USDOL, PWBA v. Rhode Island Bricklayers & Allied Craftsmen Pension Fund, 1994-RIS-64 (ALJ May 30, 1995)

U.S. Department of Labor

Office of Administrative Law Judges John W. McCormack Post Office & Courthouse Boston, MA 02109

Date: May 30, 1995

Case No.: 94-RIS-64

In the Matter of:

U.S. DEPARTMENT OF LABOR,
PENSION AND WELFARE BENEFITS ADMINISTRATION
    Complainant

    v.

RHODE ISLAND BRICKLAYERS & ALLIED CRAFTSMEN
PENSION FUND
    Respondent

BEFORE: JOEL P. GARDINER
    Administrative Law Judge

   This proceeding arises under the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended, 29 U.S.C. §51001, et seq., and its implementing regulations at 29 C.F.R. §2509, et seq. Pursuant to §502(c) (2) of ERISA, the U.S. Department of Labor, Pension and Welfare Benefits Administration ("DOL") seeks to assess a civil penalty in the amount of $3,045.00 against the Board of Trustees, Rhode Island Bricklayers & Allied Craftsmen Pension Fund ("Respondent"), for failure to file an acceptable 1991 Form 5500 Annual Report (the "1991 Annual Report"). Respondent, the administrators for the Rhode Island Bricklayers & Allied Craftsmen Pension Fund (the "Plan"), challenges the assessment of this civil penalty.

   The parties determined that there was no dispute as the facts in this matter, and requested that a decision be made on the record. The parties submitted a Joint Statement of Facts Not in Dispute that was signed by both parties. In addition, DOL submitted Complainant's Brief on March 10, 1995, and Respondent's Memorandum of Law in Opposition to Complainant's Assessment of Civil Penalty was filed on March 13, 1995.

   The parties filed a Joint Statement of Facts Not in Dispute that are incorporated herein by reference and attached as Appendix 1. In view of factual references made throughout the remainder of this Decision and Order, the court will summarize the stipulated facts below:

   1. On September 7, 1993, DOL sent Respondent a Notice of Rejection in which DOL stated that the 1991 Annual Report failed to comply with §104(b) (4) of the Act and the applicable regulations at 29 C.F.R. §§2520.103-1 and 2520.l04a-5. DOL determined that the annual report was deficient for the following reasons:

a. The report of the independent qualified public accountant ("IQPA") did not extend to all of the schedules as required by ERISA; and

b. The financial statements were not in conformity with generally accepted accounting principles.

DOL advised the Respondent to send a corrected Form 5500 to Ms; Judith DeJonge of the U.S. Department of Labor, and specified the appropriate address.

   2. On September 17, 1993, Respondent sent by certified mail, return receipt requested, a corrected 1991 Annual Report to the Internal Revenue Service (the "IRS"). The IRS did not return the report, nor did it notify Respondent that it was sent to the incorrect address.

   3. On November 19, 1993, DOL issued a Notice of Intent to Assess a Penalty (the "Notice of Intent"), notifying Respondent that it had calculated a penalty in the amount of $30,450.00. In addition, the Notice of Intent informed Respondent that it had thirty days to submit a statement of reasonable cause explaining why the penalty should not be assessed. The Notice of Intent specified that all correspondence should be directed to Ms. DeJonge.

   4. On November 24, 1993, Respondent mailed its statement to the designated address.

   5. On May 27, 1994, DOL issued its Notice of Determination on Statement of Reasonable Cause, waiving 90% of the penalty.

DOL still assessed a 10% penalty or $3,045.00 against Respondent based on the following reasons:

(a) The administrator failed to present reasonable cause for the failure to attach a satisfactory IQPA report to the plan's original report or for the failure to correct timely; and

(b) The administrator failed to send the revised 5500 Form to the address- identified in the Notice of Rejection.

