Rule2024-28848
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
December 12, 2024
Effective
January 13, 2025
Issuing agencies
Labor DepartmentWorkers' Compensation Programs Office
Abstract
This final rule revises the regulations under the Black Lung Benefits Act (BLBA) governing authorization of self-insurers. The updated regulations 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 89 Issue 239 (Thursday, December 12, 2024)</title>
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[Federal Register Volume 89, Number 239 (Thursday, December 12, 2024)]
[Rules and Regulations]
[Pages 100304-100321]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-28848]
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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: Final rule.
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SUMMARY: This final rule revises the regulations under the Black Lung
Benefits Act (BLBA) governing authorization of self-insurers. The
updated regulations 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: This rule is effective January 13, 2025.
ADDRESSES: 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
C-3520-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:
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 BLBA 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 (the 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 BLBA 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.
OWCP 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, OWCP 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, OWCP 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
[[Page 100305]]
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 were intended to allow 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
issued a notice of proposed rulemaking (NPRM) on January 19, 2023,
proposing a revised subpart B. 88 FR 3349-3366 (Jan. 19, 2023). 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 also proposed
eliminating the financial scoring process. Instead, under the proposed
rule, OWCP would require all self-insured operators to post security
equal to 120 percent of their projected black lung liabilities,
ensuring adequate coverage regardless of an operator's financial
health.\2\ The Department had determined that 120 percent was an
appropriate level of security because, among other things, it would
protect the Trust Fund in the event an operator's actual liabilities
exceed its projected liabilities. In addition, the proposal removed 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. The proposed rule also prospectively removed section 501(c)(21)
trust funds, which have proven to be less reliable, as an acceptable
form of security. Furthermore, the proposed rule clarified 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 proposal meant the applicant would have to purchase an
instrument that would pay out up to 120 percent of the projected
liability, not that the applicant would have to actually spend that
amount on collateral.
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The Department proposed these changes to 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 lessens the administrative
burden on OWCP to gather, review, and analyze operators' financial
information, and lessens the burden on operators to collect and provide
such information. The procedural changes clarify and add certainty with
respect to OWCP's and operators' respective obligations in the self-
insurance authorization process.
The public comment period closed on April 19, 2023, after an
extension of the original March 20, 2023, deadline. 88 FR 14094-14095
(Mar. 7, 2023). The Department has fully evaluated the received
comments and has determined that, with some changes in response to
comments, proceeding with a final rule is in the best interests of the
Trust Fund, stakeholders, and the program's administration.
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 statute.
III. Discussion of Significant Comments
The Department received 18 comments on the proposed regulations. In
addition to comments received on specific sections of the proposed
rule, discussed below in the Section-by-Section Explanation, a few
commenters offered more general comments. A number of commenters
supported the Department's promulgation of a proposed rule to clarify
and reform the self-insurance program. Several commenters applauded
some of the proposed rule's most significant changes, including the
requirement for increased security from self-insured operators. They
noted that Congress intended coal-mine operators to bear the cost of
black lung disease, and that they should provide enough security to
protect the Trust Fund, and ultimately, taxpayers, from any operator
bankruptcy.
Other commenters argued the changes will negatively impact self-
insured operators. Most of these negative comments asserted that self-
insured operators would face too high a financial burden if required to
post security equal to 120 percent of their projected liabilities. They
also stated that the cost of surety bonds is much higher than the
Department estimated. The commenters did not present any evidence of
the true cost of surety bonds, however, such as actual quotes from
surety bond companies.
Operators that deem surety bonds too expensive may use another
form--or multiple forms--of security, see Sec. 726.104(b), or obtain
commercial insurance, see 30 U.S.C. 933(a); 20 CFR 726.1, 726.201.
Several commenters argued that in the proposed rule, the Department
failed to consider operators' reliance on OWCP's historical practices
in the self-insurance program. They stated that operators made business
decisions based on OWCP's previous collateral requirements, and it
would be arbitrary and capricious for the Department not to weigh that
reliance against competing policy considerations. In addition, these
commenters say, the Department neglected to offer accommodations for
the operators' reliance interests, such as by grandfathering in
existing self-insurance arrangements and phasing in the requirement for
increased security over time.
The Department appreciates the commenters' concerns and has given
them serious consideration in preparing this rule. The Department has
also weighed operators' reliance interests against competing policy
considerations--most importantly, the financial security of the Trust
Fund. As many commenters acknowledged, OWCP's historical practices left
vulnerabilities in the self-insurance program and contributed to the
Trust Fund's current debt. That is why, as explained in the proposed
rule's economic analysis, the Department considered but declined to
maintain existing security levels. 88 FR 3356-3360 (Jan. 19, 2023).
That is also why it is not a viable option to grandfather in all
existing self-insurance arrangements, which would fail to adequately
protect the Trust Fund.
To better balance the Department's obligation to protect the Trust
Fund with the burden on self-insured operators to properly secure their
liabilities, the Department has decided to revise the proposed rule in
several ways. As explained more fully in the Section-by-Section
Explanation, the Department is lowering the security
[[Page 100306]]
requirement from 120 percent to 100 percent of self-insured operators'
projected liabilities. Reducing the required security will lessen the
financial burden on self-insured operators, while upholding the
operators' obligation under the BLBA to adequately secure their
liabilities in case they can no longer pay benefits directly. See 30
U.S.C. 932(b) (operators ``shall be liable for and shall secure the
payment of benefits''). The requirement for 100 percent security also
preserves congressional intent that ``individual coal operators rather
than the trust fund bear the liability for claims arising out of such
operators' mines to the maximum extent feasible.'' Old Ben Coal Co. v.
Luker, 826 F.2d 688, 693 (7th Cir. 1987) (quoting S. Rep. No. 209, 95th
Cong., 1st Sess. 9 (1977), reprinted in House Comm. on Educ. and Labor,
96th Cong., Black Lung Benefits Reform Act and Black Lung Benefits
Revenue Act of 1977, 612 (Comm. Print 1979); see also Arkansas Coals,
Inc. v. Lawson, 739 F.3d 309, 313 (6th Cir. 2014); C & K Coal Co. v.
Taylor, 165 F.3d 254, 258 (3d Cir. 1999); 20 CFR 725.1(e) (``The
purpose of the [Black Lung Disability Trust Fund] and the Black Lung
Benefits Revenue Act of 1977 was to insure that coal mine operators, or
the coal industry, will fully bear the cost of black lung disease for
the present time and in the future.''). In addition, OWCP will also
allow operators that currently use section 501(c)(21) trusts as
security instruments to continue doing so, see Sec. 726.104(b), and
will allow operators to phase in any increased security over the course
of one year, see Sec. 726.104(c).
One commenter argued that the Department's concern about the
financial security of the Trust Fund is not a valid reason for the
proposed rule, stating that self-insured operator bankruptcies are not
a major threat to the Trust Fund. The commenter cited a report by the
Government Accountability Office (GAO) for this conclusion. The
Department believes the commenter misunderstood the report. GAO
concluded the Trust Fund ``faces financial challenges, and DOL's
limited oversight of coal mine operator insurance has further strained
Trust Fund finances by allowing operator liabilities to transfer to the
federal government;'' it opined that ``the looming unsecured black lung
benefit liabilities . . . still threaten the Trust Fund.'' See GAO,
Federal Black Lung Benefits Program: Improved Oversight of Coal Mine
Operator Insurance is Needed, at 27, 29 (Feb. 2020), available at
<a href="https://www.gao.gov/products/gao-20-21">https://www.gao.gov/products/gao-20-21</a>. GAO also noted that the Trust
Fund faced particular risk in the self-insurance context, because ``in
the past, DOL did not estimate future benefit liability when setting
the amount of collateral required to self-insure.'' Id. at 2. The
report recommended the Department change this practice. Id.\3\
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\3\ The Department now includes estimates of future liability in
security calculations and requires that applicants submit those
estimates in their actuarial reports. That requirement is reflected
in OWCP's self-insurance application form, CM-2017, which requests
``[a] current, certified actuarial report on [the applicant's]
existing and future BLBA liabilities.'' See CM-2017, available at
<a href="https://www.dol.gov/agencies/owcp/dcmwc/regs/compliance/blforms">https://www.dol.gov/agencies/owcp/dcmwc/regs/compliance/blforms</a>; see
also section 20.
