29 C.F.R. Subpart D—Procedure for the Assessment of Civil Penalties Under ERISA Section 502(l)
Title 29 - Labor
Source: 55 FR 25286, June 20, 1990, unless otherwise noted.
The rules of practice set forth in this subpart are applicable to “502(l) civil penalty proceedings” (as defined in §2570.82 of this subpart) under section 502(l) of the Employee Retirement Income Security Act of 1974 (ERISA or the Act). Refer to 29 CFR 2560.502–1 for the definition of the relevant terms of ERISA section 502(l). Section 502(l) of the Employee Retirement Income Security Act of 1974 (ERISA or the Act) requires the Secretary of Labor to assess a civil penalty against a fiduciary who breaches a fiduciary responsibility under, or commits any other violation of, part 4 of title I of ERISA or any other person who knowingly participates in such breach or violation. The penalty under section 502(l) is equal to 20 percent of the “applicable recovery amount” paid pursuant to any settlement agreement with the Secretary or ordered by a court to be paid in a judicial proceeding instituted by the Secretary under section 502 (a)(2) or (a)(5). The Secretary may, in the Secretary's sole discretion, waive or reduce the penalty if the Secretary determines in writing that: (a) The fiduciary or other person acted reasonably and in good faith, or (b) It is reasonable to expect that the fiduciary or other person will not be able to restore all losses to the plan or any participant or beneficiary of such plan without severe financial hardship unless such waiver or reduction is granted. The penalty imposed on a fiduciary or other person with respect to any transaction shall be reduced by the amount of any penalty or tax imposed on such fiduciary or other person with respect to such transaction under section 502(i) or section 4975 of the Internal Revenue Code of 1986 (the Code). For purposes of this section: (a) 502(l) civil penalty proceedings means an adjudicatory proceeding relating to the assessment of a civil penalty provided in section 502(l) of ERISA; (b) Notice of assessment means any document, however designated, issued by the Secretary which contains a specified assessment, in monetary terms, of a civil penalty under ERISA section 502(l). A “notice of assessment” will contain a brief factual description of the violation for which the assessment is being made, the identity of the person being assessed, and the amount of the assessment and the basis for assessing that particular person that particular penalty amount; (c) Person includes an individual, partnership, corporation, employee benefit plan, association, exchange or other entity or organization; (d) Petition means a written request, made by a person, for a waiver or reduction of the civil penalty described herein; and (e) Secretary means the Secretary of Labor and includes, pursuant to any delegation of authority by the Secretary, the Assistant Secretary for Employee Benefits Security, Regional Directors for Employee Benefits Security, or Deputy Regional Directors for Employee Benefits Security. [55 FR 25286, June 20, 1990, as amended at 68 FR 16400, Apr. 3, 2003] (a) Except as described in §§2570.85 and 2570.86 of this part, subsequent to the payment of the applicable recovery amount pursuant to either a settlement agreement or a court order, the Secretary shall serve on the person liable for making such payment a notice of assessment of civil penalty equal to 20 percent of the applicable recovery amount. (b) Service of such notice shall be made either: (1) By delivering a copy to the person being assessed; if the person is an individual, to the individual; if the person is a partnership, to any partner; if the person is a corporation, association, exchange, or other entity or organization, to any officer of such entity; if the person is an employee benefit plan, to a trustee of such plan; or to any attorney representing any such person; (2) By leaving a copy at the principal office, place of business, or residence of such individual, partner, officer, trustee, or attorney; or (3) By mailing a copy to the last known address of such individual, partner, officer, trustee, or attorney. If service is accomplished by certified mail, service is complete upon mailing. If done by regular mail, service is complete upon receipt by the addressee. (a) The civil penalty must be paid within 60 days of service of the notice of assessment. (b) At any time prior to the expiration of the payment period for the assessed penalty, any person who has committed, or knowingly participated in, a breach or violation, or has been alleged by the Secretary to have so committed or participated, may submit a written request for a conference with the Secretary to discuss the calculation of the assessed penalty. A person will be entitled under this section to one such conference per assessment. If such written request