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DOL Home > OALJ > ERISA > USDOL, PWBA v. Sociedad Para Asistencia Legal Money Purchase Plan, 1994-RIS-62 (ALJ Mar. 29, 1995)
USDOL/OALJ Reporter USDOL, PWBA v. Sociedad Para Asistencia Legal Money Purchase Plan, 1994-RIS-62 (ALJ Mar. 29, 1995)
U.S. Department of Labor Office of Administrative Law Judges
800 K Street, NW, Suite 400-N
Washington, DC 20001-8002
DATE ISSUED: MAR 29 1995
In the Matter of:
UNITED STATES DEPARTMENT OF LABOR,
Pension and Welfare Benefits Administration,
Complainant
v.
SOCIEDAD PARA ASISTENCIA LEGAL MONEY
PURCHASE PLAN,
Respondent
CASE NO.: 94-RIS-62
Appearances:
For the Complainant: Tess J. Ferrera, Esq.
For the Respondent: Benigno Alicea-Alicea
Before: John M. Vittone,
Deputy Chief Judge
DECISION AND ORDER This case involves a penalty that Complainant, U.S. Department of Labor, Pension and Welfare Benefits Administration ("PWBA") assessed against Respondent, Plan Administrator of the Sociedad Para La Assistencia Legal Money Purchase Plan C Respondent" or "the Plan"), for failure to timely file an acceptable form 5500 Annual Report on the Plan's behalf as required by the Employee Retirement Income Security Act of 1974 ("ERISA"), section 502(c)(2), 29 U.S.C. § 1132(c)(2), and the regulations promulgated thereunder.
ERISA, as amended, 29 U.S.C. §§ 1001 et seq. is a remedial statute designed to protect the integrity of employee benefit plans maintained by employers. Section 2 of ERISA, 29 U.S.C. §§ 1001(b). Among the means to accomplish ERISA's purpose are extensive reporting and disclosure provisions, such as the audit and opinion of an independent qualified public accountant ("IQPA") in an annual report, referred to as the Form 5500. Under ERISA sections 101 and 104, 29 U.S.C. §§ 1021 and 1024, the plan administrator is responsible for ensuring that the Form 5500 is properly completed and timely filed. Section 104 of ERISA, 29 U.S.C. § 1024, sets forth the requirements that an annual report or opinion from the IQPA should include. ERISA Section 104(a)(4)1 , 29 U.S.C. § 1024(a)(4), authorizes the Secretary of Labor ("Secretary") to reject annual reports that do not comply with the statutory requirements of ERISA. If the Secretary rejects an annual report and an acceptable report is not filed within 45 days of the rejection, the Secretary may retain an IQPA, at the plan's expense, to perform the required audit and report, bring an action for appropriate legal or equitable relief, or take other action authorized by Title I of ERISA. ERISA section 104(a)(5)2 , 29 U.S.C. § 1024(a)(5).
[Page 2] In 1987, Congress amended ERISA, adding section 502(c)(2),3 29 U.S.C. § 1132(c)(2), which gives PWBA discretionary authority to assess a penalty on the administrator of an employee benefit plan for filing late or defective annual reports. The Secretary promulgated 29 C.F.R. § 2560.502c-24 which sets forth the procedures for governing the assessment of civil penalties under ERISA section 502(c)(2) which is, essentially, the subject of the controversy in this case, whose procedural history is as follows.
On June 3, 1994, PWBA issued a Notice of Determination on Reasonable Cause whereby a penalty of $2,047.50 was assessed against Respondent for failure to provide reasonable cause for not timely correcting an IQPA report. Thereafter, on June 17, 1994, Respondent filed an answer with this office pursuant to 29 C.F.R. § 2570.61(c). On July 14, 1994, I issued a Notice of Docketing which required the parties to file various information relative to this matter. Responses to the Prehearing Order were filed by Complainant and Respondent on August 8, 1994 and August 15, 1994 respectively.
In its response to the Prehearing Order, Respondent requested that this matter be decided based on the written record rather than having a formal hearing. As no objections to this request were filed, I granted Complainant's request and issued an Order to Submit Briefs, within 45 days from the issuance of the Order, on January 6, 1995. Briefs were filed by Complainant and Respondent on February 21, 1995.
FINDINGS OF FACT
1. On September 7, 1993, PWBA sent Respondent a Notice of Rejection advising that it was rejecting the Plan's 1991 Form 5500 Annual Report. Exhibit ("EX") 2.
2. PWBA's Notice of Rejection informed Respondent that the 1991 Annual Report failed to present the statement of net assets available for plan benefits in comparative format as required by 29 C.F.R. § 2520.103-l(b)(2)(i). EX 2.
3. The audit report of the IQPA did not opine on the schedule of assets held for investment as required by 29 C.F.R. §§ 2520. 103-10 and 2520. 1031(b)(5)(iii)(A). EX 1.
4. The Notice of Rejection also advised Respondent that he had a 45 day penalty-free period within which to file a corrected 1991 Annual Report. EX 2.
5. On November 26, 1993, Respondent informed PWBA that a IQPA had been retained to audit the Fund and prepare a corrected 1991 Annual Report. Respondent stated that the new audit would be submitted during the week commencing December 13, 1993. EX 3.
6. PWBA issued a Notice of Intent to Assess a Penalty on January 28, 1994, notifying Respondent that it had calculated a penalty against him in the amount of $40,950. The Notice of Intent also informed Respondent that it had 30 days to submit a statement of reasonable cause explaining why the original 1991 Annual Report was deficient. EX 4.