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Two commenters argued that the proposed rule would give OWCP such
broad discretion to set collateral, without sufficient guidelines, that
the rule would violate the Administrative Procedure Act. The Department
disagrees with these comments. The rule provides clear guidelines and
uniform requirements for self-insurance applications and
determinations, and, as a result, limits the discretion OWCP has to set
security amounts. For example, the rule requires the same documents
from all applicants; provides that all operators must use the same
OWCP-mandated actuarial assumptions in their actuarial reports;
explains that OWCP will require the same percentage of security from
all operators; and clarifies the timelines by which OWCP will process
all applications and appeals.\4\ Where the Department agreed with
commenters that the rule should be clarified, it revised this final
rule accordingly.
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\4\ 20 CFR 726.102(b)(2) in this rule (applicants must submit an
actuarial report using OWCP-mandated actuarial assumptions). In
addition, the rule provides that self-insurers will be required to
``submit security equal to 100 percent of the actuarially estimated
liabilities (all present and future liabilities).'' See 20 CFR
726.105.
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Several supporters of the proposed rule suggested that OWCP create
a public database including information about all self-insurance
applications, OWCP's estimates of operators' liability amounts, the
amount and type of security that operators provide, the status of any
operator appeals, and OWCP's decisions on self-insurance applications.
While the Department understands the value of increased transparency in
the self- insurance program, it declines to create such a public
database out of concern for operators' confidential business interests.
The Department believes this final rule will provide greater clarity,
transparency, and efficacy in the self-insurance program.
No negative comments were received on the following revised or new
regulations: sections 20 CFR 726.101(c) and (d); 726.102(a) and (c);
726.107; 726.108; 726.110 through 726.113, and 726.115. Thus, the
Department is promulgating these regulations as proposed.
The following regulatory provisions were not revised in the
proposed rule and thus were not open to comment: 20 CFR 726.101(a),
726.103, and 726.106.
Severability. If upon judicial review any provision of this rule is
deemed invalid, the Department intends that such provision(s) will be
severable and the rest of the provisions will remain intact. For
example, the following provisions of the rule can operate independently
and are mutually severable from the other provisions of the rule: (1)
the minimum requirements for self-insurance authorization under Sec.
726.101(b); (2) the requirement that applicants submit actuarial
reports using OWCP-mandated actuarial assumptions under Sec.
726.102(b)(2); (3) the updated process that OWCP will follow in issuing
written determinations on self-insurance applications under Sec.
726.104(a); (4) the limitation of section 501(c)(21) trusts to those
established before publication of the rule, and the requirement for the
submission of quarterly financial statements for such trusts under
Sec. 726.104(b)(4); (5) the option for operators to phase in their
initial or increased security deposits over the course of one year
under Sec. 726.104(c); (6) the requirement that operators submit
security equal to 100 percent of their actuarially estimated
liabilities under Sec. 726.105; (7) the timeframes for authorization
and reauthorization to self-insure under Sec. 726.114; and (8) the
appeals process set forth under Sec. 726.116. This list is not
exhaustive. Generally, the Department believes that the provisions of
the rule can operate independently and will improve the effectiveness
of the self-insurance program, even if other provisions are deemed
invalid.
Section-by-Section Explanation
20 CFR 726.101 Who May Be Authorized To Self-Insure
(1) The Department is substantially revising Sec. 726.101 to
update the minimum requirements an operator must meet to qualify for
authorization to self-insure and to remove the provisions requiring
OWCP to continuously monitor each applicant's financial situation.
Current paragraph (b) establishes the minimum requirements that an
operator must meet to qualify for authorization to self-insure. At
present, paragraphs (b)(1), (3), and (5) respectively provide that an
operator must have been in the
[[Page 100307]]
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 (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. The Department proposed removing paragraphs (b)(1),
(3), and (5) because they would no longer be necessary when all self-
insurers are required to post security that fully covers their
projected black lung liabilities.
(2) Three commenters expressed concern that by no longer evaluating
companies' financial health, OWCP is applying a ``one-size-fits-all''
approach that will harm financially sound companies. In their view,
more profitable companies will present less risk to the Trust Fund and
OWCP should therefore require less security (or no security) to cover
their liabilities. Another commenter suggested OWCP maintain at least
enough financial review to ensure companies could fulfill their self-
insurance obligations. Other commenters questioned whether the
financial review process would truly burden OWCP, and suggested that
OWCP ought to be able to conduct a financial review because other
federal agencies do so.
(3) The Department declines to revise the regulation in response to
these comments. As explained in the proposed rule, the Department is
eliminating the financial review process to reduce administrative
burdens and avoid the ever-present challenge of predicting which
operators are at risk of experiencing financial difficulties.
Importantly, the requirement that self-insured operators post security
equal to their projected black lung liabilities will adequately cover
the Trust Fund regardless of an operator's continuously changing
financial status, making the financial review process unnecessary. The
commenters have not shown that these changes will cause any particular
harm to companies that are financially stronger than others. In fact,
those companies will arguably be able to meet a higher security
requirement more easily than less financially secure companies.
Similarly, the requirement to post 100 percent security addresses a
commenter's concern that operators will not be able to fulfill their
self-insurance obligations; if they default, the Trust Fund will have
enough security to cover the operators' projected liabilities.
(4) For these reasons, as proposed in the NPRM, the Department is
removing paragraphs (b)(1), (3), and (5). The Department is renumbering
current paragraph (b)(2) as paragraph (b)(1), and paragraph (b)(4) as
paragraph (b)(2).
20 CFR 726.102 Application for Authority To Become a Self-Insurer; How
Filed; Information To Be Submitted
(1) The Department is revising 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.
(2) The Department is adding a new paragraph (b)(2) to require an
applicant to include with its application an actuarial report using
OWCP-mandated actuarial assumptions. OWCP has previously required such
an actuarial report from applicants, as indicated on OWCP's self-
insurance application form CM-2017 (Application or Renewal of Self-
Insurance Authority), 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>. In that form,
OWCP requires ``[a] current, certified actuarial report on [the
applicant's] existing and future BLBA liabilities,'' unless renewal
applicants have provided one in the previous three years. The proposed
rule explained that form CM-2017 would still be required under the new
regulations, and it requests much of the information required in
current paragraphs (b)(1), (2), (3), and (5). In this new paragraph
(b)(2), the Department is adding the actuarial report requirement to
the regulatory text, including that an operator must submit a new
actuarial report every three years. The new paragraph (b)(2) also
allows an operator to submit an additional actuarial report using
alternative assumptions.
(3) Several commenters objected to the requirement to use OWCP
actuarial assumptions in their reports. They argued that OWCP's
actuarial assumptions differ from the operators' assumptions, which are
based on the operators' experiences in paying benefits. The Department
declines to revise the regulation in response to these comments, but
provides the following clarification. Requiring operators to use OWCP's
actuarial assumptions, rather than their own, more accurately projects
the Trust Fund's potential liability and promotes fairness and
uniformity across operators. As noted in the proposed rule and again
above, OWCP has previously required companies to provide actuarial
reports that include data for different elements of actuarial analysis,
such as the discount rate, claim cost trends, and the probability of
awards. See 88 FR 3350 (Jan. 19, 2023). A numerical value is assigned
to each element. This numerical value is called an actuarial
assumption. Operators then apply those values in determining their
liability. OWCP sets actuarial assumptions for the various elements of
actuarial analysis every year, accounting for changing interest rates,
medical costs, and other relevant fluctuations. Commenters have not
challenged the elements of actuarial analysis that are to be included
in their reports. Instead, commenters have argued that the numerical
values that OWCP assigns to these elements--the actuarial assumptions
themselves--differ from the values that operators would use based on
their individual experiences, and are therefore improper. OWCP bases
its actuarial assumptions on data from claims in which the Trust Fund
is responsible for paying benefits. If a self-insured operator goes
bankrupt and the Trust Fund absorbs its responsibility for paying
benefits, it will cost the Trust Fund a different amount to pay those
benefits than it would have cost the operator. For example, medical
costs differ for the Trust Fund and operators because operators may use
different payment formulas than the Trust Fund and may have
arrangements with providers that result in lower medical costs that the
Trust Fund does not have. For these reasons, OWCP must estimate how
much it will cost the Trust Fund to bear responsibility for benefits
that were formerly the responsibility of the operator. Further, using
one set of actuarial assumptions, rather than different assumptions for
each operator, promotes consistency and fairness.
Still, the Department acknowledges an operator could, under unusual
circumstances, have a compelling reason to use different actuarial
assumptions than those required by OWCP. Therefore, the rule permits
operators, as part of the application process, to submit reports using
their own actuarial assumptions and explain why they should be used
instead, and OWCP will consider each submission. See Section-by-Section
Explanation for 20 CFR 726.104.