is submitted during the 60 day payment period described in subparagraph (a), such a request will not toll the running of that payment period. (c) The notice of assessment will become a final order (within the meaning of 5 U.S.C. 704) on the first day following the 60 day payment period, subject to any tolling caused by a petition to waive or reduce described in §2570.85. (a) At any time prior to the expiration of the payment period for the assessed penalty, any person who has committed, or knowingly participated in, a breach or violation, or has been alleged by the Secretary to have so committed or participated, may petition the Secretary to waive or reduce the penalty under this section on the basis that: (1) The person acted reasonably and in good faith in engaging in the breach or violation; or (2) The person will not be able to restore all losses to the plan or participant or beneficiary of such plan without severe financial hardship unless such waiver or reduction is granted. (b) All petitions for waiver or reduction shall be in writing and contain the following information: (1) The name of the petitioner(s); (2) A detailed description of the breach or violation which is the subject of the penalty; (3) A detailed recitation of the facts which support one, or both, of the bases for waiver or reduction described in §2570.85(a) of this part, accompanied by underlying documentation supporting such factual allegations; (4) A declaration, signed and dated by the petitioner(s), in the following form:
Under penalty of perjury, I declare that, to the best of my knowledge and belief, the representations made in this petition are true and correct. (c) If a petition for waiver or reduction is submitted during the 60 day payment period described in §2570.84(a) of this part, the payment period for the penalty in question will be tolled pending Departmental consideration of the petition. During such consideration, the applicant is entitled to one conference with the Secretary, but the Secretary, in his or her sole discretion, may schedule or hold additional conferences with the petitioner concerning the factual allegations contained in the petition. (d) Based solely on his or her discretion, the Secretary will determine whether to grant such a waiver or reduction. Pursuant to the procedure described in §2570.83(b), the petitioner will be served with a written determination informing him or her of the Secretary's decision. Such written determination shall briefly state the grounds for the Secretary's decision, and shall be final and non-reviewable. In the case of a determination not to waive, the payment period for the penalty in question, if previously initiated, will resume as of the date of service of the Secretary's written determination. The penalty assessed on a person pursuant to this section with respect to any transaction shall be reduced by the amount of any penalty or tax imposed on such person with respect to such transaction under ERISA section 502(i) and section 4975 of the Code. Prior to a reduction of penalty under this paragraph, the person being assessed must provide proof to the Department of the payment of the penalty or tax and the amount of that payment. Submissions of proof of other penalty or tax assessments will not toll the 60 day payment period, if previously initiated. If, based on the procedures described in §2570.84, 2570.85, or 2570.86, the assessed penalty amount is revised, the person being assessed will receive a revised notice of assessment and will be obligated to pay the revised assessed penalty within the relevant 60 day payment period (as determined by the applicable procedure in §2570.84, 2570.85, or 2570.86), and, if necessary, any excess penalty payment will be refunded as soon as administratively feasible. The revised notice of assessment will revoke any previously issued notice of assessment with regard to the transaction in question and will become a final order (within the meaning of 5 U.S.C. 704) the later of the first day following the 60 day payment period or the date of its service on the person being assessed, pursuant to the service procedures described in §2570.83(b). This section is effective June 20, 1990, and shall apply to assessments under section 502(l) made by the Secretary after June 20, 1990, based on any breach or violation occurring on or after December 19, 1989.
Title 29: Labor
PART 2570—PROCEDURAL REGULATIONS UNDER THE EMPLOYEE RETIREMENT INCOME SECURITY ACT
Subpart D—Procedure for the Assessment of Civil Penalties Under ERISA Section 502(l)
§ 2570.80 Scope of rules.
§ 2570.81 In general.
§ 2570.82 Definitions.
§ 2570.83 Assessment of civil penalty.
§ 2570.84 Payment of civil penalty.
§ 2570.85 Waiver or reduction of civil penalty.
§ 2570.86 Reduction of penalty by other penalty assessments.
§ 2570.87 Revision of assessment.
§ 2570.88 Effective date.
