsible for answering questions about the blackout period].


(f) Effective date. This section shall be effective and shall apply to any blackout period commencing on or after January 26, 2003. For the period January 26, 2003 to February 25, 2003, plan administrators shall furnish notice as soon as reasonably possible.


[68 FR 3727, Jan. 24, 2003, as amended at 85 FR 31922, May 27, 2020]


§ 2520.101-4 [Reserved]

§ 2520.101-5 Annual funding notice for defined benefit pension plans.

(a) In general. (1) Except as provided in paragraphs (a)(2) and (3) of this section, pursuant to section 101(f) of the Act, the administrator of a defined benefit plan to which title IV of the Act applies shall furnish annually to each person specified in paragraph (f) of this section a funding notice that conforms to the requirements of this section.


(2) A plan administrator shall not be required to furnish a funding notice—


(i) In the case of a multiemployer plan, for a plan year if the due date for such notice is on or after the earlier of:


(A) The date the plan complies with the insolvency notice requirements of section 4245(e) or 4281(d)(3) of the Act and regulations thereunder; or


(B) The date the plan has distributed assets in satisfaction of all nonforfeitable benefits under the plan pursuant to section 4041A of the Act and the regulations thereunder.


(ii) In the case of a single-employer plan, for a plan year if the due date for the funding notice is on or after the date:


(A) The Pension Benefit Guaranty Corporation is appointed as trustee of the plan pursuant to section 4042 of the Act;


(B) The plan has distributed assets in satisfaction of all benefit liabilities in a distress termination pursuant to section 4041(c)(3)(B)(i) of the Act or of all guaranteed benefits in a distress termination pursuant to section 4041(c)(3)(B)(ii) of the Act; or


(C) The plan administrator filed a standard termination notice with the Pension Benefit Guaranty Corporation pursuant to 29 CFR 4041.25, provided that the proposed termination date is on or before the due date of the funding notice and a final distribution of assets in satisfaction of all benefit liabilities proceeds in accordance with section 4041(b) of the Act.


(3) In the case of a merger or consolidation of two or more plans—


(i) The plan administrator of a non-successor plan shall not be required to furnish a funding notice for the plan year in which the merger or consolidation occurred; and


(ii) The funding notice of the successor plan, for the plan year in which the merger or consolidation occurred, must, in addition to the requirements of paragraph (b) of this section, contain a general explanation, including the effective date, of the merger or consolidation and an identification of each plan (e.g., name and plan number) involved in the merger or consolidation.


(b) Content of notice. A funding notice shall include the following information:


(1) Identifying information. The name of the plan, the name, address, and phone number of the plan administrator and the plan’s principal administrative officer (if different than the plan administrator), each plan sponsor’s name and employer identification number, and the plan number.


(2) Funding percentage—(i) Single-employer plans. For single-employer plans, a statement as to whether the plan’s funding target attainment percentage (as defined in section 303(d)(2) of the Act) for the notice year, and for each of the two preceding plan years, is at least 100 percent (and, if not, the actual percentages).


(ii) Multiemployer plans. For multiemployer plans, a statement as to whether the plan’s funded percentage (as defined in section 305(i) of the Act) for the notice year, and for each of the two preceding plan years, is at least 100 percent (and, if not, the actual percentages).


(3) Assets and liabilities—(i) Single-employer plans. For single-employer plans—


(A) A statement of the total assets (separately stating the prefunding balance and the funding standard carryover balance) and liabilities of the plan, determined in the same manner as under section 303 of the Act, as of the valuation date of the notice year and for each of the two preceding plan years, as reported in the annual report filed under section 104 of the Act for each such preceding plan year, and


(B) A statement of the value of the plan’s assets and liabilities determined as of the last day of the notice year. For purposes of this statement, the value of the plan’s assets is the fair market value of plan assets. Plan liabilities are equal to the present value of benefits accrued through the last day of the notice year determined in the same manner as liabilities are calculated under section 303 of the Act (including actuarial assumptions and methods), but using the interest rate under section 4006(a)(3)(E)(iv) of the Act in effect for the last month of the notice year.


(ii) Multiemployer plans. For multiemployer plans—


(A) A statement of the value of the plan’s assets (determined in the same manner as under section 304(c)(2) of the Act) and liabilities (determined in the same manner as under section 305(i)(8) of the Act, using reasonable actuarial assumptions as required under section 304(c)(3) of the Act) as of the valuation date of the notice year and each of the two preceding plan years, and


(B) A statement of the fair market value of plan assets as of the last day of the notice year, and as of the last day of each of the two preceding plan years as reported in the annual report filed under section 104(a) of the Act for each such preceding plan year.


