Proposed Rule2023-00534
Black Lung Benefits Act: Authorization of Self-Insurers
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
January 19, 2023
Issuing agencies
Labor DepartmentWorkers' Compensation Programs Office
Abstract
The Department is proposing revisions to regulations under the Black Lung Benefits Act (BLBA or the Act) governing authorization of self-insurers. These proposed rules will determine the process for coal mine operators to apply for authorization to self-insure, the requirements operators must meet to qualify to self-insure, the amount of security self-insured operators must provide, and the process for operators to appeal determinations made by the Office of Workers' Compensation Programs (OWCP).
Full Text
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<title>Federal Register, Volume 88 Issue 12 (Thursday, January 19, 2023)</title>
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[Federal Register Volume 88, Number 12 (Thursday, January 19, 2023)]
[Proposed Rules]
[Pages 3349-3366]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-00534]
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DEPARTMENT OF LABOR
Office of Workers' Compensation Programs
20 CFR Part 726
RIN 1240-AA16
Black Lung Benefits Act: Authorization of Self-Insurers
AGENCY: Office of Workers' Compensation Programs, Labor.
ACTION: Notice of proposed rulemaking; request for comments.
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SUMMARY: The Department is proposing revisions to regulations under the
Black Lung Benefits Act (BLBA or the Act) governing authorization of
self-insurers. These proposed rules will determine the process for coal
mine operators to apply for authorization to self-insure, the
requirements operators must meet to qualify to self-insure, the amount
of security self-insured operators must provide, and the process for
operators to appeal determinations made by the Office of Workers'
Compensation Programs (OWCP).
DATES: The Department invites written comments on the proposed
regulations from interested parties. Written comments must be received
by March 20, 2023.
ADDRESSES: You may submit written comments by any of the following
methods. To facilitate receipt and processing of comments, OWCP
encourages interested parties to submit their comments electronically.
<bullet> Federal eRulemaking Portal: <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
Follow the instructions on the website for submitting comments.
<bullet> Facsimile: (202) 693-1395 (this is not a toll-free
number). Only comments of ten or fewer pages, including a fax cover
sheet and attachments, if any, will be accepted by fax.
<bullet> Regular Mail/Hand Delivery/Courier: Submit comments on
paper to the Division of Coal Mine Workers' Compensation Programs,
Office of Workers' Compensation Programs, U.S. Department of Labor, 200
Constitution Avenue NW, Suite S3229-DCWMC, Washington, DC 20210. The
Department's receipt of U.S. mail may be significantly delayed due to
security procedures. You must take this into consideration when
preparing to meet the deadline for submitting comments.
Instructions: Your submission must include the agency name and the
Regulatory Information Number (RIN) for this rulemaking. Caution: All
comments received will be posted without change to <a href="https://www.regulations.gov">https://www.regulations.gov</a>. Please do not include any personally identifiable
or confidential business information you do not want publicly
disclosed.
Docket: For access to the rulemaking docket and to read background
documents or comments received, go to <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
Although some information (e.g., copyrighted material) may not be
available through the website, the entire rulemaking record, including
any copyrighted material, will be available for inspection at OWCP.
Please contact the individual named below if you would like to inspect
the record.
FOR FURTHER INFORMATION CONTACT: Michael Chance, Director, Division of
Coal Mine Workers' Compensation, Office of Workers' Compensation
Programs, U.S. Department of Labor, 200 Constitution Avenue NW, Suite
S3229-DCWMC, Washington, DC 20210. Telephone: 1-800-347-2502. This is a
toll-free number. TTY/TDD callers may dial toll-free 1-877-889-5627 for
further information.
SUPPLEMENTARY INFORMATION:
[[Page 3350]]
I. Background of This Rulemaking
The BLBA, 30 U.S.C. 901-944, provides for the payment of benefits
to coal miners and certain of their dependent survivors for total
disability or death due to pneumoconiosis, commonly known as black lung
disease. 30 U.S.C. 901(a); Usery v. Turner Elkhorn Mining Co., 428 U.S.
1, 5 (1976). The Act places the primary responsibility for paying
benefits on coal mine operators. 30 U.S.C. 932(b). When a coal miner is
determined to be eligible for benefits, the operator responsible for
paying benefits (the responsible operator) is generally the one that
most recently employed the miner for a period of at least one year and
is financially capable of paying benefits. 20 CFR 725.495(a)(1). If a
responsible operator cannot be determined, is unable to pay, or
defaults on its obligation to pay, the responsibility for paying
benefits falls to the Black Lung Disability Trust Fund, which is
financed by an excise tax on coal mined for domestic use and, as
necessary, borrowing from the U.S. Treasury's general fund. 30 U.S.C.
932(j), 934(b); 26 U.S.C. 4121, 9501.
Because coal mine operators are principally responsible for paying
benefits, the Act requires every operator to secure the payment of
benefits for which it may be found liable. 30 U.S.C. 932(b). Each
operator must secure the payment of benefits either by purchasing
commercial insurance or by qualifying as a self-insurer ``in accordance
with regulations prescribed by the Secretary.'' 30 U.S.C. 933(a); see
also 20 CFR 726.1.
The current regulations--Part 726 Subpart B--establish the
standards for a coal mine operator to qualify as a self-insurer. They
provide that, to qualify as a self-insurer, an operator must meet
certain minimum requirements, including ``obtain[ing] security . . . in
a form approved by [OWCP] and . . . in an amount to be determined by
[OWCP].'' 20 CFR 726.101(b)(4). The regulations identify four forms of
security that OWCP may allow an operator to provide: (1) Indemnity
bonds; (2) deposits of negotiable securities; (3) letters of credit; or
(4) trust funds under Section 501(c)(21) of the Internal Revenue Code.
20 CFR 726.104(b). The regulations further provide that ``[OWCP] shall
require the amount of security which it deems necessary and sufficient
to secure the performance by the applicant of all obligations imposed
upon him as an operator by the Act.'' 20 CFR 726.105. The regulations
also set forth a non-exhaustive list of factors that OWCP will consider
in setting the amount of security an operator must provide, including
the operator's net worth, the existence of a guarantee by a parent
corporation, and the operator's existing liability for benefits. Id.
The Department historically has not required self-insured operators
to post security with a face value that would cover all of the
operator's expected black lung liability. See 62 FR 3338, 3370 (Jan.
22, 1997). Instead, the Department has relied in part on a company's
size as evidence of its ability to make future benefits payments. Id.
Depending on the operator's assets, the Department usually required
security sufficient to cover from three to fifteen years of the
operator's payments on claims currently in award status, rather than
the operator's total liability for current and future claims. Id. Under
this model, most large operators therefore posted fewer years of
payment relative to smaller operators.
A number of bankruptcies in the mining industry revealed weaknesses
in that process and demonstrated that a more substantial security
amount would be required to adequately protect the Trust Fund.
Specifically, beginning in 2014, three large self-insured operators
filed for bankruptcy. Because these operators had insufficient
securities to cover the full amount of expected benefits, an estimated
$865 million in liabilities will ultimately transfer to the Trust Fund.
See U.S. Government Accountability Office, Federal Black Lung Benefits
Program: Improved Oversight of Coal Mine Operator Insurance is Needed,
at 13 (Feb. 2020), available at <a href="https://www.gao.gov/products/gao-20-21">https://www.gao.gov/products/gao-20-21</a>.
In response, OWCP developed revised guidelines and procedures for
authorizing coal mine operators to self-insure, which it began to
implement in 2019. These guidelines were intended to standardize the
process by which applicants provide financial and actuarial information
to OWCP. OWCP required each company to calculate and report its
projected black lung liabilities through actuarial reports using a set
of standardized assumptions, including discount rate, claim cost
trends, and the probability of awards. OWCP also developed a set of
financial metrics and a methodology to assess each operator's solvency,
profitability, and risk of default. This assessment would determine the
proportion of the operator's projected liabilities it would be required
to post as security. Operators determined to be at less risk of not
meeting their obligations would be required to provide smaller amounts
of security, while operators at higher risk would be required to
provide larger amounts of security. These guidelines were summarized in
a December 2020 bulletin, see BLBA Bulletin No. 21-01 (Dec. 7,
2020).\1\
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\1\ OWCP published a notice in the Federal Register seeking
comment on the Bulletin in January 2021, pursuant to then-operative
Executive Order 13891 and the Department's implementing regulation.
86 FR 1529 (Jan. 8, 2021). OWCP later withdrew the notice after the
Executive Order and the Department's regulation were rescinded and
the new Administration imposed a temporary regulatory freeze. 86 FR
8806 (Feb. 9, 2021).
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Although the revised guidelines allowed OWCP to better identify and
account for self-insured operators that presented significant
bankruptcy risk, they proved problematic in several respects. The
financial metrics were not able to consistently predict which operators
were at risk of experiencing financial difficulties. The process
contemplated by the guidelines also imposed significant burdens on OWCP
in continuously monitoring the financial health of individual operators
on a quarterly basis. In addition, although the guidelines were shared
with the public in various ways while they were being developed,
stakeholders raised procedural concerns about how the guidelines were
developed.
Based on its experience administering the self-insurance program
over the years and in response to stakeholder concerns, the Department
now proposes to revise Subpart B and seeks comments on its proposal.
The proposed rule would codify the practice of basing a self-insured
operator's security requirement on an actuarial assessment of its total
present and future black lung liability. The Department proposes to
eliminate the financial scoring process. Instead, the Department
proposes to require all self-insured operators to post security equal
to 120 percent of their projected black lung liabilities, which ensures
adequate coverage regardless of an operator's financial health.\2\ The
Department has determined that 120 percent is an appropriate level of
security because, among other things, it protects the Trust Fund in the
event an operator's actual liabilities exceed its projected
liabilities. The proposed rule would also remove the requirement that
an operator's average current assets over the preceding three years
must exceed its current liabilities, which would not be necessary to
protect the Trust Fund under the proposed security scheme.
[[Page 3351]]
The proposed rule would also prospectively remove Section 501(c)(21)
trust funds, which have proven to be less reliable, as an acceptable
form of security. Furthermore, the proposed rule will clarify the
process for operators to apply for authorization to self-insure, how
long the authorization remains effective, the conditions under which
OWCP will deny or revoke authorization to self-insure, and the process
for operators to appeal OWCP's determinations.
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\2\ This means the applicant would have to purchase an
instrument that would pay out up to 120% of the projected liability,
not that the applicant would have to actually spend that amount on
collateral. OWCP estimates that premiums on surety bonds will cost
anywhere from 2 percent to 12 percent of the security amount, and we
welcome comments on this estimation.