(4) Commenters raised concerns that while the proposed rule allows
operators to submit an additional actuarial report and explain why
alternate assumptions are appropriate, it does not specify that OWCP
will consider that report or how OWCP would choose between or reconcile
the two reports. The Department agrees the regulation should state that
OWCP will review and consider an operator's
[[Page 100308]]
additional report and, as stated below, is amending Sec. 726.104(a) to
clarify this. The Department is also clarifying the circumstances in
which OWCP might use the actuarial assumptions an operator submits. For
any alternative actuarial report OWCP receives, it will evaluate each
of the operator's arguments about why alternative actuarial assumptions
should apply. Some, but not all, of OWCP's considerations may include
whether the operator's circumstances would persist if the Trust Fund
took over benefit payments and whether sufficient and reliable data
support the operator's arguments. For instance, if an operator's
claimant population differs markedly from that of the Trust Fund, it
may be reasonable to use one or more of an operator's actuarial
assumptions. However, the Department expects this situation will be
rare. In most cases it will be more appropriate to apply OWCP's
assumptions based on the Trust Fund's experience. Again, using OWCP's
assumptions in most cases will help ensure fairness and uniformity
across operators.
(5) Commenters also claimed the proposed rule did not identify
OWCP's actuarial assumptions (the numerical values), or explain how
they were derived and whether they comply with generally accepted
actuarial standards. OWCP provides its actuarial assumptions to the
public on its website.\5\ OWCP uses the same assumptions in reporting
on the Trust Fund for the Department's Agency Financial Report and the
U.S. Government's tracking of significant social insurance programs,
which are also publicly available and prepared in accordance with
Generally Accepted Accounting Principles (GAAP) and the financial
reporting requirements of Office of Management and Budget (OMB)
Circular A-136.\6\ OWCP's actuaries review the assumptions annually,
including peer review by other actuaries. OWCP determines the value for
each assumption using actuarial judgment, by considering historical
experience adjusted to current conditions, expected future trends, and
the reliability of the available historical data as a predictor of
future experience. Each of the assumptions represents values that, in
the actuaries' professional judgment, are internally consistent and
have no known significant bias to underestimation or overestimation.
OWCP's assumptions comply with the Actuarial Standards of Practice as
promulgated by the Actuarial Standards Board (ASB), available at <a href="http://www.actuarialstandardsboard.org">http://www.actuarialstandardsboard.org</a>.
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\5\ OWCP provides information on the black lung program to
operators and insurance carriers, available at <a href="https://www.dol.gov/agencies/owcp/dcmwc/operators-insurers">https://www.dol.gov/agencies/owcp/dcmwc/operators-insurers</a>.
\6\ See Treasury's reporting on financial statements for
significant social insurance programs, available at <a href="https://www.fiscal.treasury.gov/reports-statements/financial-report/statements-of-social-insurance.html">https://www.fiscal.treasury.gov/reports-statements/financial-report/statements-of-social-insurance.html</a>. The Department's most recent
Agency Financial Report is also available on that website. OMB
Circular A-136, on Financial Reporting Requirements, is available at
<a href="https://www.whitehouse.gov/omb/information-for-agencies/circulars/">https://www.whitehouse.gov/omb/information-for-agencies/circulars/</a>.
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(6) Some commenters asserted that OWCP's actuarial assumptions
should have been included in the proposed rule and subject to notice
and comment. The Department disagrees for several reasons. As the
commenters made clear, one of their major objections was to the
requirement to use OWCP's actuarial assumptions at all. This
requirement was open for comment in the proposed rule, and the
Department received and responded to related comments above. The
actuarial assumptions themselves, though, were not included in the rule
because, as explained above, the numerical values will vary from year
to year as needed to adapt to new data and circumstances.
20 CFR 726.104 Action by OWCP Upon Application of Operator
(1) The Department proposed 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.
Commenters noted that while the proposed regulatory text allows
operators to submit a report using actuarial assumptions other than
those mandated by OWCP, it did not require OWCP to consider such
reports. The Department agrees the regulation should state that OWCP
will review and consider any relevant evidence the operator submits. To
clarify this, the Department is amending section 104(a) to explain that
OWCP will consider all relevant evidence and include its reasoning when
issuing a written determination denying an application.
(2) The Department proposed 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. As
explained in the proposed rule, few self-insured operators use section
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
and for other allowed purposes.
One commenter asserted that the Department cannot remove section
501(c)(21) trusts as an optional form of security. The commenter states
the Department does not have the authority to disallow section
501(c)(21) trusts, arguing Congress intended such trusts would be
available for black lung self-insurance security deposits. It also
argues that even if the Department has the authority to disallow the
use of section 501(c)(21) trusts, it has no valid reason to do so,
because such trusts pose no greater risk than other forms of security.
Finally, the commenter urges the Department to accept any existing
section 501(c)(21) trusts, because they are irrevocable and cannot be
repurposed; operators would be prejudiced if no longer allowed to use
the funds in such trusts toward their self-insurance security deposits.
The Department disagrees that it must offer section 501(c)(21)
trusts as a form of security for self-insurance. The BLBA does not
specify the form in which an operator must ``secure the payment of
benefits for which he is liable.'' 30 U.S.C. 933(a). Moreover, the
Internal Revenue Code does not require that OWCP accept section
501(c)(21) trusts as security for self-insurance. Section 501(c)(21)
specifies the circumstances under which an entity may establish such
trusts, but does not direct OWCP to allow them for self-insurance
security.
The Department also disagrees that section 501(c)(21) trusts are no
riskier than other forms of security. In arguing this, the commenter
noted that such trusts can only hold qualified investments such as
U.S., state, and municipal bonds. However, the Department is not
concerned about the riskiness of the investments in the trust, but
about the risk that the money in the trust may fall below the necessary
security amount, given that the trust can also be used for paying
claims and other expenses. 26 U.S.C. 501(c)(21)(A).
[[Page 100309]]
Because trust assets can be (and are) used for a number of purposes
other than security for a self-insurance arrangement, the trust assets
are subject to continual erosion. As a result, use of the trusts as
self-insurance security would place the Trust Fund at greater risk than
the use of other forms of security. And unlike other forms of security,
the Trust Fund does not have direct access to 501(c)(21) trust assets
or even have ready access to the trusts' financial reports.
Nevertheless, the Department has determined that existing section
501(c)(21) trusts should be permitted to continue as self-insurance
security, even though new trusts will not be allowed. As the commenter
noted, 501(c)(21) trusts are irrevocable, and the Department agrees
that it would prejudice those operators currently using this form of
security if they are no longer allowed to do so. Rather than remove the
option entirely, then, the Department is revising paragraph (b)(4) to
provide that section 501(c)(21) trusts established before the
publication of this rule can continue to be used as self-insurance
security. However, to protect the Trust Fund, operators continuing to
use existing section 501(c)(21) trusts must submit quarterly financial
statements to OWCP documenting the value of the trust. This will allow
OWCP to monitor the financial status of a trust, the value of which may
decrease in the period between annual reviews. If, for any reason, the
trust value decreases below the amount of the operator's required
security, OWCP may require an increase in the operator's security under
Sec. 726.109. The Department is adding the requirement for quarterly
financial reports to paragraph (b)(4).
(3) Several commenters expressed concern that a greatly increased
security requirement would be difficult to fulfill immediately. These
commenters suggested that OWCP collect the increased security over a
period of years instead of all at once.
The Department agrees the burden on operators could be lessened by
staggering the collection of security over a reasonable period of time.
While commenters suggested phasing in the collection over a period of
years, the Department believes this would leave the Trust Fund
inadequately secured for too long. However, the Department will allow
operators to post security in phases over the course of one year, which
the Department has determined will properly balance the interests in
providing operators more time while limiting the Trust Fund's risk of
inadequate security. To further limit the Trust Fund's risk of delay in
receiving adequate security, the Department is requiring that operators
phase in their payments in quarterly installments. Thus, the Department
is adding a new paragraph (c) to provide that operators may submit
their increased security requirements in equal portions quarterly, to
be complete in one year: operators opting for phased posting must
deposit at least 25 percent of the increased security amount within 30
days of OWCP issuing the notification provided in newly redesignated
paragraphs (d) and (e), followed by at least 50 percent of their
increased security amount within four months of that notification, at
least 75 percent within eight months, and 100 percent within one year.
If an operator fails to timely pay any of one of these installments, it
will be deemed non- compliant with its self-insurance authorization,
and OWCP will revoke that authorization. The civil money penalty
provisions of 20 CFR part 726, subpart D, will apply to any operator
that fails to timely secure its benefits under this regulation.
