Requesting Relief from Section 411 Debarment

[Eric Taylor]

Does anyone have experience in seeking relief for a Section 411 debarment--i.e., relief permitting convicted felon to serve as consultant to an employee benefit plan prior to the 13-year restriction period?  We have client who just discovered that they have long-term employee with felony conviction covered under Section 411.  Employee is a clerical worker in insurance agency / TPA type group that does work for group benefit plans.

In particular, I am interested in thoughts / experience around:

• Assume individual is prohibited from serving even in a clerical type position if some of the employer's services constitute consulting for ERISA plans
• Any sense how long it usually takes to pursue relief / how much time and effort is typically required assuming relatively sympathetic case--conviction more than 10 years ago and individual has been clean and conviction had some sympathetic facts (innocent spouse type issues)
• Any thought that client is in trouble for unknowingly employing individual for the prior few years when was unaware of law, her conviction and there has been no trouble plus has taken action to suspend her work while investigating.

Thanks for any advice anyone may have.

[david rigby]

For reading/reference, section 411 of ERISA

https://www.law.cornell.edu/uscode/text/29/1111

 

[Peter Gulia]

A few points of information the employer and its lawyer might explore:

 

To get relief from ERISA § 411, the rule is:

 

Procedure Governing Applications for Certificates of Exemption under the Labor-Management Reporting and Disclosure Act of 1959, and the Employee Retirement Income Security Act of 1974, 44 Federal Register 6,890 (Feb. 2, 1979), 28 C.F.R. §§ 4.1 to 4.17.

 

To guess how long the process might take, the U.S. Parole Commission’s decisions are available not only under the Freedom of Information Act but also under the Commission’s rule.  One might look at the records of several cases to get a sense of the durations from filing an application to a decision on it.

 

Beyond ERISA, the employer might ask for its lawyer’s advice about 18 U.S.C. § 1033(e).  It makes it a Federal crime for a person convicted of a disqualifying crime to “engage[]” in the business of insurance[.]”  Also, it makes it a Federal crime for a natural person to “willfully permit[]” a disqualified person’s “participation” in an insurance business.  An otherwise precluded employment can be allowed with an insurance regulator’s express consent that meets the terms of the Federal statute.

 

If the insurance agency or third-party administrator has subsidiaries or affiliates in banking, commodities, securities, investment-advisory, or other financial-services businesses, the employer might want its lawyer’s advice about whether a law that applies to a related business also affects the affiliated group.

 

The employer might want its lawyer’s advice about the effect of representations the employer might have made in applying for fidelity-bond, employee-dishonesty, or other surety or liability insurance.

 

[Eric Taylor]

Thanks very much.  We are familiar with the text of 411 and applicable federal and state insurance debarments are being handled separately.  I was under the impression that the US Parole Commission involvement had fallen away such that the process now involves a hearing with a federal judge and representation of the DOL by the Office of the Solicitor but I may not fully understand the process.  In any event, was hoping there might be somebody out there with some recent experience with the current process that might have some insight on timing.  Thanks.

[Peter Gulia]

According to the rule, a hearing is "before one or more Commissioners, or before one or more administrative law judges appointed" for the purpose.

https://www.ecfr.gov/cgi-bin/text-idx?SID=7c623260ae7a9ec2e2ab0d2e3aab4ab3&mc=true&node=se28.1.4_18&rgn=div8

A rule for considering, and allowing an applicant's response to, an administrative law judge's recommended decision suggests that a hearing by an ALJ is typical.

An applicant's representative need not be admitted to practice law in the State in which the applicant resides or works; it's enough to be admitted to practice before the highest court of any State.

https://www.ecfr.gov/cgi-bin/text-idx?SID=7c623260ae7a9ec2e2ab0d2e3aab4ab3&mc=true&node=se28.1.4_19&rgn=div8

I'd bet few lawyers have handled even one matter seeking to remove an ERISA 411 disqualification.

 

[Eric Taylor]

Peter,

Thanks very much.  I suspect you are correct.  I've been an ERISA lawyer for over 20 years and have never had occasion to consider the process.

FWIW, the original version of the statute (which appears to have imposed only a 5-year ban) expressly references the role of the US Parole Commission and an administrative hearing, etc. along the lines of the regulations you linked.  The current version of the statute, however, seems to suggest that the hearing would be before a federal judge (e.g., the sentencing judge if the offense was a federal offense or a district court judge for the district in which the offense occurred if a state or local matter).   While that references the US Parole Commission sentencing guidelines, it seems like the hearing is now expected to be in federal court.  I'm thinking the regulations are just outdated but there does not appear to be much guidance around the overall process.  Thanks again.

[Peter Gulia]

Yes, a sentencing court can grant relief.

The Parole Commission seems to be another route if the court had not granted relief in the original sentencing (perhaps because the defendant might not have known to ask), and the disqualified person prefers not to go to court.

In my 33 years of employee-benefits practice, I've never seen a matter involving ERISA 411 (but I assume that's because every applicant with a conviction was screened out before hiring).

I teach section 411 to my LL.M. students; thanks for giving me something to think about.