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The Department believes that the proposed rule will better protect
the Trust Fund when a self-insured operator becomes insolvent.
Moreover, by eliminating the need to continuously monitor each
individual operator's financial situation, the proposed rule will
lessen the administrative burden on OWCP to gather, review, and analyze
operators' financial information, and lessen the burden on operators to
collect and provide such information. The procedural changes will also
provide greater clarity and certainty with respect to OWCP's and
operators' respective obligations in the self-insurance authorization
process. Based on all of these considerations, the Department has
preliminarily determined the benefits of the proposed rule (e.g., the
increased safeguards for the Trust Fund and taxpayers, the decreased
administrative burden, etc.) would outweigh the purchase price of any
additional surety bonds or other securities for operators who choose to
self-insure.
The Department invites comments on the proposed rule from all
interested parties. The Department is particularly interested in
comments addressing the impact of the proposed rulemaking on coal mine
operators currently participating in the self-insurance program and any
resulting impact on their ability to continue participating in the
program.
II. Statutory Authority
Section 426(a) of the BLBA, 30 U.S.C. 936(a), authorizes the
Secretary of Labor to prescribe rules and regulations necessary for the
administration and enforcement of the Act.
III. Summary of the Proposed Rule
A. General Provisions
The Department is proposing several general revisions to advance
the goals set forth in Executive Order 13563, 76 FR 3821 (Jan. 21,
2011), on Improving Regulation and Regulatory Review. The Order states
that regulations must be ``accessible, consistent, written in plain
language, and easy to understand.'' Id.; see also E.O. 12866, 58 FR
51735 (Sept. 30, 1993) (agencies must draft ``regulations to be simple
and easy to understand, with the goal of minimizing the potential for
uncertainty and litigation arising from such uncertainty.'').
Accordingly, the Department proposes numerous technical and stylistic
changes to Subpart B to improve clarity, consistency, and readability.
The Department proposes to remove the imprecise term ``shall''
throughout the sections that it is amending, and to substitute
``must,'' ``must not,'' ``will,'' or other situation-appropriate terms.
No alteration in meaning either results from or is intended by these
changes.
Consistent with the goal of making this regulation easier to
understand, the Department proposes several additional technical
changes. For instance, the Department proposes to replace references to
``the Office'' with ``OWCP'' because that acronym is more commonly used
by stakeholders. As explained in current Sec. 725.101(a)(21),
``Office'' and ``OWCP'' both mean ``the Office of Workers' Compensation
Programs, United States Department of Labor.'' Thus, no alteration in
meaning either results from or is intended by this change.
The current regulations frequently refer to applications ``for
authority to become a self-insurer'' or ``for authorization to self-
insure.'' Where appropriate, OWCP proposes to amend such references to
include applications ``to renew authorization to self-insure'' or
similar language. This change is intended to clarify, where necessary,
whether and when the requirements of this Subpart B apply to renewal
applications.
The technical and stylistic changes designated here are not
included in the section-by-section explanation. All proposed
substantive revisions to existing rules and all proposed new rules are
discussed below.
B. Section-by-Section Explanation
20 CFR 726.101 Who May Be Authorized To Self-Insure
OWCP proposes substantially revising Sec. 726.101 to update the
minimum requirements an operator must meet to qualify for authorization
to self-insure and remove the provisions requiring OWCP to continuously
monitor each applicant's financial situation.
Paragraph (a) is retained in its entirety.
Current paragraph (b) establishes the minimum requirements that an
operator must meet to qualify for authorization to self-insure. At
present, paragraphs (b)(1), (b)(3), and (b)(5) respectively provide
that an operator must have been in the business of coal mining for at
least three consecutive years prior to applying, the operator's average
current assets over the prior three years must exceed its current
liabilities by a specified amount, and the operator must have five or
more employee-miners. Paragraphs (b)(2) and (b)(4) respectively provide
that an operator must demonstrate the administrative capacity to fully
service claims and that an operator must obtain security in a form
approved by OWCP and in an amount determined by OWCP.
OWCP proposes to remove paragraphs (b)(1), (b)(3), and (b)(5).
Because OWCP elsewhere proposes to require all self-insurers to post
security equal to 120 percent of their projected black lung
liabilities, the requirements of paragraphs (b)(1), (b)(3), and (b)(5)
would no longer be necessary. OWCP has preliminarily determined that a
120 percent security level for all companies would better protect the
Trust Fund in the event of an operator's default than percentages that
vary based on a company's continuously-changing financial status. OWCP
has likewise preliminarily determined that an actuarial assessment of
liability for current and future claims is a better gauge of the dollar
amounts the Trust Fund may be required to pay out, than consideration
only of an operator's current claims. This change would also reduce the
administrative burdens for both OWCP and self-insured operators.
Given the foregoing changes, OWCP proposes to renumber current
paragraph (b)(2) as paragraph (b)(1), and paragraph (b)(4) as paragraph
(b)(2).
Current paragraph (c) provides that no operator who is unable to
meet the requirements of this section should apply for authorization to
self-insure and that OWCP will not approve an application for self-
insurance ``until such time as the amount prescribed by [OWCP] has been
secured in accordance with this subpart.'' OWCP proposes to revise
paragraph (c) by removing the language prohibiting nonqualifying
operators from applying. That requirement will serve no purpose and
have no practical consequences in the revised regulation. OWCP also
proposes to revise paragraph (c) by clarifying that no application will
be approved until OWCP receives security in the amount and in the form
determined by OWCP. Revised paragraph (c) will also specify that, if an
applicant is seeking authorization to self-insure for the first time,
the applicant is not authorized to self-insure while its application is
under review. The purpose of this change is to
[[Page 3352]]
clarify the circumstances under which OWCP will approve a qualifying
operator's application to self-insure.
OWCP also proposes to add a new paragraph (d), which will provide
that no operator whose application for authorization to self-insure or
to renew authorization to self-insure is denied may reapply until 12
months after a final decision denying such application. The purpose of
this addition is to prevent non-qualifying operators from filing serial
applications for authorization to self-insure. In turn, this addition
would reduce the administrative burden on OWCP to review renewed
applications. Moreover, if an operator disagrees with the amount of
security OWCP has determined is appropriate, the operator can simply
use the appeal process set forth in Sec. 726.116 rather than filing a
new application. Barring operators from reapplying within 12 months
after a denial prevents operators from pursuing new applications while
an appeal on the denied application is pending.
20 CFR 726.102 Application for Authority To Become a Self-Insurer; How
Filed; Information To Be Submitted
OWCP proposes to amend paragraph (a) to require operators to file
applications for authorization to self-insure (or to renew
authorization to self-insure) electronically in a manner prescribed by
OWCP, and to remove existing requirements that apply only to paper
filings (e.g., affixing a corporate seal). This change is intended to
streamline the application process and reduce the administrative burden
of processing physical mail and documents.
OWCP proposes to substantially revise paragraph (b) to change and
update the information that must be submitted with an application for
authorization to self-insure or to renew authorization to self-insure.
Current paragraphs (b)(1), (b)(2), (b)(3), and (b)(5) require an
operator to submit several pieces of information, including a statement
of the employer's payroll, a statement of the average number of
employees engaged in coal mine employment within the preceding three
years, a list of mines covered by any particular self-insurance
agreement and a statement demonstrating the applicant's administrative
capacity to service claims. OWCP requires operators to provide much of
this information in the requisite application forms, namely, forms CM-
2017 and CM-2017b, which are available on OWCP's website at <a href="https://www.dol.gov/agencies/owcp/dcmwc/regs/compliance/blforms">https://www.dol.gov/agencies/owcp/dcmwc/regs/compliance/blforms</a>. Accordingly,
OWCP proposes to retain current paragraphs (b)(1), (b)(2), (b)(3), and
(b)(5), but renumber them after adding two more paragraphs.
OWCP proposes to add a new paragraph (b)(1) that will require an
application to include any application forms required by OWCP. As noted
above, those forms currently include CM-2017 and CM-2017b.
OWCP also proposes to add a new paragraph (b)(2) to require an
applicant to include with its application an actuarial report using
OWCP-mandated actuarial assumptions. Proposed paragraph (b)(2) would
also provide that an operator must submit a new actuarial report every
three years and allow an operator to submit an additional actuarial
report using alternative assumptions.
With the additions of proposed paragraphs (b)(1) and (b)(2),
current paragraphs (b)(1), (b)(2), (b)(3), and (b)(5) are respectively
renumbered as (b)(3), (b)(4), (b)(5), and (b)(6).
Current paragraph (b)(4) requires an applicant to submit its gross
and net assets and liabilities for the preceding three years. Because
OWCP elsewhere proposes to eliminate the minimum requirement pertaining
to an operator's assets and liabilities, it likewise proposes to remove
current paragraph (b)(4).
Current paragraph (b)(6), which allows OWCP to request additional
information or evidence from an applicant at OWCP's discretion, is
retained and renumbered as paragraph (b)(7). OWCP proposes to make
stylistic changes to new paragraph (b)(7) by removing unnecessary
language. No alteration in meaning either results from or is intended
by this change.
Paragraph (c), which specifies which entities may apply for
authorization to self-insure, is retained in its entirety, but revised
to clarify that the paragraph also applies to applications to renew
authorization to self-insure.
20 CFR 726.103 Application for Authority To Self-Insure; Effect of
Regulations Contained in This Part
Current Sec. 726.103 is retained in its entirety.
20 CFR 726.104 Action by OWCP Upon Application of Operator
OWCP proposes deleting and replacing paragraph (a) to clarify what
action OWCP must take with respect to an application and the timeframe
within which OWCP will take such action. New paragraph (a) provides
that OWCP will issue a written determination, either denying the
application or determining the amount of security, within 30 days after
determining that an application is complete. New paragraph (a) also
allows OWCP to extend the 30-day deadline if it determines that
additional evidence is needed or that the applicant's evidence is not
in compliance with OWCP's requirements.
OWCP proposes removing current paragraph (b)(4), which allows a
self-insurer to give security by funding a trust pursuant to section
501(c)(21) of the Internal Revenue Code. Few self-insured operators use
501(c)(21) trusts as security and most of those operators use them in
combination with other forms of security. Also, OWCP has determined
that section 501(c)(21) trusts are a less reliable form of security and
more burdensome for OWCP to monitor because, unlike other forms of
security which generally guarantee a fixed dollar amount, the amounts
kept in the trusts can fluctuate and significantly decrease as self-
insurers use such trusts to pay claims and the costs of administration.