Accordingly, any operator that disagrees with the penalties imposed
must follow the procedures at 20 CFR 726.307 for contesting penalties,
and not the self-insurance authorization appeals process outlined below
in the new 20 CFR 726.116.
In light of these changes, the Department is redesignating new
paragraphs (c), (d), and (e) to paragraphs (d), (e), and (f),
respectively. The Department is also revising paragraphs (d) and (e) to
provide that self-insurance authorization or reauthorization will be
effective upon OWCP's receipt of a completed agreement and undertaking,
along with either the applicant's full security amount or its first
quarterly installment.
20 CFR 726.105 Fixing the Amount of Security
(1) 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 Department proposed replacing current Sec. 726.105 with the
requirement that any operator approved to self-insure must submit
security equal to 120 percent of its actuarially estimated liabilities
(all present and future liabilities) as determined by OWCP based on the
actuarial report or reports submitted by the applicant with their
application (or on file with OWCP), other information submitted with
the operator's application, or any other materials or information that
OWCP deems relevant. As noted in the proposed rule, this meant
applicants would have to purchase an instrument that would pay out up
to 120 percent of the projected liability, not that the applicant would
have to actually spend that amount on collateral. The Department
estimated that premiums on surety bonds would cost anywhere from 2
percent to 12 percent of the security amount and solicited comments on
this estimation.
(2) Some commenters supported this proposed change. They stated
that in keeping with congressional intent, the increased security
amount would help avoid shifting liability from bankrupt operators to
the Trust Fund and, ultimately, to taxpayers. One commenter noted that
the requirement for increased security is all the more important now
that severe forms of black lung disease are on the rise, meaning that
operators' future liabilities would rise too. The commenters also
believed the requirement would not unduly burden operators, who could
secure their liability for benefits through other instruments or
purchase commercial insurance instead of self-insuring.
(3) By contrast, several coal-mine operators and their associations
commented that requiring security at 120 percent of projected liability
would be too great an expense. As explained above, the Department has
decided to lower the required security amount from 120 to 100 percent
of an operator's projected liability. The Department has weighed the
interests of protecting the Trust Fund and of reducing the burden on
operators, and determined that 100 percent security is the proper
balance. The new Sec. 726.105 will provide that operators approved to
self-insure must submit 100 percent of the actuarially estimated
liabilities. This requirement comports with the BLBA's requirement that
operators secure their liability (30 U.S.C. 932(b), 933(a)). The
natural reading of this requirement is that operators must secure their
full liability, not merely a portion of it. The requirement also
harmonizes the treatment of self-insured operators with that of
commercially insured operators, as an insurance policy for Federal
black lung claims must cover all of an operator's liability--present
and future. 20 CFR 726.202 and 726.203(c)(1)(ii).
(4) Some commenters asserted that the Department erred in expecting
that operators could obtain surety bonds for an annual premium of 2 to
12 percent of the covered bond amount. These commenters highlighted
that this range was based on general surety bonds, not
[[Page 100310]]
those specific to the coal industry. Instead, they posited that in
addition to premiums, operators would need to post collateral for the
surety bonds, up to and including 100 percent of the bond amount.
In the proposed rule, the Department invited comment on the cost of
surety bonds. The Department explained that the range of 2 to 12
percent of security was based on a review of public data from surety
companies. While commenters alleged the cost would be far greater, they
did not submit any direct evidence of the asserted cost, such as actual
surety bond quotes. Notably, no surety company submitted comment on the
proposed rule. Therefore, the Department has no basis on which to
change its estimation.
(5) Some commenters complained that surety bonds are also harder
for coal companies to obtain in today's market but did not submit
evidence of this assertion. These commenters stated that they are aware
of only three surety bonds used as security for self-insurance since
1980, and only one that is still active. These numbers are inaccurate.
Over ten currently active self-insured operators have security in the
form of surety bonds, and some of them have more than one; these
operators have submitted proof of their surety bonds to OWCP as part of
their participation in the self-insurance program. As the Department
noted in the proposed rule, surety bonds are the most common form of
security that current self-insured operators use. The Department
recognizes, as these commenters noted, that coal companies and coverage
of black lung benefits might be considered high risk in the surety
industry. That is one reason the Department is acting to better protect
the Trust Fund and ensure that self-insured operators are properly
secured. The Trust Fund should not be subject to enhanced risk so that
operators may self-insure. Rather, Congress intended that coal
operators, and not taxpayers, bear responsibility for paying black lung
benefits to the miners who worked for them. Furthermore, as stated
above, operators have security options other than surety bonds. They
may use other forms--or multiple forms--of security for self-insurance
(negotiable securities and letters of credit) or purchase commercial
insurance to satisfy their obligations under the BLBA.
(6) Several commenters argued that the Department could not require
an operator to secure its future liabilities, and instead could only
require security for current claims in award status. The Department
finds no merit in this argument. The BLBA requires every operator to
secure the payment of benefits for which it may be found liable. See 30
U.S.C. 932(b) (``each such operator shall be liable for and shall
secure the payment of benefits''), 933(a) (``each operator of a coal
mine . . . shall secure the payment of benefits for which he is liable
under section 932 of this title by (1) qualifying as a self-insurer in
accordance with regulations prescribed by the Secretary, or (2)
[purchasing commercial insurance]''); 20 CFR 726.1 (``[the BLBA]
requires each coal mine operator who is operating or has operated a
coal mine . . . to secure the payment of benefits for which he may be
found liable'').
Further, the BLBA and its implementing regulations \7\ provide that
liability extends to claims filed in the future. See 30 U.S.C. 932(i)
(operators that acquire a mine or its assets ``shall be liable for and
shall . . . secure the payment of all benefits which would have been
payable by the prior operator.''); 20 CFR 725.494(a) (``[a]n operator
may be considered a `potentially liable operator' . . . if . . . [t]he
miner's disability or death arose at least in part out of employment in
or around a mine or other facility during a period when the mine or
facility was operated by such operator, or by a person with respect to
which the operator may be considered a successor operator.''); 20 CFR
724.494(e)(2) (an operator that ``qualified as a self-insurer . . .
during the period in which the miner was last employed by the
operator'' is ``deemed capable of assuming its liability for a
claim[.]'').
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\7\ The Secretary has authority to promulgate regulations
directing the payment of benefits by operators and apportioning
liability among them. 30 U.S.C. 932(a) (``the Secretary is
authorized to prescribe in the Federal Register such additional
provisions . . . as he deems necessary to provide for the payment of
benefits by such operator to persons entitled thereto[.]''); 30
U.S.C. 932(h) (``The Secretary may also, by regulation, establish
standards for apportioning liability for benefits under this
subsection among more than one operator, where such apportionment is
appropriate.'').
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By necessity, an operator's liability extends to future claims. As
various commenters noted, black lung claims may be filed long after
miners stopped working, due to the progressive nature of black lung
disease; it may disable miners even years after their exposure to coal-
mine dust ends. See 20 CFR 718.201(c) (black lung disease is ``a latent
and progressive disease which may first become detectable only after
the cessation of coal mine dust exposure.''). As a result, a
significant portion of operators' liability involves claims that are
incurred but not reported (IBNR). In other words, these claims involve
situations in which the miner has suffered or will suffer an injury
(exposure to coal-mine dust), but has not yet filed a claim or received
an award. The only accurate way of securing an operator's black lung
liability, then, is to account for future claims.
Further, reading the BLBA as the commenters proposed would lead to
untenable results, such as OWCP being unable to require a new operator
to secure the payment of benefits at all, as it would have no claims
currently in award status.
To support their arguments against securing future liability,
several commenters asserted that state workers' compensation programs
only require security for present claims in award status. This is not
accurate. Although states vary in how they determine an employer's
estimated liability, some states require actuarial reports estimating
the total liability from all present and future claims. See, e.g.,
Minn. Stat. sec. 79A.04, subd. 2 (``The minimum deposit is 110 percent
of the private self-insurer's estimated future liability . . . as
determined by an Associate or Fellow of the Casualty Actuarial
Society[.]''). Even the commenters acknowledge that a high percentage
of black lung liability consists of IBNR claims. Thus, the Department
believes that it must take IBNR claims into account when setting
security amounts.