(iii) Contributions receivable. For purposes of determining the fair market value of plan assets as of the last day of the notice year under paragraphs (b)(3)(i)(B) and (b)(3)(ii)(B) of this section, the plan administrator may, but is not required to, include contributions made after the notice year and before the notice is furnished to recipients, but only to the extent such contributions are treated for funding purposes as having been made on account of the notice year under section 303(g)(4) of the Act, in the case of a single-employer plan, or under section 304(c)(8) of the Act, in the case of a multiemployer plan.


(4) Demographic information. A statement of the number of participants and beneficiaries who, as of the valuation date of the notice year, are: Retired or separated from service and receiving benefits; retired or separated from service and entitled to future benefits (but currently not receiving benefits); or active participants under the plan. The statement shall indicate the number of participants and beneficiaries in each category and the sum of all such participants and beneficiaries. The terms “active” and “retired or separated” shall have the same meaning given to those terms in instructions to the annual report filed under section 104(a) of the Act.


(5) Funding policy. A statement setting forth—


(i) The funding policy of the plan;


(ii) The asset allocation of investments under the plan (expressed as percentages of total assets) as of the end of the notice year; and


(iii) A general description of any investment policy of the plan as it relates to the funding policy in paragraph (b)(5)(i) of this section and the asset allocation of investments under paragraph (b)(5)(ii) of this section.


(6) Endangered, critical, or critical and declining status. In the case of a multiemployer plan, a statement whether the plan was in endangered, critical, or critical and declining status under section 305 of the Act for the notice year and, if so—


(i) A statement describing how a person may obtain a copy of the plan’s funding improvement plan or rehabilitation plan, as appropriate, adopted under section 305 of the Act and the actuarial and financial data that demonstrate any action taken by the plan toward fiscal improvement;


(ii) A summary of the plan’s funding improvement plan or rehabilitation plan, including any update or modification of such funding improvement or rehabilitation plan adopted under section 305 of the Act during the notice year; and


(iii) In the case of a multiemployer plan in critical and declining status:


(A) The projected date of insolvency;


(B) A clear statement that such insolvency may result in benefit reductions; and


(C) A statement describing whether the plan sponsor has taken legally permitted actions to prevent insolvency.


(7) Events having a material effect on liabilities or assets. Subject to paragraph (g) of this section, in the case of any plan amendment, scheduled benefit increase or reduction, or other known event taking effect in the current plan year and having a material effect on plan liabilities or assets for the year, an explanation of the amendment, scheduled benefit increase or reduction, or event, and a projection to the end of such plan year of the effect of the amendment, scheduled benefit increase or reduction, or event on plan liabilities.


(8) Rules on termination or insolvency—(i) Single-employer plans. In the case of a single-employer plan, a summary of the rules governing termination of single-employer plans under subtitle C of title IV of the Act.


(ii) Multiemployer plans. In the case of a multiemployer plan, a summary of the rules governing insolvency, including the limitations on benefit payments.


(9) PBGC guarantees. A general description of the benefits under the plan which are eligible to be guaranteed by the Pension Benefit Guaranty Corporation, along with an explanation of the limitations on the guarantee and the circumstances under which such limitations apply.


(10) Annual report information. A statement that a person entitled to notice under paragraph (f) of this section may obtain a copy of the annual report of the plan filed under section 104(a) of the Act upon request, through the Internet Web site of the Department of Labor, or through any Intranet Web site maintained by the applicable plan sponsor (or plan administrator on behalf of the plan sponsor).


(11) Information disclosed to PBGC. In the case of a single-employer plan, if applicable, a statement that the contributing sponsor of the plan or a member of the contributing sponsor’s controlled group was required to provide information under section 4010 of the Act for the information year ending in the notice year (see 29 CFR 4010.5).


(12) Additional information. Any additional information that the plan administrator elects to include, provided that such information is necessary or helpful to understanding the mandatory information in the notice, or is otherwise permitted by law.


(c) Style and format of notice. Funding notices shall be written in a manner that is consistent with the style and format requirements of § 2520.102-2 of this chapter.


(d) When to furnish notice. (1) Except as provided in paragraph (d)(2) of this section, a funding notice shall be provided not later than 120 days after the end of the notice year.