The remaining provisions of paragraph (b) are retained.
OWCP proposes to add a new paragraph (c). New paragraph (c)
provides that if the applicant is receiving authorization to self-
insure for the first time, OWCP will notify the applicant that its
authorization to self-insure is contingent upon submitting the required
security and completed agreement and undertaking, and that the
applicant's authorization will be effective for 12 months from the date
such security and completed agreement and undertaking are received by
OWCP. The purpose of this amendment is to clarify when a new
applicant's authorization to self-insure becomes effective.
Additionally, as explained in more detail below, under new Sec.
726.111, OWCP will also notify the applicant of the date on which its
authorization is effective, the date on which such authorization will
expire, and the date by which the applicant must apply to renew that
authorization if it intends to continue self-insuring its liabilities.
OWCP proposes to add a new paragraph (d) for procedures when OWCP
renews the applicant's authorization to self-insure. Under proposed
paragraph (d)(1), if there are no changes in the required security
amount, OWCP would notify the applicant that the applicant's
authorization to self-insure is effective for 12 months from the date a
completed agreement and undertaking is received. Under proposed
paragraph (d)(2), if changes are required to the existing security
amount, OWCP would notify the applicant that the applicant's
authorization to self-insure is not effective until the applicant has
[[Page 3353]]
submitted the required security and a completed agreement and
undertaking. In the latter event, the applicant's authorization to
self-insure will be effective for 12 months from the date such updated
security and completed agreement and undertaking are received by OWCP.
The purpose of this amendment is to clarify when a renewal applicant's
reauthorization to self-insure becomes effective.
Current paragraph (c) is retained but renumbered as paragraph (e).
OWCP proposes to amend this paragraph to provide that any applicant who
cannot meet the security requirements imposed by OWCP should proceed to
obtain a commercial policy or contract of insurance and submit proof of
such coverage within 30 days after OWCP issues its decision. Current
paragraph (c) also sets forth the process by which an applicant may
appeal OWCP's determination on an application. Because OWCP elsewhere
proposes to set forth new procedures for an applicant to appeal OWCP's
determinations (see Sec. 726.116), that language is now redundant.
Accordingly, OWCP proposes to revise paragraph (c) to clarify that an
applicant may appeal such determinations in the manner set forth in new
Sec. 726.116. For the same reasons, OWCP proposes to delete current
paragraph (d), which describes what action OWCP will take with respect
to such an appeal.
20 CFR 726.105 Fixing the Amount of Security
Current Sec. 726.105 requires OWCP to set the amount of security
each applicant is required to post by determining the amount
``necessary and sufficient to secure the performance by the applicant
of all obligations imposed upon him as an operator by the Act.'' The
current regulation provides that OWCP will consider various factors
including, but not limited to, the operator's net worth, the existence
of a guarantee by a parent corporation, and the operator's existing
liability for benefits.
OWCP proposes to delete current Sec. 726.105 and replace it with a
new Sec. 726.105. Proposed Sec. 726.105 would provide that any
operator approved to self-insure must submit security equal to 120
percent of its actuarial estimated liabilities (all present and future
liabilities) as determined by OWCP based on the actuarial report or
reports submitted by the applicant (or on file with OWCP), other
information submitted with the operator's application, or any other
materials or information that OWCP deems relevant. This means the
applicant would have to purchase an instrument that would pay out up to
120% of the projected liability, not that the applicant would have to
actually spend that amount on collateral. OWCP estimates that premiums
on surety bonds will cost anywhere from 2 percent to 12 percent of the
security amount, and we welcome comments on this estimation.
This change would better protect the Trust Fund in the event that a
self-insured operator becomes insolvent or enters bankruptcy. This
change will also better protect the Trust Fund in the event an
insolvent operator's actual liabilities turn out to be greater than its
projected liabilities. Generally, OWCP will continue to determine an
operator's projected liabilities based on the operator's actuarial
report and supporting information, including the information submitted
with an operator's annual renewal application. Because those reports
attempt to project future liabilities, however, they are inherently
imperfect and open to potential error. This approach is also consistent
with the practices of some state workers' compensation programs that
set a security deposit amount based on accrued or projected
liabilities. See, e.g., 8 Alaska Admin. Code section 46.040 (setting
security deposit amount at $600,000 or 125% of the total accrued
workers' compensation liability, whichever is greater); Ariz. Code
section 23-961(a)(2) and Ariz. Admin. Code section 20-5-206(D) (setting
guaranty bond amount at fixed dollar amount or 125% of the total
outstanding accrued liability); La. Rev. Stat. section 23:1168(a)(4);
La. Admin. Code tit. 40, Pt. I, section 1725 (requiring amount of
securities or surety bond to be at least $100,000, or at least 110% of
the average workers' compensation losses incurred over the most recent
three year period, or at least 110% of the total amount of unpaid
workers' compensation reserves at the time of application, whichever is
greatest); Minn. Stat. section 79A.04, subd. 2 (setting 110 percent
security deposit for self-insurance); N.C. Code section 97-185(a1),
(b2) (requiring security deposit of at least 100% of the individual
self-insurer's total undiscounted outstanding claims liability per the
most recent report from a qualified actuary, but not less than $500,000
or such greater amount or such greater amount as the Commissioner
prescribes based on, but not limited to, the financial condition of the
individual self-insurer and the risk retained by the individual self-
insurer); Tenn. Comp. R. & Regs. 0780-01-83-.05(2) (setting 125 percent
security deposit); Tx. Labor 407.064(d) (requiring security deposit of
the greater of $300,000 or 125% of applicant's incurred liabilities for
compensation). Additionally, by adopting this change, OWCP would no
longer have to continuously monitor or collect information about each
operator's financial situation. Furthermore, as explained in greater
detail below, the Department has determined that the anticipated
benefits of this change outweigh the costs.
20 CFR 726.106 Type of Security
Current Sec. 726.106 is retained in its entirety. OWCP proposes to
make stylistic changes to Sec. 726.106. No alteration in meaning
either results from or is intended by these changes. In addition to
these stylistic changes, OWCP proposes to revise paragraph (a) to
clarify that an operator may not provide any form of security other
than those provided for in Sec. 726.104(b). This change merely
clarifies existing requirements.
20 CFR 726.107 Deposits of Negotiable Securities With Federal Reserve
Banks or the Treasurer of the United States; Authority To Sell Such
Securities; Interest Thereon
OWCP proposes to substantially revise Sec. 726.107 to clarify and
update the treatment of negotiable securities.
New paragraph (a) retains the requirements that deposits of
securities provided for by the regulations in this part must be made
with any Federal Reserve bank or any branch of a Federal Reserve bank
designated by OWCP, or the Treasurer of the United States. New
paragraph (a) also adds a requirement that any such deposit must be
held in the name of the Department of Labor.
New paragraph (b) provides that, if a self-insurer defaults on its
obligations under the Act, OWCP has the power, in its discretion, to
(1) collect the interest on such securities as it may become due; (2)
sell any or all of the securities; and (3) apply the collected interest
or proceeds from the sale of securities to the payment of any benefits
for which the self-insurer may be liable. This paragraph largely
restates existing requirements.
New paragraph (c) provides that, if a self-insurer with deposits of
securities has neither defaulted nor appealed from a determination made
by OWCP under Sec. 726.104, OWCP will allow the self-insurer to
collect interest on the security deposit. This change will replace
existing provisions of current Sec. 726.106, which provide that OWCP
may authorize a self-insurer to collect interest on the securities
deposited by a self-insurer when OWCP deems it
[[Page 3354]]
unnecessary to resort to such securities for the payment of benefits.
In light of these changes, OWCP also proposes to retitle Sec.
726.107 to read: ``How Negotiable Securities Are Handled.''
20 CFR 726.108 Withdrawal of Securities
OWCP proposes to substantially revise current Sec. 726.108, to
clarify the circumstances under which a self-insurer may make
withdrawals of any form of security.
New paragraph (a) provides that no withdrawal of any form of
security (indemnity bonds, negotiable securities, and/or letters of
credit) may be made except upon express written authorization by OWCP.
New paragraph (b) provides that, if a self-insurer wishes to
withdraw securities, it must submit a written request, which must
include (1) an updated actuarial report using OWCP-mandated actuarial
assumptions to support why the existing security levels are no longer
applicable; or (2) replacement securities in the amount and form
approved by OWCP.
These changes are intended to protect the Trust Fund by preventing
a self-insured operator from taking actions with respect to its
security deposit that could hinder OWCP's ability to use those
securities to pay benefits. Furthermore, because new Sec. 726.108
applies to all forms of security, not only negotiable securities, OWCP
proposes to retitle Sec. 726.108 to read: ``Withdrawal of
Securities.''
20 CFR 726.109 Increase in the Amount of Security
OWCP proposes to delete and replace current Sec. 726.109. New
Sec. 726.109 provides that OWCP may, at its discretion, increase the
amount of security a self-insurer is required to post whenever OWCP
determines that the amount of security on deposit is insufficient to
secure the payment of benefits and medical expenses under the Act. OWCP
might make such a determination, for example, if it learns that the
data on which an operator's liability estimate were based have
significantly changed or an operator acquires new mines or employees.
New Sec. 726.109 no longer allows OWCP to reduce an operator's
required security amount between self-insurance renewal authorizations.
OWCP believes it is not necessary to allow for a reduction in an
operator's security amount in between renewals, which would occur every
12 months, because that process would simply allow an operator to
relitigate OWCP's original determination, even after an operator has
exhausted the appeal process. Disallowing operators from requesting
decreases in their security amounts would thus preserve OWCP's limited
resources to review and process self-insurance applications.
Furthermore, if an operator believes that its projected liabilities
have decreased due to a change in circumstances, the operator will have
an opportunity to request a lower security amount during the annual
renewal process.
Furthermore, reducing an operator's security amount could only
increase the risk that an operator's liabilities could transfer to the
Trust Fund. This change thus better protects the Trust Fund, consistent
with Congress's intent that the coal operators who exposed coal miners
to coal dust be responsible for paying black lung benefits, not
taxpayers. If an operator disagrees with OWCP's determination to
increase its security amount, it would be free to appeal that
determination using the appeals process set forth in Sec. 726.116.
In light of these changes, OWCP proposes to retitle Sec. 726.109
to read: ``Increase in the Amount of Security.''