In its study of insurance in the black lung program, the GAO
concluded that future liabilities should be factored into security
amounts, and explained that not doing so in the past contributed to
inadequate protection of the Trust Fund. See GAO, Federal Black Lung
Benefits Program: Improved Oversight of Coal Mine Operator Insurance is
Needed, at 18, 19 (Feb. 2020), available at <a href="https://www.gao.gov/products/gao-20-21">https://www.gao.gov/products/gao-20-21</a>. The GAO reported that ``[e]stimating future costs
based on sound actuarial practice is essential to the integrity of the
insurance and the risk financing system and is key to fulfilling the
promises embodied in insurance contracts, according to Actuarial
Standards Board standards.'' Id. at 19 (internal citation omitted)).
Providing for future liability also serves Congress's intent that
operators bear the burden of paying benefits to the ``maximum extent
feasible. Luker, 826 F.2d at 693 (quoting S. Rep. No. 209, 95th Cong.,
1st Sess. 9 (1977), reprinted in House Comm. on Educ. and Labor, 96th
Cong., Black Lung Benefits Reform Act and Black Lung Benefits Revenue
Act of 1977, 612 (Comm. Print 1979).
[[Page 100311]]
(7) The Department will not lower the required amount of security
below 100 percent of an operator's liability. As noted above, the BLBA
requires that operators secure their full liability. Moreover, as
explained in the proposed rule, the Department decided to require 120
percent security in part because of the challenges in accurately
estimating liabilities, and the possibility that an insolvent
operator's actual liabilities could be greater than OWCP expected. Some
of the factors that could increase an operator's actual liabilities
over their estimated liabilities could include pneumoconiosis becoming
more prevalent, or the costs of medical treatment increasing faster
than expected. However, for the reasons discussed above, the Department
is modifying the final rule to require only 100 percent security rather
than the proposed 120 percent security.
(8) One commenter argued that the proposed rule would allow OWCP to
disregard an operator's actuarial report(s) and rely instead on any
other information it deems relevant. This was not the Department's
intent. OWCP will review and consider all relevant information that
operators submit with their application, including any information not
identified in Sec. 726.105 that would be pertinent. To clarify that
OWCP will not disregard any submissions, the Department is revising the
regulation to exchange the word ``and'' for ``or'' in the following:
``Any operator approved to self-insure must submit 100 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, and any other
materials or information that OWCP deems relevant'' (emphasis added).
20 CFR 726.109 Increase in the Amount of Security
(1) The Department proposed deleting and replacing 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 BLBA. This allows OWCP to require a correction in security
if, between annual renewals, a self-insured operator's security has
fallen below the requirement for 100 percent of their liability.
(2) Several commenters expressed concern that OWCP would increase
an operator's security without a known reason or prescribed grounds,
and could increase an operator's security beyond the percentage of
collateral initially required.
(3) As stated in the proposed rule, OWCP could decide that the
amount of an operator's security on deposit is insufficient if, for
example, 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. The Department believes the ability to increase
security for reasons like this is necessary to protect the Trust Fund,
consistent with Congress's intent that the coal operators who expose
coal miners to coal dust be responsible for paying black lung benefits,
not taxpayers. Further, 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.
However, the Department agrees with the commenters that the
regulation should clarify that OWCP will provide a written explanation
of the reasons and grounds for increasing an operator's security. The
Department, however, will not increase the required liability beyond
100 percent of the operator's actuarially estimated liability. The
regulation has been revised to make this clear.
20 CFR 726.114 Authorization and Reauthorization Timeframes
(1) The Department proposed deleting and replacing current Sec.
726.114 to substantially revise the timeframe for authorizations and
reauthorizations.
(2) Several commenters noted that legacy operators (those who have
ceased mining operations but remain liable for black lung claims)
should continue to be authorized for self-insurance. In revising Sec.
726.114(a) and (b), the Department inadvertently omitted paragraph (c).
Section 726.114(c) provides that self-insured operators must continue
to reapply for self-insurance reauthorization after ceasing their
mining operations. This regulation is consistent with other parts of
the black lung regulations dealing with the requirement for operators
to secure the payment of benefits after they cease coal-mining
operations. See, e.g., 20 CFR 726.1, 726.4, and 726.302(c)(2)(ii). The
Department intends to keep the current paragraph (c) as part of the new
regulation.
(3) Therefore, the Department is clarifying that current Sec.
726.114(c) is retained in its entirety. The Department is making
stylistic changes to Sec. 726.114(c). No alteration in meaning either
results from or is intended by these changes.
20 CFR 726.116 Appeal Process
(1) Section 726.116 is new. It establishes and clarifies the
process for an operator to appeal a self-insurance determination made
by the Division of Coal Mine Workers' Compensation (DCMWC). The
proposed rule provided that a self-insurance applicant would submit a
request for review of the initial determination within 30 days to
DCMWC. Within 30 days of submitting the request, the applicant would
have to submit any evidence and/or briefing on which they intended to
rely. In its briefing, the applicant could request an informal
conference with DCMWC. The conference would be limited to the issues
identified in the applicant's written materials. Upon review, the
Director of DCMWC would issue a supplemental decision. The proposed
rule then provided that an applicant aggrieved by a supplemental
decision could request further review by the Director of OWCP, who
would review the evidence of record and not accept any new evidence or
arguments. The Director of OWCP would then issue a final agency
decision.
(2) Several commenters expressed concern about operators remaining
under-secured during a potentially lengthy appeals process. One
commenter requested that OWCP include timeframes for its decision-
making, to ensure appeals do not drag on while the Trust Fund lacks
sufficient security. Several commenters asserted that operators should
post the required security during the pendency of their appeals, to
protect the Trust Fund from inadequate funding if operators declare
bankruptcy while contesting their security requirements. Expressing the
opposite view, some commenters requested that the security requirement
be stayed pending appeals and argued that operators would be
irreparably harmed if forced to provide the security before their
appeals were decided.
(3) The Department agrees that the timeline of the appeals process
needs to be clear and limited, to ensure operators do not remain under-
secured for too long, increasing the risk to the Trust Fund in case of
bankruptcy. However, the Department is concerned that, as some
commenters indicated, operators would be harmed if forced to post the
required security during the pendency of their appeals. Therefore, the
Department has decided to address the risk to the Trust Fund by
streamlining the appeals process and setting clear deadlines for OWCP
decision-making.
[[Page 100312]]
(4) The new regulation will provide a one-step--rather than two-
step--appeals process. Instead of appealing to the Director of DCMWC
first and, if unsatisfied, to the Director of OWCP, applicants will be
able to appeal DCMWC's initial determination directly to the Director
of OWCP. The Director of OWCP will not accept any new evidence, and
instead review only the applicants' arguments about an error in the
initial DCMWC determination. This is consistent with general appellate
practices and provides an applicant with an adequate opportunity to be
heard on its appeal.
The Director of OWCP will have 60 days to take up the appeal and
issue a final agency decision. At this time, if the applicant had been
authorized to self-insure and was seeking a renewal that OWCP denied,
their self-insurance will end and they will need to secure commercial
insurance or face civil penalties for failure to secure benefits. 30
U.S.C. 933(d)(1), 20 CFR 726.300. These changes are reflected in new
paragraphs (a) through (d).
(5) Paragraph (a) sets forth the process to file an appeal. It
provides that any applicant who wishes to appeal a determination made
by DCMWC must submit an appeal to the Director of OWCP within 30 days
after DCMWC issues 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.
(6) Paragraph (b) sets forth the process for submitting briefs
containing any arguments that DCMWC erred in its initial determination.
It provides that, within 30 days of submitting an appeal, the applicant
must submit any briefing on which the applicant intends to rely. It
also provides that the Director of OWCP may, at their discretion,
extend this deadline for up to 30 days upon a showing of good cause by
the applicant. No more than two extensions will be granted. Examples of
good cause may include the applicant representative's personal illness
or an unusual circumstance prohibiting their access to necessary
documents. The applicant must document an inability to comply or
extreme hardship in complying on a timely basis.
(7) 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 appeal. Paragraph
(c)(2) provides that, if an applicant requests a conference, the
Director of OWCP will hold a conference with OWCP, the Office of the
Solicitor, and the applicant's representatives. Paragraph (c)(3)
provides that, if the applicant does not request a conference, the
Director of OWCP may either decide the appeal on the record or schedule
a conference on their 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.
(8) Paragraph (d) sets forth the Director of OWCP's obligations in
the appeal process. Paragraph (d)(1) provides that the Director of OWCP
will review the initial determination, evidence of record, and
arguments submitted on appeal, and that the applicant may not submit
any new evidence to the Director of OWCP. Paragraph (d)(2) provides
that the Director of OWCP will have 60 days from receipt of the appeal
to take up the appeal and issue a final agency decision. 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. Paragraph
(d)(3) explains that if the Director of OWCP issues a final agency
decision denying self- insurance, and the operator's self-insurance
application is one for renewal (they have previously been approved for
self-insurance), their self-insurance authorization will end and they
must secure commercial insurance or face civil penalties for their
failure to secure benefits.
