Black Lung Benefits Act: Authorization of Self-Insurers

<RULE> DEPARTMENT OF LABOR <SUBAGY>Office of Workers' Compensation Programs</SUBAGY> <CFR>20 CFR Part 726</CFR> <RIN>RIN 1240-AA16</RIN> <SUBJECT>Black Lung Benefits Act: Authorization of Self-Insurers</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Office of Workers' Compensation Programs, Labor. <HD SOURCE="HED">ACTION:</HD> Final rule. <SUM> <HD SOURCE="HED">SUMMARY:</HD> 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). </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> This rule is effective January 13, 2025. </EFFDATE> <HD SOURCE="HED">ADDRESSES:</HD> For access to the rulemaking docket and to read background documents or comments received, go to <E T="03">https://www.regulations.gov.</E> Although some information ( <E T="03">e.g.,</E> 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. <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> 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. </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">I. Background of This Rulemaking</HD> 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); <E T="03">Usery</E> v. <E T="03">Turner Elkhorn Mining Co.,</E> 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); <E T="03">see also</E> 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. <E T="03">Id.</E> 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. <E T="03">See</E> 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. <E T="03">Id.</E> 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. <E T="03">Id.</E> 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. <E T="03">See</E> U.S. Government Accountability Office, <E T="03">Federal Black Lung Benefits Program: Improved Oversight of Coal Mine Operator Insurance is Needed,</E> at 13 (Feb. 2020), <E T="03">available at https://www.gao.gov/products/gao-20-21</E> . In response, OWCP developed revised guidelines and procedures for authorizing coal mine operators to self-insure, which it began to implement in 2019. These guidelines were intended to standardize the process by which applicants provide financial and actuarial information to OWCP. OWCP required each company to calculate and report its projected black lung liabilities through actuarial reports using a set of standardized assumptions, including discount rate, claim cost trends, and the probability of awards. OWCP also developed a set of financial metrics and a methodology to assess each operator's solvency, profitability, and risk of default. This assessment would determine the proportion of the operator's projected liabilities it would be required to post as security. Operators determined to be at less risk of not meeting their obligations would be required to provide smaller amounts of security, while operators at higher risk would be required to provide larger amounts of security. These guidelines were summarized in a December 2020 bulletin, <E T="03">see</E> BLBA Bulletin No. 21-01 (Dec. 7, 2020). <SU>1</SU> <FTREF/> <FTNT> <SU>1</SU>  OWCP published a notice in the <E T="04">Federal Register</E> 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). </FTNT> 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. <SU>2</SU> <FTREF/> 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. 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