20 CFR 726.110 Filing of Agreement and Undertaking
OWCP proposes to amend Sec. 726.110 to update the requirements for
filing of an agreement and undertaking.
Current paragraphs (a) and (b) are retained. Current paragraph
(a)(3) provides that, in an agreement and undertaking, the applicant
must agree to provide security in a form approved by OWCP and in an
amount established by OWCP ``as elected in the application.'' OWCP
proposes to delete ``as elected in the application'' to make clear that
OWCP, not the applicant, has the final say as to which form or forms of
security a particular operator may or must post.
Paragraph (c) is new. It provides that any operator authorized to
self-insure must notify OWCP of any changes to its business structure,
including the purchase or sale of any coal mining operations, that
could affect the operator's liability for benefits under the Act. It
further provides that the operator must provide such notification to
OWCP within 30 days of such change, but clarifies that an operator's
liability following such a change remains governed by Subpart G of
these regulations, 20 CFR 725.490-725.497. The purpose of this change
is to ensure that operators promptly notify OWCP of changes that could
require or justify an increase in the operator's security amount.
Paragraph (d) is also new. It provides that OWCP may, at its
discretion, request any information from a self-insured operator that
may affect the operator's liability for benefits under the Act. The
purpose of this change is likewise to ensure that OWCP can request
information that could require or justify an increase in the operator's
security amount.
20 CFR 726.111 Notice of Authorization to Self-Insure
Current Sec. 726.111 is retained in its entirety. OWCP proposes to
make stylistic changes to Sec. 726.111. No alteration in meaning
either results from or is intended by these changes. In addition to
these stylistic changes, OWCP proposes to add a new sentence, providing
that OWCP will also notify the applicant of the date on which its
authorization is effective, the date on which such authorization will
expire, and the date by which the applicant must apply to renew that
authorization if it intends to continue self-insuring its liabilities.
The purpose of this addition is to ensure that the appropriate dates
and deadlines are clear and clearly communicated to the applicant.
20 CFR 726.112 Reports Required of Self-Insurer; Examination of
Accounts of Self-Insurer
Current Sec. 726.112 is retained in its entirety. OWCP proposes to
make stylistic changes to Sec. 726.112. No alteration in meaning
either results from or is intended by these changes.
20 CFR 726.113 Disclosure of Confidential Information
Current Sec. 726.113 is retained in its entirety. OWCP proposes to
make stylistic changes to Sec. 726.113. No alteration in meaning
either results from or is intended by these changes.
20 CFR 726.114 Authorization and Reauthorization Timeframes
OWCP proposes to delete and replace current Sec. 726.114 to
substantially revise the timeframe for authorizations and
reauthorizations.
New paragraph (a) provides that no initial or renewed authorization
to self-insure may be granted for a period in excess of 12 months
unless OWCP determines that extenuating circumstances justify a longer
period. This change thus shortens the existing maximum allowable
authorization period from 18 months to 12 months.\3\
[[Page 3355]]
The purpose of this change is to require self-insured operators to
provide information to OWCP more frequently, thereby ensuring that the
security amounts set by OWCP are based on up-to-date information. For
instance, operators will be required to submit data concerning their
existing claims and employee figures each year, which could alert OWCP
to potential changes in an operator's projected liabilities. This
process will also allow OWCP to better track other potentially relevant
information, including a self-insured operator's subsidiaries,
corporate officers, mines, and the like. Requiring renewal applications
on an annual basis also makes sense insofar as most operators operate
on twelve-month fiscal calendars. This approach would also give outside
stakeholders confidence that OWCP is adequately enforcing compliance
with these regulations and ensuring that self-insured operators post
sufficient security.
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\3\ The existing regulations provide an 18-month period only for
a company's initial self-insurance authorization. After the initial
authorization, self-insurers ``will receive from the Office each
year a bond form for execution in contemplation of reauthorization,
and the submission of such bond duly executed in the amount
indicated by the Office will be deemed and treated as such self-
insurer's application for reauthorization for the ensuing fiscal
year.'' 20 CFR 726.114(a).
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New paragraph (b) provides that each operator authorized to self-
insure must apply for reauthorization 90 days prior to the 12-month
authorization expiration date. This change will ensure that OWCP has
the opportunity to act on an operator's application for reauthorization
to self-insure before the operator's existing authorization expires.
In light of these changes, OWCP proposes to retitle Sec. 726.114
to read: ``Authorization and Reauthorization Timeframes.''
20 CFR 726.115 Revocation of Authorization to Self-Insure
OWCP proposes to restructure and make stylistic changes to current
Sec. 726.115 for clarity. No alteration in meaning either results from
or is intended by these changes. In addition, OWCP proposes one
substantive change. Current Sec. 726.115 provides that the failure or
insolvency of the surety on an operator's indemnity bond can provide
good cause for OWCP to withdraw the operator's authorization to self-
insure. OWCP proposes to revise Sec. 726.115 to clarify that the same
result will obtain if any other financial institution holding any form
of security provided by an operator fails or becomes insolvent. OWCP
believes this change simply recognizes that there is no valid reason to
treat the failure of a surety any differently than the failure of any
other financial institution holding security on behalf of an operator.
OWCP also proposes to change ``communication of the Office'' to
``request made by OWCP'' for clarity.
20 CFR 726.116 Appeal Process
Section 726.116 is new. It establishes and clarifies the process
for an operator to appeal a self-insurance determination made by OWCP.
Paragraph (a) sets forth the process to file an appeal. It provides
that any applicant who wishes to appeal a determination made by OWCP
must submit a request for review to the Division of Coal Mine Workers'
Compensation (DCMWC) within 30 days after such determination. It also
provides that the 30-day deadline to appeal may not be extended. This
method is consistent with general appellate practices and 30 days
provides operators with sufficient time to determine whether to appeal
a determination.
Paragraph (b) sets forth the process for submitting briefs and
evidence. It provides that, within 30 days of submitting a request for
review, the applicant must submit any evidence and/or briefing on which
the applicant intends to rely. It also provides that DCMWC may, at its
discretion, extend this deadline upon a showing of good cause by the
applicant.
Paragraph (c) sets forth the process for requesting an informal
conference on an appeal. Paragraph (c)(1) provides that an applicant
may request an informal conference and that such requests must be made
when the applicant submits briefing in support of its request for
review. Paragraph (c)(2) provides that, if an applicant requests a
conference, DCMWC will hold a conference between DCMWC, the Office of
the Solicitor, and the applicant's representatives. Paragraph (c)(3)
provides that, if the applicant does not request a conference, DCMWC
may either decide the appeal on the record or schedule a conference on
its own initiative. Paragraph (c)(4) provides that the conference will
be limited to the issues identified in the applicant's written
materials. Again, this method is consistent with general appellate
practices and provides an applicant with an adequate opportunity to be
heard on its appeal.
Paragraph (d) sets forth DCMWC's obligations in the review process.
It provides that DCMWC will review the previous determination in light
of the evidence and arguments submitted and issue a supplemental
decision.
Paragraph (e) sets forth the process for further appeals. Paragraph
(e)(1) provides that any applicant aggrieved by a supplemental
determination made by DCMWC may request further review by the Director
of OWCP within 30 days of such supplemental determination. Paragraph
(e)(2) provides that the Director of OWCP will review the supplemental
determination and evidence of record only and that the applicant may
not submit new evidence or arguments to the Director of OWCP. Paragraph
(e)(3) provides that the Director of OWCP will issue a final agency
decision within 30 days of receipt of an appeal. This requirement will
ensure that there is a final agency action that is reviewable in the
Federal courts as provided in the Administrative Procedure Act, 5
U.S.C. 701 et seq. See also 5 U.S.C. 704.
IV. Administrative Law Considerations
A. Information Collection Requirements
The Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3501 et seq.,
and its implementing regulations, 5 CFR part 1320, require that the
Department consider the impact of paperwork and other information
collection burdens imposed on the public. A Federal agency generally
cannot conduct or sponsor a collection of information, and the public
is generally not required to respond to an information collection,
unless it is approved by the Office of Management and Budget (OMB)
under the PRA and displays a currently valid OMB Control Number. In
addition, notwithstanding any other provisions of law, no person may
generally be subject to penalty for failing to comply with a collection
of information that does not display a valid Control Number. See 5 CFR
1320.5(a) and 1320.6.
Although the proposed rules contain information collections within
the meaning of the PRA (see proposed Sec. 726.102), these collections
are not new. They are currently approved for use in the black lung
program by OMB under Control Number 1240-0057 (CM-2017 Application or
Renewal of Self-Insurance Authority; and CM-2017b Report of Claims
Information for Self-Insured Operators). Aside from the removal of the
collection associated with form CM-2017a, the requirements for
completion of the forms and the information collected on the forms will
not change if this rule is adopted in final. Since that is the only
change being made to the collections, the overall burdens imposed by
the information collections will be reduced if this proposal is
adopted.
The information collection package for this proposal has been
submitted to OMB for review under 44 U.S.C. 3504, paragraph (c) of the
Paperwork Reduction Act of 1995, as amended.
[[Page 3356]]
Comments may be sent by the methods listed in the ADDRESSES section of
this preamble.
OWCP is particularly interested in comments that address the
following:
<bullet> Whether the collection of information is necessary for the
proper performance of the functions of the Agency, including whether
the information has practical utility;
<bullet> The accuracy of OWCP's estimate of the burden of the
collection of information, including the validity of the methodology
and assumptions used;
<bullet> Methods to enhance the quality, utility, and clarity of
the information to be collected; and
<bullet> Minimizing the burden of the collection of information on
those who are to respond, including through the use of appropriate
automated, electronic, mechanical, or other technological collection
techniques or other forms of information technology, e.g., permitting
electronic submission of responses.
OMB Control Number: 1240-0057.
Affected Public: Business or other for-profit.
Number of Respondents: 61.
Frequency: Annually.
Number of Responses: 122.
Annual Burden Hours: 244.
Annual Respondent or Recordkeeper Cost: $34,000.
OWCP Form(s): OWCP Forms CM-2017 (Application or Renewal of Self-
Insurance Authority), CM-2017b (Report of Claims Information for Self-
Insured Operators).
B. Executive Orders 12866 and 13563 (Regulatory Planning and Review)
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of the available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity).