7. On March 8, 1994, Respondent filed corrected 1991 financial statements and a statement of reasonable cause which describes Respondent's attempts to correct the rejected Annual Report. EX 5.
8. After consideration of Respondent's statement of reasonable cause, PWBA issued a Notice of Determination on June 3, 1994, waiving $38,902.50 of the initial penalty, resulting in a penalty of $2,047.50 against Respondent. EX 6.
[Page 3] ISSUE The sole issue in this case is whether reasonable cause exists to justify full abatement of the penalty assessed by PWBA.
DISCUSSION PWBA contends that substantial evidence exists to support the assessed penalty primarily because of the time that passed between the September 7, 1993 Notice of Rejection (EX 2) and Respondent's November 26, 1993 letter to PWBA regarding the retention of an IQPA (EX 3). PWBA correctly points out that Respondent had a 45 day penalty-free period within which to file a corrected 1991 Annual Report. ERISA Section 104(a)(5), 29 U.S.C. § 1021(a)(5). And, while DOL issued a Notice of Rejection on September 7, 1993 (EX 2), Respondent did not file its letter with PWBA regarding retention of an IQPA until November 26, 1993 -- over one month past the 45 day deadline. It is for this time period that DOL assessed the 5% penalty, not the time period between the January 28, 1994 Intent to Assess Penalty (EX 4) and Respondent's arch 8, 1994 Statement of Reasonable Cause (EX 5).5
Given these facts, PWBA has acted quite reasonable, and with an eye towards the substantial evidence in this case, in initially assessing the penalty and subsequently abating 95% of it following Respondent's Statement of Reasonable Cause. Respondent has not provided sufficient evidence, however, to negate the fact that it failed to timely respond to the initial Notice of Rejection. And, while I find that Respondent's actions following the Notice of Intent to Assess Penalty were within the spirit of ERISA's purpose, the fact remains that no evidence of communication between Respondent and PWBA at the time of the Notice of Rejection exists to explain why Respondent was remiss in complying with the 45 day deadline. Respondent only provides information after the fact to explain its noncompliance with the deadline. Without such evidence, I am unable find reasonable cause to justify full abatement of the assessed penalty.
As no evidence has been presented to demonstrate that PWBA has acted in an arbitrary, capricious or unreasonable manner in its determination to assess the 5% penalty given the facts of this case, I find that reasonable cause does not exist to justify full abatement of the assessed penalty by PWBA.
[Page 4] ORDER In light of the foregoing, it is hereby ORDERED that PWBA's determination to assess a penalty against Respondent is AFFIRMED.
JOHN M. VITTONE,
Deputy Chief Judge
NOTICE OF APPEAL RIGHTS: Pursuant to 29 C.F.R. § 2570.69, a notice of appeal must be filed with the Secretary of Labor within 20 days of the date of issuance of this Decision and Order or the decision of this court will become the fmal agency action within the meaning of 5 U.S.C. § 704.
JMV/eca/mb
[ENDNOTES] 1 Section 104(a)(4) states:
(4) The Secretary may reject any filing under this section-
(A) if he determines that such filing is incomplete for purposes of this part; or
(B) if he determines that there is any material qualification by an accountant or an actuary contained in an opinion submitted pursuant to section 103(a)(3)(A) or section 103(a)(4)(B) of this title.
2 Section 104(a)(5) states, in relevant part:
If the Secretary rejects a filing of a report under paragraph (4) and if a revised filing satisfactory to the Secretary is not submitted within 45 days after the Secretary makes his determination under paragraph (4) to reject the filing, and if the Secretary deems it in the best interest of the participants, he make take any one of the following actions-
(A) retain an independent qualified public accountant . . - on behalf of the participants to perform an audit,
(B) retain an enrolled actuary
(C) bring a civil action for such legal or equitable relief as may be appropriate to enforce the provisions of this part, or
(D) take any other action authorized by this subchapter.
3 Section 502(c)(2) states:
The Secretary may asses a civil money penalty against any plan administrator of up to $1,000 a day from the date of such plan administrator's failure or refusal to file the annual report required to be filed with the Secretary under section 10l(b)(4). For purposes of this paragraph, an annual report that has been rejected under section 104(a)(4) for failure to provide material information shall not be treated as having been filed with the Secretary.
4 Relevant sections of 29 C.F.R. § 2560.502c-2 state:
(d) Waiver of assessed penalty. The Department may waive all or part of the penalty tobe assessed under section 502(c)(2) on a showing by the administrator that there was reasonable cause for the failure to file the annual report.
(e) Showing of reasonable cause. Upon issuance by the Department of a notice of intent to assess a penalty, the administrator shall have 30 days from the date of the service of notice,..., to file a statement of reasonable cause for the failure to file a complete annual report or why the penalty, as calculated, should not be assessed. A showing of reasonable cause must be made in the form of a written statement setting forth all of the facts alleged as reasonable cause. The statement must contain a declaration by the administrator that the statement is made under the penalties of perjury.
5 With respect to PWBA's refusal to fully abate the assessed penalty, PWBA states, "Under these facts, the Respondent is not entitled to a complete abatement of all penalties because an acceptable 1991 Annual Report was not filed within the 45 day penalty-free period." PWBA Brief at 10 (emphasis supplied).
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