(2) In the case of a small plan, a funding notice shall be provided not later than the earlier of the date on which the annual report is filed under section 104(a) of the Act or the latest date the annual report must be filed under that section (including extensions). For this purpose, a single-employer plan is a small plan if it meets the exception in section 303(g)(2)(B) of the Act, and a multiemployer plan is a small plan if it had 100 or fewer participants on each day during the plan year preceding the notice year.


(e) Manner of furnishing notice. (1) [Reserved]


(2) A funding notice must be furnished to the Pension Benefit Guaranty Corporation in a manner consistent with the requirements of part 4000 of title IV of the Act. The date that the notice is furnished to the Pension Benefit Guaranty Corporation is determined consistent with that part.


(f) Persons entitled to notice. Persons entitled to a funding notice under this section are:


(1) Each participant covered under the plan on the last day of the notice year;


(2) Each beneficiary receiving benefits under the plan on the last day of the notice year;


(3) Each alternate payee under the plan on the last day of the notice year;


(4) Each labor organization representing participants under the plan on the last day of the notice year;


(5) In the case of a multiemployer plan, each employer that, as of the last day of the notice year, is a party to the collective bargaining agreement(s) pursuant to which the plan is maintained or who otherwise may be subject to withdrawal liability pursuant to section 4203 of the Act; and


(6) The Pension Benefit Guaranty Corporation.


(g) Special rules and definitions for material effect disclosures. (1) The term “current plan year” means the plan year after the notice year. Thus, for example, if the notice year is January 1, 2017 through December 31, 2017, then the current plan year would be January 1, 2018 through December 31, 2018.


(2) An event described in paragraph (b)(7) of this section is recognized as “taking effect” in the current plan year if the effect of the event is taken into account for the first time for funding under section 430 or 431 of the Internal Revenue Code, as applicable, in such year.


(3) An event described in paragraph (b)(7) of this section has a “material effect” if it results, or is projected to result, in an increase or decrease of five percent or more in the value of assets or liabilities from the valuation date of the notice year. For this measurement, calculate assets and liabilities in the same manner as under paragraph (b)(2) of this section.


(4) An event described in paragraph (b)(7) of this section has a “material effect” if, in the judgment of the plan’s enrolled actuary, the effect of the event is considered material for purposes of the plan’s funding status under section 430 or 431, as applicable, of the Internal Revenue Code, without regard to paragraph (g)(3) of this section.


(5) An event described in paragraph (b)(7) of this section is “known” only if it is known by the plan administrator prior to 120 days before the due date of the notice. Thus, if an event otherwise described in paragraph (b)(7) first becomes known to a plan administrator 120 days or less before the due date of a notice, the plan administrator is not required to explain, or project the effect of, the event in that notice.


(6) The term “other known event” includes, but is not limited to, an extension of coverage under the existing terms of the plan to a new group of employees; a plan merger, consolidation, or spinoff pursuant to regulations under section 414(l) of the Internal Revenue Code; or, a shutdown of any facility, plant, store, or such other similar corporate event that creates immediate eligibility for benefits that would not otherwise be immediately payable for participants separating from service. The term does not include market fluctuations.


(7) With respect to events described in paragraph (g)(4) of this section, the plan administrator may, instead of projecting the effect on plan liabilities to the end of the current plan year, include an explanation why the event is considered material by the enrolled actuary.


(8) Example. The following example illustrates the special rules and definitions of paragraph (g) of this section:



Example.Plan Y is a single-employer calendar year plan. Company X, the sponsor of Plan Y, adopts an amendment on June 1, 2017, offering a subsidized early retirement benefit to participants age 50 or older who retire on or after September 1, 2017 and before March 1, 2018. The amendment increases the liabilities of Plan Y by an amount greater than 5% of the value of Plan Y’s liabilities on January 1, 2017. Company X does not make an election under Code section 412(d)(2) to accelerate recognition of the event for funding. The amendment is taken into account for the first time under section 430 of the Code as of the January 1, 2018 valuation date. Therefore, the amendment is recognized as taking effect under the final rule in 2018. Since the amendment adopted on June 1, 2017, is known more than 120 days prior to the April 30, 2018 due date of the 2017 funding notice, the amendment must be disclosed in the 2017 funding notice under paragraph (b)(7) of the final regulations as a material effect event taking effect in 2018 (i.e., the current plan year).

(h) Model notices. (1) The appendices to this section contain a model notice for single-employer plans and a model notice for multiemployer plans. These models are intended to assist plan administrators in discharging their notice obligations under this section. Use of a model notice is