Under Executive Order 12866, the Office of Information and
Regulatory Affairs of OMB determines whether a regulatory action is
significant and, therefore, subject to the requirements of the E.O. and
review by OMB. Section 3(f) of Executive Order 12866 defines a
``significant regulatory action'' as an action that is likely to result
in a rule that (1) has an annual effect on the economy of $100 million
or more, or adversely affects in a material way a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety, or State, local or tribal governments or communities
(also referred to as economically significant); (2) creates serious
inconsistency or otherwise interferes with an action taken or planned
by another agency; (3) materially alters the budgetary impacts of
entitlement grants, user fees, or loan programs, or the rights and
obligations of recipients thereof; or (4) raises novel legal or policy
issues arising out of legal mandates, the President's priorities, or
the principles set forth in the Executive Order.
Executive Order 13563 emphasizes the importance of quantifying both
costs and benefits, reducing costs, harmonizing rules, and promoting
flexibility. It also instructs agencies to review ``rules that may be
outmoded, ineffective, insufficient, or excessively burdensome, and to
modify, streamline, expand, or repeal them.''
The Department has considered the proposed rule with these
principles in mind and has determined that the anticipated benefits of
this regulation outweigh the costs. The discussion below sets out the
rule's anticipated economic impact, including factors favoring adoption
of the proposal. The Office of Information and Regulatory Affairs of
OMB has determined that the Department's rulemaking is not an
``economically significant regulatory action'' under Section 3(f)(1) of
Executive Order 12866.
1. Economic Considerations
The proposed rule will have an economic impact on coal mine
operators that currently participate in the self-insurance program, as
well as any new applicants. The proposed rule nevertheless would be
necessary to better protect the Trust Fund, reduce the administrative
burdens on OWCP and operators, and bring clarity to the self-insurance
process.
As explained in the preamble, prior security requirements have
proven inadequate to protect the Trust Fund when a self-insured
operator becomes insolvent. From 2014 to 2016, three self-insured coal
operators entered bankruptcy with combined collateral of $27.4 million;
the resulting transfer of black lung liabilities to the Trust Fund was
eventually estimated to be $865 million. See U.S. Government
Accountability Office, Federal Black Lung Benefits Program: Improved
Oversight of Coal Mine Operator Insurance is Needed, at 13 (Feb. 2020),
available at <a href="https://www.gao.gov/products/gao-20-21">https://www.gao.gov/products/gao-20-21</a>. Had this proposed
rule been in effect at the time, the three operators would have had far
more in collateral, producing dollar-for-dollar savings for the Trust
Fund. Of note, the amount of the coal operators' future black lung
liability was originally estimated in 2019 to be around $313 million to
$325 million. This was revised to $865 million in 2020 due to a variety
of factors, including increases in black lung benefit award rates and
higher medical treatment costs. Because the amount of a coal operator's
future black lung liability is inherently unpredictable to some degree
and can increase over time, requiring collateral at 120% better
protects the Trust Fund than a lower percentage.
Moreover, the existing financial scoring process has proven overly
cumbersome and costly to OWCP in terms of time and resources. The
proposed rule would eliminate the financial scoring process and require
all self-insured operators to post security equal to 120 percent of
their projected black lung liabilities. By requiring sufficient
security based simply on projected liabilities, the financial scoring
process is no longer needed, removing the burden on the agency to
attempt to assess risk by collecting and analyzing the information in
the form CM-2017a. The proposed rule would also remove certain minimum
requirements that would become unnecessary, including the requirement
that an operator's average current assets over the preceding three
years exceed its current liabilities.
This analysis provides the Department's estimate of the economic
impact of the proposed rule, both on the economy as a whole and on
individual operators. The Department invites comments on this analysis
from all interested parties. The Department is particularly interested
in comments addressing the Department's evaluation of the impact of the
proposed rule on operators that currently participate in the self-
insurance program.
a. Data Considered
To determine the proposed rule's general economic impact, the
Department calculated how the rulemaking would affect several
stakeholder groups, including: (i) OWCP, (ii) taxpayers, (iii)
commercially insured operators, and (iv) self-insured operators.
i. OWCP
The proposed rule change does not impose additional demands on OWCP
resources and in fact will result in a reduction in administration
costs.\4\ It
[[Page 3357]]
eliminates the need for OWCP to repeatedly perform annual financial
health assessments on each self-insured operator. This produces a
short-term savings in the administrative costs to perform the analysis,
including both costs associated with OWCP time and contractors hired to
assist OWCP in this analysis. The proposed rule would require OWCP to
review actuarial liability estimates every three years and monitor
authorized self-insureds for compliance with eligibility requirements,
but these are not new costs because OWCP is already performing those
functions under the current guidelines. The savings in administrative
expenses is estimated to be, at a minimum, equivalent to the annual
cost of one full-time financial analyst.
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\4\ In the 2017 Information Collection Request, when the form
CM-2017a was first approved, OWCP estimated that analyzing the
information collected in that form would cost the agency $3,279.94
annually. No longer requiring this form should save the agency this
cost.
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ii. Taxpayers
The proposed rule provides taxpayers with both short- and long-term
benefits. In the short term, taxpayers will benefit from lower
administration expenses, because savings can be used elsewhere in the
government without requiring additional tax revenues. In the long term,
the proposed rule reduces taxpayers' financial exposure by reducing the
risk that the Trust Fund--which has borrowed from the U.S. Treasury's
general fund nearly every year since 1979 to make needed expenditures--
will need to assume liabilities of self-insured operators that become
insolvent. The proposed rule would require security deposits that are
120 percent of the actuarial liability, instead of only partial
security deposits as is currently the case for most self-insured
operators. Under the current guidelines, the Trust Fund remains
partially exposed to the risk of coal operator bankruptcies for
operators considered at low or medium risk of failing to meet their
obligations; under the current guidelines, these operators must provide
security for 70 percent and 85 percent respectively of their black lung
liabilities. Even operators considered high risk under the current
guidelines, and therefore required to provide security for 100 percent
of their black lung liabilities, present some risk that their projected
liabilities will prove too low. Moreover, due to the pending appeals
discussed above, a number of operators have securities on deposit with
OWCP that are substantially less than those required under the existing
guidelines.
Requiring a 120 percent liability security deposit transfers the
risk of insufficient securities to commercial security bond
underwriters and banks that specialize in financial risk assessments
and are better equipped than OWCP to assess the financial stability of
coal mine operators (and who are compensated for assuming that risk via
operators' purchase of surety bonds or other forms of security). The
proposed rule would require self-insured operators to post additional
security in the aggregate, which would cover the claims for which they
are responsible if they were to default on their claim payments (based
on the operators' current estimates of their actuarial liabilities).
This means the burden for self-insured operators' liabilities would
remain with them instead of transferring to the Trust Fund and,
indirectly, to taxpayers.
iii. Commercially Insured Operators
The proposed rule will not impose additional costs on operators
that secure their BLBA liabilities through commercial insurance. The
proposed rule affects only the eligibility criteria, security
requirements, and other procedures for operators that secure their
liabilities by qualifying to self-insure. At most, commercially insured
operators might choose to reassess whether, in light of these changes,
commercial insurance remains the most cost-effective option for
securing their liabilities or, instead, whether to switch to self-
insurance. The cost of any such assessment would be de minimis.
iv. Self-Insured Operators
The proposed rule could increase costs for current operators that
are self-insured. In 2019, OWCP identified a total of 20 operators that
were, or recently had been, actively mining coal and participating in
the self-insurance program. Four of these operators have since gone
bankrupt and are not included in this impact analysis. Of the remaining
16 self-insured operators, seven have commercial insurance for their
current operations, but self-insure their legacy liabilities. Nine
secure both their current and legacy liabilities through self-
insurance.
The proposed rule would apply to the 16 operators noted above.
Table 1 lists the 16 operators' actuarially estimated liabilities,
securities currently on deposit, the present security requirement under
current guidelines, and future security requirements under the proposed
rule.
Table 1: Self-Insured Coal Mine Operators Actuarial Liabilities and
Security Deposits
[GRAPHIC] [TIFF OMITTED] TP19JA23.001
[[Page 3358]]
The proposed rule does not impose additional reporting or filing
requirements on the coal operators currently in the self-insurance
program beyond notifying OWCP of any business structure changes that
could affect the operator's liability for benefits under the Act. If
anything, the proposed rule decreases administrative burdens. Operators
are required to continue updating their actuarial liability estimates
on a three-year cycle but are no longer required to file quarterly
financial reports. There will be a cost to the operators for the time
required to review and understand the rule. Because of the small number
of affected establishments, this rule familiarization cost is de
minimis in aggregate and is not included in the rule's total cost
estimate.
The proposed rule requires self-insured operators to adjust the
amount of their security deposits to reach 120 percent of their
reported actuarial black lung liability. Table 1 reflects that 15 of
the 16 current self-insured operators would be required to increase
their security deposits as a result. For each operator, the cost of the
increase in security deposits depends on which security deposit option
the operator employs (since different security options have different
costs) and amount of the required increase.
Operators with security deposits in the form of indemnity bonds
will incur a cost determined by the commercial bond underwriters. OWCP
does not have direct information on the cost of these bonds, as pricing
is a function of multiple qualitative and quantitative attributes of
each operator and is determined by underwriters on a case-by-case
basis. Each underwriter has their own pricing formula and offers
various payment options. To estimate the cost impacts of the proposed
rule, an annual premium ranging from 2 percent to 12 percent of the
additional security was used as an estimate. This range is based on a
review of public data from several different surety companies; however,
actual costs could be higher or lower.\5\ The agency welcomes comment
on these assumptions and estimates. Additionally, this analysis focuses
solely on surety bonds because that is both the most widely used option
among currently self-insured operators and the most cost-effective
option.
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\5\ In reaching this estimate, OWCP reviewed publicly available
estimates of surety bond premiums from BondExchange; Bryant Surety
Bonds; Insureon; JW Surety Bonds; Lance Surety Bond Associates,
Inc.; NNA Surety Bonds; Surety Bonds Direct; Surety Solutions; and
Value Penguin. Note that these are for surety bonds generally, not
surety bonds for coal companies specifically. The 2 to 12 percent
range was then developed based on this public data.