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 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 contained information collections
within the meaning of the PRA (see proposed Sec. 726.102), these
collections related to the self- insurance application forms 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 are not changed in
this final rule; therefore, the overall burdens imposed by the
information collections are reduced.
One commenter argued that an operator's information collection
burden would increase under the new regulation's requirement to submit
actuarial reports with OWCP- mandated actuarial assumptions. The
Department disagrees with this contention. OWCP has required applicants
to submit actuarial reports with OWCP-mandated actuarial assumptions
since 2019. Further, OWCP already considered and requested public
comment on the information collection burden of producing these
actuarial reports. Along with the self-insurance application forms,
OWCP explained in the notice to the public that applicants would need
to submit actuarial reports, and estimated that twenty operators would
have to submit actuarial reports they did not otherwise prepare in the
course of business.\8\ The main application form, CM-2017, approved
under OMB Control Number 1240-0057, provides that applicants' actuarial
reports ``must comply with the standards specified by OWCP, which are
posted on the black lung program's website: <a href="https://www.dol.gov/agencies/owcp/dcmwc/operators-insurers">https://www.dol.gov/agencies/owcp/dcmwc/operators-insurers</a>.'' The website, in turn,
provides OWCP's current actuarial assumptions. Because applicants'
information collection burden with respect to forms CM-2017 and CM-
2017b will not increase under this regulation, OWCP will proceed with
the burden estimates contained in the NPRM for these forms.
---------------------------------------------------------------------------
\8\ The Supporting Statement is available on OMB's website at
<a href="https://omb.report/icr/202201-1240-003/doc/122887700">https://omb.report/icr/202201-1240-003/doc/122887700</a>.
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This final rule provides a minimal burden in requiring quarterly
financial statements for section 501(c)(21) trusts. See Sec.
726.104(b)(4). OWCP estimates this will add a minimal burden to the
[[Page 100313]]
public, totaling under two hours per year for all statement
submissions. Similarly, OWCP estimates this requirement will add a
minimal burden to OWCP in reviewing the statements, amounting to 1.67
---------------------------------------------------------------------------
hours of review time and $85.47 in wages.
OMB Control Number: 1240-0057.
Affected Public: Business or other for-profit.
Number of Respondents: 61.
Frequency: Annually for Forms CM-2017 and CM-2017b, and
quarterly for Section 501(c)(21) trust statements.
Number of Responses: 142.
Annual Burden Hours: 246.
Annual Respondent or Recordkeeper Cost: $34,000.
Federal Government Cost: $15,695.
OWCP Collections: OWCP Forms CM-2017 (Application or Renewal of
Self- Insurance Authority) and CM-2017b (Report of Claims
Information for Self- Insured Operators); Quarterly Financial
Reports on Section 501(c)(21) Trusts.
B. Executive Order 12866: Regulatory Planning and Review; Executive
Order 13563: Improving Regulation and Regulatory Review; and Executive
Order 14094: Modernizing Regulatory Review
Under Executive Order (E.O.) 12866, as amended by E.O. 14904, the
Office of Information and Regulatory Affairs (OIRA) 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 E.O.
12866 defines a ``significant regulatory action'' as an action that is
likely to result in a rule that may (1) have an annual effect on the
economy of $200 million or more, or adversely affect in a material way
a sector of the economy, productivity, competition, jobs, the
environment, public health or safety, or State, local, territorial, or
Tribal governments or communities; (2) create a serious inconsistency
or otherwise interfere with an action taken or planned by another
agency; (3) materially alter the budgetary impacts of entitlements,
grants, user fees, or loan programs, or the rights and obligations of
recipients thereof; or (4) raise legal or policy issues ``for which
centralized review would meaningfully further the President's
priorities or the principles set forth in this Executive order.'' See
E.O. 12866, 58 FR 51735 (Oct. 4, 1993), as amended by E.O. 14094, 88 FR
21879 (Apr. 11, 2023).
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.'' See E.O. 13563, 76 FR
3821 (Jan. 21, 2011).
OIRA has determined that this rule is a significant regulatory
action. See E.O. 12866, 58 FR 51735, as amended by E.O. 14094, 88 FR
21879.
Economic Considerations
This final rule will have an economic impact on coal mine operators
that currently participate in the self-insurance program, as well as
any new applicants. This final rule nevertheless is 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 GAO, 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 final 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' 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.
This final rule eliminates the financial scoring process and
requires all self- insured operators to post security equal to 100
percent of their projected black lung liabilities. By requiring
sufficient security based simply on projected liabilities, the Trust
Fund will be better protected and the financial scoring process is no
longer needed. This final rule also removes certain minimum
requirements that are now 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 this final rule, both on the economy as a whole and on
individual operators.
a. Data Considered
To determine the rule's general economic impact, the Department
calculated how the rule will affect several stakeholder groups,
including: (i) OWCP, (ii) taxpayers, (iii) commercially insured
operators, and (iv) self-insured operators.
i. OWCP
This final rule does not impose additional demands on OWCP
resources and in fact will result in a reduction in administration
costs.\9\ It eliminates the need for OWCP to repeatedly perform annual
financial health assessments on each self-insured operator.
---------------------------------------------------------------------------
\9\ 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 is expected to save the
agency this cost.
---------------------------------------------------------------------------
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. This final rule
will 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.
ii. Taxpayers
This final 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,
this final 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. This final rule will require security deposits that are 100
percent of the operators' 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 that do not secure 100 percent of their black lung
liabilities under existing guidelines. Moreover, a number of operators
have
[[Page 100314]]
securities on deposit with OWCP that are substantially less than those
required even under the existing guidelines.
Requiring a 100 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). This
final rule requires 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
This final rule will not impose additional costs on operators that
secure their BLBA liabilities through commercial insurance. This final
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
This final 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.
This final rule will 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 existing
guidelines, and future security requirements under this final rule.
Table 1--Self-Insured Coal Mine Operators Actuarial Liabilities and Security Deposits
[All dollar amounts in thousands (,000)]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Coal mine operator Present--on deposit Existing guidelines Final rule
-------------------------------------------------------------- -----------------------------------------------------------------------------
Operator Ratio of Ratio of Ratio of
reported securities securities securities
black lung Operator to reported Operator to reported Operator to reported
ID No. Name Status actuarial securities actuarial securities actuarial securities actuarial
liability on deposit liability requirement liability requirement liability
(%) (%) (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1............................ Company 1..... Active........ $162,939 $24,400 15 $114,057 70 $162,939 100
2............................ Company 2..... Active........ 111,518 6,900 6 78,063 70 111,518 100
3............................ Company 3..... Active........ 93,826 2,500 3 65,678 70 93,826 100
4............................ Company 4..... Legacy........ 57,730 8,400 15 40,411 70 57,730 100
5............................ Company 5..... Legacy........ 56,802 21,000 37 39,761 70 56,802 100
6............................ Company 6..... Active........ 49,382 1,500 3 34,567 70 49,382 100
7............................ Company 7..... Active........ 29,581 20,330 69 20,707 70 29,581 100
8............................ Company 8..... Legacy........ 23,935 12,412 52 16,755 70 23,935 100
9............................ Company 9..... Active........ 21,400 14,079 66 14,980 70 21,400 100
10........................... Company 10.... Legacy........ 3,297 3,301 100 3,297 100 3,297 100
11........................... Company 11.... Legacy........ 1,364 1,364 100 1,159 85 1,364 100
12........................... Company 12.... Legacy........ 1,333 1,133 85 1,133 85 1,333 100
13........................... Company 13.... Legacy........ 1,230 1,046 85 1,046 85 1,230 100
14........................... Company 14.... Active........ 746 634 85 634 85 746 100
15........................... Company 15.... Active........ 656 558 85 558 85 656 100
16........................... Company 16.... Active........ 205 400 195 174 85 205 100
------------------------------------------------------------------------------------------
Self-Insured Operators .............. .............. 615,944 119,957 19 432,980 70 615,944 100
Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
This final 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 BLBA. If
anything, this final 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.
This final rule requires self-insured operators to adjust the
amount of their security deposits to reach 100 percent of their
reported actuarial black lung liability. Table 1 reflects that 13 of
the 16 current self-insured operators will 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 the 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 final
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;
[[Page 100315]]
however, actual costs could be higher or lower.\10\ As noted above,
commenters did not provide alternative data on the cost of bonds.