   The purpose of ERISA, a remedial statute, is to protect the integrity of the employee benefit plans through comprehensive regulation. Alessi v. Raybestos-Manhattan. Inc., 451 U.S. 504 (1981); ERISA §2, 29 U.S.C. §1001. Consequently, Congress included comprehensive provisions requiring the disclosure and reporting of financial and other information. 29 U.S.C. §1001(b). Section 104(a)(1)(A) of the Act requires that the administrator of an employee benefit plan file an annual report within 210 days-after the close of the year. 29 U.S.C. §1024(a)(1)(A). The contents of the annual report are set forth in §103 of the Act and the applicable regulations at §2520.103-1. On behalf of plans with 100 or more participants, the administrators may elect an alternative means to comply with the annual reporting provisions. 29 C.F.R. §2520.103-1(a)(2). The administrator may choose to file a completed Form 5500 "Annual return/Report of Employee Benefit Plan" and any supplemental statements or schedules required by the Form 5500. 29 C.F.R. §2520.103-1(b)(1).

   Section 502 of ERISA provides the Secretary with the power to take civil action against an administrator who fails to comply with the reporting provisions of the Act. 29 U.S.C. 1132. The Secretary may assess a civil penalty of up to $1,000.00 a day for failure or refusal to file an annual report. 29 U.S.C. §1132(c)(2). Upon receipt of a notice of rejection by the U.S. Department of Labor ("DOL") for the failure to submit material information, the administrator has 45 days in which to file a revised report. 29 U.S.C. §1024(a) (5); 29 C.F.R. §2560.502-l(b)(3). Prior to assessing a civil penalty against the administrator for failure to submit a satisfactory report within 45 days, the regulations provide that DOL must issue a Notice of Intent to assess a penalty indicating the amount of the intended penalty, and the reasons for the penalty. 29 C.F.R. §2560.502c-2(c). DOL may waive or reduce the penalty to be assessed upon a showing of reasonable cause for the failure to file the annual report. 29 C.F.R. §2560.502c-2(d). This response must be a written statement setting forth the relevant facts, must contain a declaration that the statement is made under penalties of perjury, and must be filed within 30 days of the date of service of the notice of intent. 29 C.F.R. §2560.502c-2(e). DOL reviews the statement of reasonable cause in which it either assesses the penalty, or waives all or part of it. 29 C.F.R. §2560.502c-2(g)(1).

   In the instant matter, DOL properly notified Respondent that there were 45 days in which to remedy the deficiencies of their 1991 Annual Report in the Notice of Rejection issued on September 7, 1993. Respondent acted promptly to amend the unsatisfactory 1991 Annual Report. Respondent mailed the revised report on September 17, 1991, ten days after DOL issued the Notice of Rejection. Although the Notice of Rejection specifically stated that the revised report should be sent to DOL, Respondent sent the revised report to the IRS. DOL never received a copy of the revised annual report in the specified 45 days. Consequently, DOL issued a Notice of Intent to assess a penalty in the amount of $30,450.00. DOL provided its calculations used to determine the proper amount of Respondent's penalty. According to DOL, the penalty had accrued for 203 days, and was based on a rate of $150.00 per day. Furthermore, DOL notified Respondent that there were 30 days in which to file a reasonable cause statement in accordance with the regulations at §2560.502c-2(e). DOL specified that all correspondence in this matter should be directed to Ms. DeJonge of the DOL.

   Following the Notice of Intent, Respondent replied promptly with its statement of reasonable cause and the copy of the revised 1991 Annual Report which was improperly sent to the IRS. Essentially, Respondent blamed the situation on human error.¹ Upon consideration of the statement of reasonable cause, DOL reduced the penalty by 90%. DOL determined that it would still assess a 10% penalty for Respondent's's failures to comply with ERISA.

¹ In addition, Respondent attempted to compare the current situation with a similar matter where an improper filing of an annual report did not result in a penalty. Nevertheless, Respondent realized that its assertions were inaccurate and redacted the statement in the Joint Statement of Facts Not in Dispute. (Jt. Stmt. of Facts at ¶7).