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For operators with security deposits in the form of negotiable
securities, the additional costs would consist of the opportunity costs
of the additional deposits (i.e., the difference in return between
funds held in such accounts and funds invested elsewhere, such as in
higher-performing investments or reinvested into the operations of the
business itself). One common convention to estimate hypothetical
returns on forgone investments is to use a company or industry-level
Weighted Average Cost of Capital (WACC); the median WACC for the metals
and mining industry is currently around 9.4 percent, although the WACC
for coal mining companies specifically, and in particular for
individual coal mining companies, may be higher or lower. The
opportunity costs for these operators could be estimated by calculating
the difference between their WACC and the annual return earned on their
security deposit and multiplying that figure by the dollar increase in
their security. OWCP has not quantified these costs for two principal
reasons. First, as noted above, most self-insured operators use
indemnity bonds as security. OWCP does not anticipate that these
operators will begin using negotiable securities. Second, annual
indemnity bond costs are likely to be lower than the one-time payment
of negotiable securities and associated opportunity costs, making
indemnity bonds the more cost-effective option. As this economic
analysis demonstrates, OWCP predicts that any increased indemnity bond
costs associated with this rulemaking will not have a significant
impact on self-insured operators. Furthermore, any operators that
currently use negotiable securities to secure some or all of their
liabilities can continue using those securities in combination with
indemnity bonds to comply with any increased security requirement
(i.e., some portion of the operator's liabilities could be secured with
negotiable securities and the remainder could be secured with indemnity
bonds).
Table 2 calculates the estimated increased costs of a larger
indemnity bond for each operator and compares this figure to each
operator's annual revenues. Annual revenues are represented by a three-
year average over the 2018-2020 time period, as reported by S&P or
operator-provided financial statements. Annual costs are estimated as
the average of the maximum and minimum annual premium (i.e., the
midpoint of the 2 percent to 12 percent range). As shown in Table 2,
the estimated annual impact for operators as a percentage of annual
revenue ranges from a high of 0.941 percent to less than 0.1 percent
(including one negative value).\6\
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\6\ Surety bonds are generally paid for annually, and the
premium is paid up front at the beginning of the year or charged a
finance fee for a payment plan. Discounting is not presented in
Table 2 because the average estimated cost represents one annual
premium payment, rather than the total net present value of all
future payments.
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OWCP invites additional information from commenters on the cost of
these bonds.
[[Page 3359]]
Table 2: Estimated Annual Cost of Increased Security Deposit in the
Form of Indemnity Bonds
[GRAPHIC] [TIFF OMITTED] TP19JA23.002
b. Economic Impact Summary
The Office of Management and Budget uses a $100 million-dollar
annual threshold for determining the proposed rule's economic
significance. See, e.g., E.O. 12866 (defining regulation that has
annual effect on the economy of $100 million or more as
``significant''). Based on this test, the self-insurance proposal would
not be ``economically significant.''
Operator securities on deposit are estimated to change by nearly
$720 million. This, however, represents an estimate of the projected
liabilities over the lifetime of all claims for all self-insured
companies. Even if they were all to go bankrupt simultaneously--which
is extremely unlikely--the estimated liabilities represent benefits
payments over the lifetime of the impacted miners and survivors. As an
illustration, consider the annual payout in recent years from the
estimated $865 million transfer of black lung liabilities to the Trust
Fund as a result of the three bankruptcies from 2014 to 2016. From
fiscal years 2015 through 2022, the Trust Fund paid out between $8
million and $30 million per year to active beneficiaries as a direct
result of those three bankruptcies. OWCP does not have the ability to
predict bankruptcies with certainty, as explained elsewhere in this
preamble as a rationale for proposing to eliminate the financial
scoring process. Nevertheless, given the fact that $865 million in
projected liabilities has thus far not resulted in more than $30
million in disbursements to active beneficiaries per year, OWCP
predicts that the share of benefits paid from this additional $720
million in securities on deposit will not exceed $30 million in any
given year.
Furthermore, OWCP estimates ranges from approximately $14 million
to $86 million on an annual basis, with a mid-range estimate of $50
million. In Table 2 above, the minimum and maximum estimated costs of
change in securities are based on 2 percent and 12 percent,
respectively, of the total change in secured position for each
operator. OWCP used an annual premium ranging from 2 percent to 12
percent of the additional security based on a review of public data
from several different surety companies. OWCP used estimates for surety
bonds because that is both the most widely used option among currently
self-insured operators and likely to be the most cost-effective option.
The combined opportunity cost on the current self-insurance
operators is less than 0.1 percent of aggregate average annual
revenues. Even for the operator facing the largest increase as a
portion of revenues (Company 1 in Table 2), the expected impact is less
than 1 percent of average annual revenues. The impact on the coal
industry overall is smaller than that of the self-insured operator
group because there is no impact (0.0 percent) on commercially insured
operators.
2. Other Considerations
The Department considered alternative options and methods before
proposing these changes to the self-insurance program. Specifically,
the Department considered imposing a 100 percent security requirement
(20 points lower than the proposed rule) or a 140 percent security
requirement (20 points greater than the proposed rule). These
alternative requirements were subjectively selected for the purpose of
sensitivity testing. In both cases the overall impact remains below the
aggregate 1 percent of revenue thresholds.
After considering these alternatives, the Department determined
that the 120 percent security requirement is more cost-effective than
the 100 percent or 140 percent requirements. Relative to the
hypothetical 100 percent requirement, the 120 percent requirement
better protects the Trust Fund because if an operator's actuarial
estimates prove too low, any liabilities not covered by the operator's
securities would ultimately transfer to the Trust Fund. Even when
operators use OWCP's mandated actuarial assumptions, the operator's
actuarial report will reflect, ultimately, a best estimate of the
operator's existing and future liabilities. Insofar as any projection
of future events is inherently fallible, an operator's actual
liabilities could turn out to be greater than its earlier estimates.
Indeed, prior operator
[[Page 3360]]
bankruptcies have demonstrated that an operator's actual black lung
liabilities can far exceed their prior actuarially projected
liabilities. See U.S. Government Accountability Office, Federal Black
Lung Benefits Program: Improved Oversight of Coal Mine Operator
Insurance is Needed, at 13 (Feb. 2020), available at <a href="https://www.gao.gov/products/gao-20-21">https://www.gao.gov/products/gao-20-21</a> (noting that the estimated transfer in
benefit liabilities to the Trust Fund pursuant to three bankruptcies
went from $325 million in 2019 to $865 million in 2020). This approach
is also consistent with the practices of some state workers'
compensation programs, as described in more detail in the Section-by-
Section Explanation. See, e.g., Minn. Stat. section 79A.04, subd. 2
(setting 110 percent security deposit for self-insurance); Tenn. Comp.
R. & Regs. 0780-01-83-.05(2) (setting 125 percent security deposit).
The hypothetical 140 percent requirement, by contrast, proved too
onerous. As reflected in Table 2B below, although the overall impact of
the 140 percent requirement remained below the aggregate 1 percent of
revenue thresholds, it did have an impact on at least one operator in
excess of the 1 percent of revenue threshold.
OWCP also considered not proposing any changes, thereby maintaining
the current existing security levels. As with the alternative of
requiring 100 percent for all operators, this approach would not
adequately protect the Trust Fund and would maintain the challenges and
administrative burden of the financial scoring model described earlier
in this preamble. That model was not able to consistently predict which
operators were at risk of experiencing financial difficulties, and it
imposed significant burdens on OWCP to continuously monitor the
financial health of individual operators on a quarterly basis. OWCP
therefore considered, but ultimately rejected, maintaining the
financial scoring model.
In light of all of these considerations, the Department has
preliminarily determined that setting a security requirement as a
single percentage of projected black lung liabilities, regardless of
assessments of financial health, and setting that percentage at 120
percent strikes the right balance between adequately protecting the
Trust Fund and accommodating operators' interests. OWCP seeks comment
on this preliminary determination.
Table 2A: Estimated Annual Costs of Increased Security Deposit at 100
Percent
[GRAPHIC] [TIFF OMITTED] TP19JA23.003
[[Page 3361]]
Table 2B: Estimated Annual Costs of Increased Security Deposit at 140
Percent
[GRAPHIC] [TIFF OMITTED] TP19JA23.004
C. Regulatory Flexibility Act and Executive Order 13272 (Proper
Consideration of Small Entities in Agency Rulemaking)
The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601 et seq.,
requires an agency to prepare a regulatory flexibility analysis when it
proposes regulations that will have ``a significant economic impact on
a substantial number of small entities'' or to certify that the
proposed regulations will have no such impact, and to make the analysis
or certification available for public comment.
The Department has determined that a regulatory flexibility
analysis under the RFA is not required for this rulemaking. For the
mining industry, SBA uses three levels of employee counts to define
small mining operations:
NAICS 212111 Bituminous Coal and Lignite Surface Mining--1,250
employees
NAICS 212112 Bituminous Coal Underground Mining--1,500 employees
NAICS 212113 Anthracite Mining--250 employees
According to the SBA criteria, 6 of the 16 self-insured operators,
or 38 percent, are considered small firms. Under this proposed rule,
the combined impact on these 6 operators would be 0.2 percent of annual
revenues, with a range from 0.1 percent to 0.4 percent. Again, these
impacts are very small, and for that reason the proposed rule is not
considered to have a significant economic impact on a substantial
number of small operators. The overall impact on the large operators is
less than 0.1 percent of annual revenues.\7\
---------------------------------------------------------------------------
\7\ The RFA does not define ``significant'' or ``substantial.''
5 U.S.C. 601. It is widely accepted, however, that ``[t]he agency is
in the best position to gauge the small entity impacts of its
regulations.'' SBA Office of Advocacy, ``A Guide for Government
Agencies: How to Comply with the Regulatory Flexibility Act,'' at 18
(August 2017), available at <a href="https://cdn.advocacy.sba.gov/wp-content/uploads/2019/06/21110349/How-to-Comply-with-the-RFA.pdf">https://cdn.advocacy.sba.gov/wp-content/uploads/2019/06/21110349/How-to-Comply-with-the-RFA.pdf</a>. One measure
for determining whether an economic impact is ``significant'' is the
percentage of revenue affected. For this rule, the Department used
as a standard of significant economic impact whether the costs for a
small entity equal or exceed 3 percent of the entity's annual
revenue.
The Department has used the threshold of 3 percent of revenues
for the definition of significant economic impact in a number of
recent rulemakings. See, e.g., Wage and Hour Division, Establishing
a Minimum Wage for Contractors, Notice of Proposed Rulemaking, 79 FR
34568, 34603 (June 17, 2014); Office of Federal Contract Compliance
Programs, Government Contractors, Requirement To Report Summary Data
on Employee Compensation, Notice of Proposed Rulemaking, 79 FR
46562, 46591 (Aug. 8, 2014). The 3 percent standard is also
consistent with the standards utilized by various other Federal
agencies in conducting their regulatory flexibility analyses. See,
e.g., Department of Health and Human Services Centers for Medicare &
Medicaid Services, ``Medicare and Medicaid Programs; Regulatory
Provisions To Promote Program Efficiency, Transparency, and Burden
Reduction; Part II; Final Rule,'' 79 FR 27105, 27151 (May 12, 2014).