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. If operators do not wish
to use surety bonds, however, they may obtain a different form--or
multiple forms--of security, or commercial insurance. See 20 CFR
726.104(b), 30 U.S.C. 933(a), and 20 CFR 726.1 and 726.201.
---------------------------------------------------------------------------
\10\ 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.
---------------------------------------------------------------------------
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 7.7 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. 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 the most
recent revenue available to OWCP, 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 0.422 percent to less than one thousandth of a
percent (including one negative value).\11\
---------------------------------------------------------------------------
\11\ 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.
Table 2--Estimated Annual Cost of Increased Security Deposit in the Form of Indemnity Bonds
[All dollar amounts in thousands (,000)]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Coal mine operator Required security deposit = 100%
--------------------------------------------------------------------------------- Minimum Maximum Average Estimated
Operator Change in estimated estimated estimated Year of operator
reported Operator Operator required cost of cost of cost of Annual annual impact as a
ID No. Name black lung securities securities secured change in change in change in revenue revenue percent of
actuarial on deposit required: position securities securities securities revenue
liability final rule \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
1............ Company 1........ $162,939 $24,400 $162,939 $138,539 $2,771 $16,625 $9,698 $2,296,100 2022 0.422
2............ Company 2........ 111,518 6,900 111,518 104,618 2,092 12,554 7,323 3,703,100 2022 0.198
3............ Company 3........ 93,826 2,500 93,826 91,326 1,827 10,959 6,393 4,101,600 2022 0.156
4............ Company 4........ 57,730 8,400 57,730 49,330 987 5,920 3,453 1,972,500 2022 0.175
5............ Company 5........ 56,802 21,000 56,802 35,802 716 4,296 2,506 1,738,700 2022 0.144
6............ Company 6........ 49,382 1,500 49,382 47,882 958 5,746 3,352 2,406,500 2022 0.139
7............ Company 7........ 29,581 20,330 29,581 9,251 185 1,110 648 4,981,900 2022 0.013
8............ Company 8........ 23,935 12,412 23,935 11,523 230 1,383 807 1,603,500 2018 0.050
9............ Company 9........ 21,400 14,079 21,400 7,321 146 879 512 14,918,500 2022 0.003
10........... Company 10....... 3,297 3,301 3,297 (4) (0) (1) (0) 241,700 2022 0.000
11........... Company 11....... 1,364 1,364 1,364 (0) (0) (0) (0) 636,657 2018 0.000
12........... Company 12....... 1,333 1,133 1,333 200 4 24 14 11,080,000 2018 0.000
13........... Company 13....... 1,230 1,046 1,230 184 4 22 13 22,989,000 2022 0.000
14........... Company 14....... 746 634 746 112 2 13 8 68,545 2018 0.011
15........... Company 15....... 656 558 656 98 2 12 7 70,826 2018 0.010
16........... Company 16....... 205 400 205 (195) (4) (23) (14) 2,551,800 2022 -0.001
--------------------------------------------------------------------------------------------------------------------------------------------------------
Self-Insured Operators Total 615,944 119,957 615,944 495,987 9,920 59,518 34,719 75,360,928 ........ 0.046
------------------------------------------------------------------------------------------------------------------------------------------
Commercially Insured .......... .......... .......... .......... .......... .......... .......... ........... ........ 0.000
Operators Total \2\.
------------------------------------------------------------------------------------------------------------------------------------------
Coal Mine Industry Total .......... .......... .......... .......... .......... .......... .......... ........... ........ 0.024
(Self-Insured +
Commercially Insured).
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ The change represents the difference between the final rule and the securities currently on deposit.
\2\ Commercially Insured Operators includes all other coal mine operators other than the self-insured operators listed.
[[Page 100316]]
b. Economic Impact Summary
Operator securities on deposit are estimated to change by nearly
$500 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 $500
million in securities on deposit will not exceed $30 million in any
given year.
Furthermore, OWCP estimates ranges from approximately $10 million
to $60 million on an annual basis, with a mid-range estimate of $35
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 a half of a 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.
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 for
regulations that will have ``a significant economic impact on a
substantial number of small entities'' or to certify that the
regulations will have no such impact.
The Department has determined that a regulatory flexibility
analysis under the RFA is not required for this rulemaking. For the
mining industry, the Small Business Administration (SBA) uses two
levels of employee counts to define small mining operations:
1. North American Industry Classification System (NAICS) code
212114, Bituminous Coal and Lignite Surface Mining--1,250 employees.
2. NAICS 212115, Bituminous Coal Underground Mining--1,500
employees.
For purposes of this analysis, operators were classified as Surface
operations (NAICS = 212114) or Underground (NAICS = 212115) depending
on their predominant method of coal mining. The SBA classification of
small entities was applied according to the operator's NAICS code type
of operations.
According to the SBA criteria, 6 of the 16 self-insured operators,
or 38 percent, are considered small firms. Tables 3A and 3B show the
impact on small and large self- insured operators. As explained 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.
The combined impact on these 6 operators ranges from $0 to $3.5
million, which translates to 0 percent to 0.18 percent of annual
revenues. These impacts are very small, and for that reason the 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 0.01 percent of annual revenues.\12\
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\12\ 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
27106, 27151 (May 12, 2014).
Table 3A--Small Self-Insured Coal Mine Operators
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Dollars in thousands (,000) Employee counts \1\
------------------------------------------------- ------------------------------------------------------------------------
Minimum Maximum Average Rule
ID No. Name Operations type estimated estimated estimated change
cost of cost of cost of Annual impact 2020 2021 2022 3 Yr
change in change in change in revenue (%) average
securities securities securities
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
4............. Company 4............ Underground.......... 987 5,920 3,453 1,972,500 0.175 1,133.............. 1,127.............. 1,172.............. 1,144
5............. Company 5............ Underground.......... 716 4,296 2,506 1,738,700 0.144 1,401.............. 704................ 854................ 986
10............ Company 10........... Surface.............. -0.1 -0.5 -0.3 241,700 -0.000 500................ 500................ 500................ 500
11............ Company 11........... Surface.............. 0 0 0 636,657 0.000 950 est............ 950 est............ 950 est............ 950
14............ Company 14........... Surface.............. 2 13 8 68,545 0.011 142 est............ 142 est............ 142 est............ 142
15............ Company 15........... Surface.............. 2 12 7 70,826 0.010 180................ 180................ 180................ 180
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Employee counts reflects all employees for each company. It is not limited to coal mining employees.
[[Page 100317]]
Table 3B--Large Self-Insured Coal Mine Operators
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Dollars in thousands (,000) Employee counts \1\
------------------------------------------------- ------------------------------------------------------------------------
Minimum Maximum Average Rule
ID No. Name Operations type estimated estimated estimated change
cost of cost of cost of Annual impact 2020 2021 2022 3 Yr
change in change in change in revenue (%) average
securities securities securities
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1............. Company 1............ Underground.......... 2,771 16,625 9,698 2,296,100 0.422 1,494.............. 1,575.............. 1,860.............. 1,643
2............. Company 2............ Underground.......... 2,092 12,554 7,323 3,703,100 0.198 3,203.............. 3,303.............. 3,404.............. 3,303
3............. Company 3............ Underground.......... 1,827 10,959 6,393 4,101,600 0.156 3,250.............. 3,500.............. 3,730.............. 3,493
6............. Company 6............ Underground.......... 958 5,746 3,352 2,406,500 0.139 2,902.............. 2,990.............. 3,371.............. 3,088
7............. Company 7............ Surface.............. 185 1,110 648 4,981,900 0.013 4,600.............. 4,900.............. 5,500.............. 5,000
8............. Company 8............ Underground.......... 230 1,383 807 1,603,500 0.050 6,000 est.......... 6,000 est.......... 6,000 est.......... 6,000
9............. Company 9............ Surface.............. 146 879 512 14,918,500 0.003 16,787............. 16,688............. 16,974............. 16,816
12............ Company 12........... Surface.............. 4 24 14 11,080,000 0.000 11,300............. 11,300 est......... 11,300 est......... 11,300
13............ Company 13........... Surface.............. 4 22 13 22,989,000 0.000 25,000............. 25,500............. 27,000............. 25,833
16............ Company 16........... Surface.............. -4 -23 -14 2,551,800 -0.001 3,011.............. 2,884.............. 2,982.............. 2,959
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Large Self-Insured Operators Total...................... 8,213 49,278 28,745 70,632,000 0.008 77,547............. 78,640............. 82,121............. 79,436
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Employee counts reflects all employees for each company. It is not limited to coal mining employees.