---------------------------------------------------------------------------
Details of the factual basis for economic significance are provided
in the Industry Profile and Analysis section of this report. Tables 3A
and 3B show the impact on small and large self-insured operators.
[[Page 3362]]
Table 3A: Small Self-Insured Coal Mine Operators
[GRAPHIC] [TIFF OMITTED] TP19JA23.005
Table 3B: Large Self-Insured Coal Mine Operators
[GRAPHIC] [TIFF OMITTED] TP19JA23.006
Based on these facts, the Department certifies that this proposed
rule will not, if promulgated, have a significant economic impact on a
substantial number of small entities. Thus, an initial regulatory
flexibility analysis is not required. The Department, however, invites
comments from members of the public who believe the proposed rule would
have a significant economic impact on a substantial number of small
coal mine operators. The Department has provided the Chief Counsel for
Advocacy of the Small Business Administration with a copy of this
certification. See 5 U.S.C. 605.
Industry Profile and Analysis
Types of Operations
The United States coal mine industry consists of hundreds of mines
controlled by hundreds of operators. Coal mine operators vary in size
from owners of multiple mines to operators of single mines. The two
main categories of coal mining operations are surface and underground,
but many operators are also involved in other coal-related enterprises,
including steel production, mining technology and support services,
petroleum products, other mineral mining operations, and energy
generation. Coal mining is the only focus of some operators, while for
others it is only incidental to their main enterprise. For purposes of
this analysis, operators engaged in surface mining or with multiple
streams of revenue were classified as Surface operations (NAICS =
212111). Other operators were classified as Underground (NAICS =
212112) or Anthracite (NAICS = 212113) depending on their main source
of revenues. The SBA classification of small entities was applied
according to the operator's NAICS code type of operations.
Revenues Versus Coal Production
Typically, coal operators are analyzed on the basis of measures
such as coal production, coal reserves, and mine productivity. Among
self-insured operators, there are differences in the proportion of coal
mining operations covered by self-insurance, and the proportion of
operators' total operations that are mining related. To determine the
impact of the rule change, total company revenues were used, because an
individual operator could have multiple revenue streams available to
support their workers' compensation costs. As noted, 38 percent of the
self-insured operators are classified as ``small'' using employee
counts, under the SBA's definitions. However, 50 percent are classified
as ``major'' coal producers based on coal production. The ``major''
classification is based on the US Energy Information Administration
(``EIA'') criterion--of producing more than 5 million short tons of
coal per year.
[[Page 3363]]
Table 4: Coal Production by Operator
[GRAPHIC] [TIFF OMITTED] TP19JA23.007
D. Unfunded Mandates Reform Act of 1995
Title II of the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 1531
et seq., directs agencies to assess the effects of Federal regulatory
actions on state, local, and tribal governments, and the private
sector, ``other than to the extent that such regulations incorporate
requirements specifically set forth in law.'' The proposed rule does
not include any Federal mandate that may result in increased
expenditures by state, local, or tribal Governments, or increase
expenditures by the private sector by more than $100 million, and
therefore is not covered by the Unfunded Mandates Reform Act.
E. Executive Order 13132 (Federalism)
The Department has reviewed this proposed rule in accordance with
Executive Order 13132 regarding federalism and has determined that it
does not have ``federalism implications.'' E.O. 13132, 64 FR 43255
(Aug. 4, 1999). The proposed rule will not ``have substantial direct
effects on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government'' if
promulgated as a final rule. Id.
F. Executive Order 12988 (Civil Justice Reform)
The proposed rule meets the applicable standards in Sections 3(a)
and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize
litigation, eliminate ambiguity, and reduce burden.
G. Congressional Review Act
The proposed rule is not a ``major rule'' as defined in the
Congressional Review Act, 5 U.S.C. 801 et seq. If promulgated as a
final rule, this rule will not result in: an annual effect on the
economy of $100 million or more; a major increase in costs or prices
for consumers, individual industries, Federal, state, or local
Government agencies, or geographic regions; or significant adverse
effects on competition, employment, investment, productivity,
innovation, or on the ability of United States-based enterprises to
compete with foreign-based enterprises in domestic and export markets.
List of Subjects in 20 CFR Part 726
Administrative practice and procedure, Black lung benefits, Coal
miners, Mines, Penalties.
For the reasons set forth in the preamble, the Department of Labor
proposes to amend 20 CFR part 726 as follows:
PART 726--BLACK LUNG BENEFITS; REQUIREMENTS FOR COAL MINE
OPERATOR'S INSURANCE
0
1. The authority citation for part 726 continues to read as follows:
Authority: 5 U.S.C. 301; 30 U.S.C. 901 et seq., 902(f), 925,
932, 933, 934, 936; 33 U.S.C. 901 et seq.; 28 U.S.C. 2461 note
(Federal Civil Penalties Inflation Adjustment Act of 1990 (as
amended by the Federal Civil Penalties Inflation Adjustment Act
Improvements Act of 2015)); Pub. L. 114-74 at sec. 701;
Reorganization Plan No. 6 of 1950, 15 FR 3174; Secretary's Order 10-
2009, 74 FR 58834.
0
2. For the reasons set forth in the preamble, revise Subpart B as
follows:
Subpart B--Authorization of Self-Insurers
Sec.
726.101 Who May be Authorized to Self-Insure.
726.102 Application for Authority to Become a Self-Insurer; How
Filed; Information to be Submitted.
726.103 Application for Authority to Self-Insure; Effect of
Regulations Contained in this Part.
726.104 Action by OWCP upon Application of Operator.
726.105 Fixing the Amount of Security.
726.106 Type of Security.
[[Page 3364]]
726.107 How Negotiable Securities Are Handled.
726.108 Withdrawal of Securities.
726.109 Increase in the Amount of Security.
726.110 Filing of Agreement and Undertaking.
726.111 Notice of Authorization to Self-Insure.
726.112 Reports Required of Self-Insurer; Examination of Accounts of
Self-Insurer.
726.113 Disclosure of Confidential Information.
726.114 Authorization and Reauthorization Timeframes.
726.115 Revocation of Authorization to Self-Insure.
726.116 Appeal Process.
Sec. 726.101 Who May be Authorized to Self-Insure.
(a) Pursuant to section 423 of part C of title IV of the Act,
authorization to self-insure against liability incurred by coal mine
operators on account of the total disability or death of miners due to
pneumoconiosis may be granted or denied in the discretion of the
Secretary. The provisions of this subpart describe the minimum
requirements established by the Secretary for determining whether any
particular coal mine operator may be authorized as a self-insurer.
(b) The minimum requirements which must be met by any operator
seeking authorization to self-insure are as follows:
(1) The operator must demonstrate the administrative capacity to
fully service such claims as may be filed against it; and,
(2) Such operator must obtain security, in a form approved by OWCP
(see Sec. 726.104) and in an amount to be determined by OWCP (see
Sec. 726.105).
(c) No application will be approved until OWCP receives security in
the amount and in the form determined by OWCP. If the applicant is
seeking authorization to self-insure for the first time, it is not
authorized to self-insure while its application is under review.
(d) No operator whose application for authorization to self-insure
or to renew authorization to self-insure may reapply until 12 months
after a final decision denying such application.
Sec. 726.102 Application for Authority to Become a Self-Insurer; How
Filed; Information to be Submitted.
(a) How filed. An application for authorization to self-insure or
to renew authorization to self-insure must be submitted electronically
in the manner prescribed by OWCP. Such application must be signed by
the applicant and if the applicant is not an individual, by the
principal officer of the applicant duly authorized to make such
application.
(b) Information to be submitted. Each application for authority to
self-insure or to renew authorization to self-insure must contain the
following:
(1) Any application forms required by OWCP.
(2) An actuarial report using OWCP-mandated assumptions, unless the
applicant has submitted an actuarial report within the preceding 3
years. An applicant must submit a new actuarial report every 3 years.
The operator may submit an additional actuarial report using alternate
assumptions. Such additional report must be accompanied by a statement
from the applicant explaining why it believes the alternative
assumptions are appropriate.
(3) A statement of the employer's payroll report for each of the
preceding 3 years.
(4) A statement of the average number of employees engaged in
employment within the purview of the Act for each of the preceding 3
years.
(5) A list of the mine or mines to be covered by any particular
self-insurance agreement. Each such mine or mines listed shall be
described by name and reference shall be made to the Federal
Identification Number assigned such mine by the Bureau of Mines, U.S.
Department of the Interior.
(6) A statement demonstrating the applicant's administrative
capacity to provide or procure adequate servicing for a claim including
both medical and dollar claims.
(7) In addition to the aforementioned, OWCP may in its discretion,
require the applicant to submit such further information or such
evidence as OWCP may deem necessary.
(c) Who may file. An application for authorization to self-insure
(including an application to renew authority to self-insure) may be
filed by any parent or subsidiary corporation, partner or partnership,
party to a joint venture or joint venture, individual, or other
business entity which may be determined liable for the payment of black
lung benefits under part C of title IV of the Act, regardless of
whether such applicant is directly engaged in the business of mining
coal. However, in each case for which authorization to self-insure is
granted, the agreement and undertaking filed pursuant to Sec. 726.110
and the security deposit must be respectively filed by and deposited in
the name of the applicant only.
Sec. 726.103 Application for Authority to Self-Insure; Effect of
Regulations Contained in this Part.
As appropriate, each of the regulations, interpretations and
requirements contained in this part 726 including those described in
subpart C of this part are binding upon each applicant under this
subpart, and the applicant's consent to be bound by all requirements of
the said regulations are deemed to be included in and a part of the
application, as fully as though written therein.
Sec. 726.104 Action by OWCP upon Application of Operator.
(a) Within 30 days after determining that an applicant's
application for authorization to self-insure or to renew authorization
to self-insure is complete, OWCP will issue a written determination
either denying the application or determining the amount of security
which must be given by the applicant to guarantee the payment of
benefits and the discharge of all other obligations which may be
required of such applicant under the Act. OWCP may extend the 30-day
deadline if it determines that additional evidence is needed or that
the applicant's evidence is not in compliance with OWCP's requirements.
(b) The applicant will thereafter be notified that they may give
security in the amount fixed by OWCP (see Sec. 726.105):
(1) In the form of an indemnity bond with sureties satisfactory to
OWCP;
(2) By a deposit of negotiable securities with a Federal Reserve
Bank in compliance with Sec. Sec. 726.106(c) and 726.107; or
(3) In the form of a letter of credit issued by a financial
institution satisfactory to OWCP (except that a letter of credit is not
sufficient by itself to satisfy a self-insurer's obligations under this
part).
(c) If the applicant is receiving authorization to self-insure for
the first time, OWCP will notify the applicant that:
(1) its authorization to self-insure is contingent upon submitting
the required security and completed agreement and undertaking; and
(2) the applicant's authorization to self-insure is effective for
12 months from the date such security and completed agreement and
undertaking are received by OWCP.
(d) If OWCP renews the applicant's authorization to self-insure,
OWCP will notify the applicant that:
(1) If there are no changes in the required security amount, the
applicant's authorization to self-insure is granted and effective for
12 months from the date the applicant's completed agreement and
undertaking is received by OWCP or
(2) If changes are needed to the existing security amount, the
applicant's
[[Page 3365]]
authorization to self-insure is not granted until the applicant has
submitted the required security and signed agreement and undertaking.
The applicant's authorization to self-insure will be effective for 12
months from the date such updated security and completed agreement and
undertaking are received by OWCP.
(e) Any applicant who cannot meet the security deposit requirements
imposed by OWCP should proceed to obtain a commercial policy or
contract of insurance and submit proof of such coverage within 30 days
after OWCP notifies the applicant of its decision. Any applicant for
authorization to self-insure whose application has been denied or who
believes that the security deposit requirements imposed by OWCP are
excessive may appeal such determination in the manner set forth in
Sec. 726.116.
Sec. 726.105 Fixing the Amount of Security.
Any operator approved to self-insure must submit 120 percent of the
actuarial estimated liabilities (all present and future liabilities),
as determined by OWCP based on the actuarial report or reports
submitted with the operator's application or on file with OWCP, other
information submitted with the operator's application, or any other
materials or information that OWCP deems relevant.
Sec. 726.106 Type of Security.
(a) OWCP will determine the type or types of security which an
applicant must or may procure. An operator may not provide any form of
security other than those provided for in Sec. 726.104(b).
(b) In the event the indemnity bond option is selected, the bond
must be in such form and contain such provisions as OWCP prescribes:
Provided that only corporations may act as sureties on such indemnity
bonds. In each case in which the surety on any such bond is a surety
company, such company must be one approved by the U.S. Treasury
Department under the laws of the United States and the applicable rules
and regulations governing bonding companies (see Department of
Treasury's Circular-570).
(c) If the form of negotiable securities is selected, the operator
must deposit the amount fixed by OWCP in any negotiable securities
acceptable as security for the deposit of public moneys of the United
States under regulations issued by the Secretary of the Treasury. (See
31 CFR part 225.) The approval, valuation, acceptance, and custody of
such securities is hereby committed to the several Federal Reserve
Banks and the Treasurer of the United States.
Sec. 726.107 How Negotiable Securities Are Handled.
(a) Deposits of securities provided for by the regulations in this
part must be made with any Federal Reserve bank or any branch of a
Federal Reserve bank designated by OWCP, or the Treasurer of the United
States, and must be held in the name of the Department of Labor.
(b) If the self-insurer defaults on its obligations under the Act,
OWCP has the power, in its discretion, to:
(1) collect the interest as it may become due;
(2) sell any or all of the securities; and
(3) apply the collected interest or proceeds from the sale of
securities to the payment of any benefits for which the self-insurer
may be liable.
(c) If a self-insurer with deposits of securities has neither
defaulted nor appealed from a determination made by OWCP under Sec.
726.104, OWCP may allow the self-insurer to collect interest on the
security deposit.
Sec. 726.108 Withdrawal of Securities.
(a) Withdrawal of any form of security (indemnity bonds, negotiable
securities, and/or letters of credit) is prohibited except upon express
written authorization by OWCP.
(b) If a self-insurer wishes to withdraw securities, it must submit
a written request, and must submit either an updated actuarial report
using OWCP-mandated actuarial assumptions to support why the existing
security levels are no longer applicable or replacement securities in
the amount and form approved by OWCP. If OWCP approves the operator's
request to withdraw and replace its securities, the operator must
provide the replacement securities before it withdraws its existing
securities.
Sec. 726.109 Increase in the Amount of Security.
OWCP may, at its discretion, increase the amount of security a
self-insurer is required to post whenever it determines that the amount
of security on deposit is insufficient to secure the payment of
benefits and medical expenses under the Act.
Sec. 726.110 Filing of Agreement and Undertaking.
(a) In addition to the requirement that adequate security be
procured as set forth in this subpart, the applicant for the
authorization to self-insure must, as a condition precedent to
receiving such authorization, execute and file with OWCP an agreement
and undertaking in a form prescribed and provided by OWCP in which the
applicant must agree:
(1) To pay when due, as required by the Act, all benefits payable
on account of total disability or death of any of its employee-miners;
(2) To furnish medical, surgical, hospital, and other attendance,
treatment, and care as required by the Act;
(3) To provide security in a form approved by OWCP (see Sec.
726.104) and in an amount established by OWCP (see Sec. 726.105);
(4) To authorize OWCP to sell any negotiable securities so
deposited or any part thereof, and to pay from the proceeds thereof
such benefits, medical, and other expenses and any accrued penalties
imposed by law as OWCP may find to be due and payable.
(b) When an applicant has provided the requisite security, it must
submit to OWCP a completed agreement and undertaking, together with
satisfactory proof that its obligations and liabilities under the Act
have been secured.
(c) Any operator authorized to self-insure must notify OWCP of any
changes to its business structure, including the purchase, sale, or
lease of any coal mining operations, that could affect the operator's
liability for benefits under the Act. The operator must provide such
notification to OWCP within 30 days of such change. In all events,
however, an operator's liability following a change or sale is governed
by Subpart G of these regulations, 20 CFR 725.490-725.497.
(d) OWCP may, at its discretion, require an operator to provide any
information that may affect the operator's liability for benefits under
the Act.
Sec. 726.111 Notice of Authorization to Self-Insure.
Upon receipt of a completed agreement and undertaking and
satisfactory proof that adequate security has been provided, OWCP will
notify an applicant for authorization to self-insure in writing that it
is authorized to self-insure to meet the obligations imposed upon such
operator by section 415 and part C of title IV of the Act. OWCP will
also notify the applicant of the date on which its authorization is
effective, the date on which such authorization will expire, and the
date by which the applicant must apply to renew such authorization if
the applicant intends to continue self-insuring its liabilities under
the Act.
[[Page 3366]]
Sec. 726.112 Reports Required of Self-Insurer; Examination of
Accounts of Self-Insurer.
(a) Each operator who has been authorized to self-insure under this
part must submit to OWCP reports containing such information as OWCP
may from time to time require or prescribe.
(b) Whenever it deems it to be necessary, OWCP may inspect or
examine the books of account, records, and other papers of a self-
insurer for the purpose of verifying any financial statement submitted
to OWCP by the self-insurer or verifying any information furnished to
OWCP in any report required by this section, or any other section of
the regulations in this part, and such self-insurer must permit OWCP or
its duly authorized representative to make such an inspection or
examination as OWCP may require. In lieu of this requirement OWCP may
in its discretion accept an adequate report of a certified public
accountant.
(c) Failure to submit or make available any report or information
requested by OWCP from an authorized self-insurer pursuant to this
section may, in appropriate circumstances, result in a revocation of
the authorization to self-insure.
Sec. 726.113 Disclosure of Confidential Information.
Any financial information or records, or other information relating
to the business of an authorized self-insurer or applicant for the
authorization of self-insurance obtained by OWCP is exempt from public
disclosure to the extent provided in 5 U.S.C. 552(b) and the applicable
regulations of the Department of Labor promulgated thereunder. (See 29
CFR part 70.)
Sec. 726.114 Authorization and Reauthorization Timeframes.
(a) No initial or renewed authorization to self-insure may be
granted for a period in excess of 12 months unless OWCP determines that
extenuating circumstances exist to allow an extension.
(b) If an applicant is seeking to renew its authority to self-
insure, the applicant must file its application no later than 90 days
before its existing authorization period ends.
Sec. 726.115 Revocation of Authorization to Self-Insure.
OWCP may suspend or revoke the authorization of any self-insurer
for good cause, including but not limited to:
(a) failure by a self-insurer to comply with any provision or
requirement of law or of the regulations in this part, or with any
lawful order or request made by OWCP;
(b) the failure or insolvency of the surety on its indemnity bond,
if such bond is used as security, or any other financial institution
holding any form of security provided by an operator; or
(c) impairment of financial responsibility of such self-insurer.
Sec. 726.116 Appeal Process.
(a) How to appeal. Any applicant that wishes to appeal OWCP's
determination on an application must submit a written request for
review to OWCP in the form and manner prescribed by OWCP within 30 days
of such determination. This deadline may not be extended.
(b) What to submit. Within 30 days after filing written request for
review, the applicant must submit any evidence and/or briefing on which
it intends to rely. OWCP may, at its discretion, extend this deadline
at the applicant's request upon a showing of good cause.
(c) Conferences.
(1) The applicant may request an informal conference to present its
position. Such request must be made in writing when the applicant
submits evidence and briefing in support of its request for review.
(2) If the applicant requests a conference, OWCP will hold one with
the applicant's representatives.
(3) If the applicant does not request a conference, OWCP may either
decide the appeal on the record or, at its discretion, schedule a
conference on its own initiative.
(4) The conference will be limited to the issues identified in the
applicant's written materials.
(d) OWCP's review. OWCP will review the previous determination in
light of any new evidence or additional information submitted and issue
a supplemental determination.
(e) Further appeals.
(1) Any applicant aggrieved by a supplemental determination made by
OWCP may request further review by the Director of OWCP within 30 days
of such supplemental determination.
(2) The Director of OWCP will review the supplemental decision and
evidence of record only. The applicant may not submit new evidence or
arguments to the Director of OWCP.
(3) The Director of OWCP will issue a final agency decision.
Signed at Washington, DC.
Christopher J. Godfrey,
Director, Office of Workers' Compensation Programs.
[FR Doc. 2023-00534 Filed 1-18-23; 8:45 am]
BILLING CODE 4510-CK-P
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</html>Indexed from Federal Register on January 19, 2023.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.