Based on these facts, the Department certifies that this final rule
will not have a significant economic impact on a substantial number of
small entities. Thus, the Department has made a final determination
that a regulatory flexibility analysis is not required. 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 were classified as Surface operations (NAICS =
212114) or Underground (NAICS = 212115) depending on their predominant
method of coal mining. 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 U.S. Energy Information Administration
(``EIA'') criterion of producing more than 5 million short tons of coal
per year.
Table 4--Coal Production by Operator
--------------------------------------------------------------------------------------------------------------------------------------------------------
Coal mine operator Coal production (thousand short tons)
---------------------------------------------------------------------------------------------------------------------- % of U.S.
Major U.S. coal 3 Yr production Business size
ID No. Name producer 2020 2021 2022 average
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.................. Company 1............. Yes................. 18,790 23,963 24,103 22,285 3.9 Large.
2.................. Company 2............. Yes................. 61,705 71,854 78,364 70,641 12.4 Large.
3.................. Company 3............. Yes................. 13,897 15,835 15,867 15,200 2.7 Large.
4.................. Company 4............. No.................. 0 0 0 0 0.0 Small.
5.................. Company 5............. Yes................. 7,864 5,605 6,315 6,595 1.2 Small.
6.................. Company 6............. Yes................. 26,900 32,218 35,477 31,532 5.5 Large.
7.................. Company 7............. Yes................. 104,814 105,383 101,929 104,042 18.3 Large.
8.................. Company 8............. No.................. 0 0 0 0 0.0 Large.
9.................. Company 9............. No.................. 456 0 0 152 0.0 Large.
10................. Company 10............ Yes................. 30,801 27,852 28,899 29,184 5.1 Small.
11................. Company 11............ Yes................. 8,146 6,845 6,425 7,139 1.3 Small.
12................. Company 12............ No.................. 0 0 0 0 0.0 Large.
13................. Company 13............ No.................. 1,612 1,443 1,437 1,498 0.3 Large.
14................. Company 14............ No.................. 115 121 143 126 0.0 Small.
15................. Company 15............ No.................. 1,741 2,065 1,685 1,831 0.0 Small.
16................. Company 16............ No.................. 3,737 3,503 3,735 3,658 0.6 Large.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Self-Insured Operators Total................................. 280,578 296,687 304,380 293,882 51.6
-------------------------------------------------------------------------------------
Coal Mine Industry Total..................................... 535,434 577,431 594,155 569,007 100.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 100318]]
--------------------------------------------------------------------------------------------------------------------------------------------------------
........... ........... ........... ........... % of
production
--------------------------------------------------------------------------------------------------------------------------------------------------------
Major US Coal Producer: Self Insured............................. 272,917 289,555 297,379 286,617 57.8
Major US Coal Producer: Commercially Insured..................... 185,690 221,208 220,174 209,024 42.2
Total Major US Coal Producers................................ 458,607 510,763 517,553 495,641 100.0
Non-Major Self Insured........................................... 7,661 7,132 7,001 7,265 9.9
Non-Major Commercially Insured................................... 69,166 59,536 69,601 66,101 90.1
Total Non-Major US Coal Producers............................ 76,827 66,668 76,602 73,366 100.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
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.'' This 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 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 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.'' Id.
F. Executive Order 12988 (Civil Justice Reform)
This 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
Pursuant to Subtitle E of the Small Business Regulatory Enforcement
Fairness Act of 1996, also known as the Congressional Review Act, 5
U.S.C. 801 et seq, OIRA has determined that this rule does not meet the
criteria set forth in 5 U.S.C. 804(2).
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, OWCP amends 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. Revise subpart B to read 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.
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 is denied 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
[[Page 100319]]
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 actuarial assumptions,
unless the applicant has submitted such a report within the preceding 3
years. The operator may submit an additional actuarial report using
alternate assumptions with an explanation of 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 must be
described by name and reference must be made to the Mine Identification
Number assigned such mine by the Mine Safety and Health Administration,
U.S. Department of Labor.
(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 information required in paragraphs (b)(1)
through (6) of this section, 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, 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 regulations in this part 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 review and consider all relevant
information submitted in the application and 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 in this subpart.
(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;
(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); or
(4) In the form of a trust pursuant to section 501(c)(21) of the
Internal Revenue Code (26 U.S.C. 501(c)(21)) established prior to
December 12, 2024. Operators using such trusts must submit quarterly
financial statements to OWCP documenting the value of the trust every
ninety days, beginning with ninety days from the date on which OWCP's
authorization or reauthorization of the operator's self-insurance
becomes effective under paragraphs (d) and (e) of this section.
(c) Operators that are required to submit an initial or increased
security deposit may do so in quarterly increments over the course of
one year. Such operators must deposit at least 25 percent of the newly
required security amount within thirty days of OWCP issuing the
notification provided in paragraphs (d) and (e) of this section,
followed by at least 50 percent of their required security within four
months, at least 75 percent within eight months, and 100 percent within
one year. If an operator fails to timely submit any one of these
security installments, OWCP will revoke its self-insurance
authorization and the operator will be subject to the civil penalty
provisions in subpart D of this part.
(d) 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 (either the full amount or first
quarterly installment under paragraph (c) of this section) and
completed agreement and undertaking are received by OWCP.
(e) 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 authorization to self-insure is not granted until the
applicant has submitted the required security (either the full amount
or first quarterly installment under paragraph (c) of this section) 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.
(f) Any applicant who cannot meet the security deposit requirements
imposed by OWCP in this subpart should proceed to obtain a commercial
policy or contract of insurance and submit proof of such coverage
within 30 days after OWCP issues notification to 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 in this subpart are excessive may appeal
such determination in the manner set forth in Sec. 726.116.
[[Page 100320]]
Sec. 726.105 Fixing the amount of security.
Any operator approved to self-insure must submit security equal to
100 percent of the actuarially 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,
and 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 in 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.
(a) 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 100 percent of the
self-insurer's liability for payment of benefits and medical expenses
under the Act. OWCP will provide a written explanation for the
increase.
(b) OWCP will not require an operator to post greater than 100
percent of its estimated liabilities, based on the information
prompting the increase in security.
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); and
(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 20 CFR 725.490 through 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.
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
this part, and such self-
[[Page 100321]]
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 in 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.
(c) Each operator authorized to self-insure under this part must
apply for reauthorization for any period during which it engages in the
operation of a coal mine and for additional periods after it ceases
operating a coal mine. Upon application by the operator, accompanied by
proof that the security it has posted is sufficient to secure all
benefits potentially payable to miners formerly employed by the
operator, OWCP will issue a certification that the operator is exempt
from the coal mine operator insurance requirements of this part based
on its prior operation of a coal mine. The civil money penalty
provisions of subpart D of this part will be applicable to any operator
that fails to apply for reauthorization in accordance with the
provisions of this section.
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 DCMWC's
determination on an application must submit a written appeal to the
Director of OWCP in the form and manner prescribed by OWCP within 30
days of DCMWC issuing such determination. This deadline may not be
extended.
(b) What to submit. Within 30 days after filing a written appeal,
the applicant must submit any briefing on which it intends to rely,
including any arguments that DCMWC's initial determination was
erroneous. The applicant is not entitled to submit any further evidence
at this time; all evidence must be submitted to DCMWC with the initial
application. OWCP may, at its discretion, extend this deadline at the
applicant's request for up to 30 days upon a showing of good cause. No
more than two extensions will be granted.
(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 briefing in support of its appeal.
(2) If the applicant requests a conference, the Director of OWCP
will hold one with the applicant's representatives and the Department's
Office of the Solicitor.
(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 and
issue a final agency decision.
(1) The Director of OWCP will review the initial decision, evidence
of record, and arguments submitted on appeal. The applicant may not
submit new evidence to the Director of OWCP.
(2) The Director of OWCP will have 60 days from receipt of the
appeal to take up the appeal and issue a final agency decision.
(3) If the Director of OWCP issues a final agency decision denying
self- insurance, any existing self-insurance authorization of the
applicant will end. The applicant will have 30 days from the issuance
of the final agency decision to obtain and submit proof of commercial
insurance or begin facing civil penalties for failure to secure
benefits.
Signed at Washington, DC, this 3rd day of December 2024.
Christopher J. Godfrey,
Director, Office of Workers' Compensation Programs.
[FR Doc. 2024-28848 Filed 12-11-24; 8:45 am]
BILLING CODE 4510-CK-P
</pre></body>
</html>Indexed from Federal Register on December 12, 2024.
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.