Black Lung Benefits Act: Authorization of Self-Insurers

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, Department of Labor. ACTION: Notice of proposed rulemaking; request for comments. SUMMARY: The Department is proposing revisions to regulations under the Black Lung Benefits Act (BLBA or the Act) governing authorization of self-insurers. These rules will determine the process for coal mine operators to apply for authorization to self-insure, the requirements operators must meet to qualify to self-insure, the amount of security self-insured operators must provide, and the types of security accepted for operators to self-insure. DATES: The Department invites written comments on the proposed regulations from interested parties. Written comments must be received by September 28, 2026. ADDRESSES: You may submit written comments by any of the following methods. To facilitate receipt and processing of comments, the Office of Workers' Compensation Programs (OWCP) encourages interested parties to submit their comments electronically. • Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions on the website for submitting comments. Pursuant to the Administrative Procedure Act at 5 U.S.C. 553(b)(4), a plain language summary of the rule may also be found on the Federal eRulemaking Portal. • Facsimile: (202) 693-1395 (this is not a toll-free number). Only comments of ten or fewer pages, including a fax cover sheet and attachments, if any, will be accepted by fax. • Regular Mail/Hand Delivery/Courier: Submit comments on paper to the Division of Coal Mine Workers' Compensation Programs, Office of Workers' Compensation Programs, U.S. Department of Labor, 200 Constitution Avenue NW, Suite C3520-DCWMC, Washington, DC 20210. The Department's receipt of U.S. mail may be significantly delayed due to security procedures. You must take this into consideration when preparing to meet the deadline for submitting comments. Instructions: Your submission must include the agency name and the Regulatory Information Number (RIN) for this rulemaking. Caution: All comments received will be posted without change to http://www.regulations.gov. Please do not include any personally identifiable or confidential business information you do not want publicly disclosed. Docket: For access to the rulemaking docket and to read background documents or comments received, go to http://www.regulations.gov. 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: Ryan Jansen, Acting Director, Division of Coal Mine Workers' Compensation, Office of Workers' Compensation Programs, U.S. Department of Labor, 200 Constitution Avenue NW, Suite C3520-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 Act places the primary responsibility for paying benefits on coal mine operators. 30 U.S.C. 932(b). When a coal miner is determined to be eligible for benefits, the operator responsible for paying benefits (the responsible operator) is generally the one that most recently employed the miner for a period of at least one year and is financially capable of paying benefits. 20 CFR 725.495(a)(1). If a responsible operator cannot be determined, is unable to pay, or defaults on its obligation to pay, the responsibility for paying benefits falls to the Black Lung Disability Trust Fund, which is primarily financed by an excise tax on coal mined for domestic use. 30 U.S.C. 932(j), 934(b); 26 U.S.C. 4121, 9501. If the black lung excise tax revenue is not sufficient to finance the Black Lung benefits due, the trust fund may borrow from the general fund of the Treasury. As of September 30, 2024, the Fund reported a $6.6 billion deficit  1 and has borrowed from the U.S. Treasury's general fund nearly every year since 1979 to make needed expenditures. 2 In FY24, OWCP's Black Lung Program paid compensation and medical benefits for 12,911 beneficiaries, totaling approximately $140 million under Part C of title IV of the Act. 3 1   https://www.dol.gov/sites/dolgov/files/OPA/reports/2024annualreport.pdf . 2  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 https://www.gao.gov/products/gao-20-21 . 3   https://www.dol.gov/agencies/owcp/dcmwc/statistics/PartsBandCBeneficiaries . Because coal mine operators are principally responsible for paying benefits, the Act requires every operator to secure the payment of benefits for which it may be found liable. 30 U.S.C. 932(b). Each operator must secure the payment of benefits either by purchasing commercial insurance or by qualifying as a self-insurer “in accordance with regulations prescribed by the Secretary.” 30 U.S.C. 933(a); see also 20 CFR 726.1. At the end of FY24, there were 709 Responsible Mine Operators (RMOs) covered by commercial insurance policies containing a Federal Black Lung endorsement. In comparison, 15 RMOs were authorized to self-insure their Federal Black Lung liabilities, which is only two percent of RMOs that could potentially be affected by this rulemaking. There were 10,139 covered beneficiaries being paid by RMOs, either through commercial insurance policies or self-insurance authorization, during this timeframe. 4 4   https://www.dol.gov/sites/dolgov/files/OWCP/OWCPFY23-24AnnualReporttoCongress.pdf . Regulations—20 CFR 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)(2). The regulations identify four forms of security that an operator may use alone or in concert: (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). Historically, the Department did “not require 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). The Department relied in part on a company's size as evidence of its ability to make future benefits payments. Id. A number of insolvencies 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 https://www.gao.gov/products/gao-20-21 . 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 determined the proportion of the operator's projected liabilities it would be required to post as security. Operators determined to be at less risk of not meeting their obligations would be required to provide smaller amounts of security, while operators at higher risk would be required to provide larger amounts of security. These guidelines were summarized in a December 2020 bulletin, see BLBA Bulletin No. 21-01 (Dec. 7, 2020). 5 5  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 incoming Administration imposed a temporary regulatory freeze. 86 FR 8806 (Feb. 9, 2021). In 2021, the then-new administration withdrew enforcement of these guidelines, and began work on revised rulemaking that culminated in the current regulations. The Department promulgated new regulations in 2024 (89 FR 100304, December 12, 2024), providing that “[a]ny 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.” 20 CFR 726.105. The 2024 regulations implemented the practice of basing a self-insured operator's security requirement on an actuarial assessment of its total present and future black lung liability. 20 CFR 726.105, 89 FR at 100320. The regulations eliminated the process of assessing each operator's financial strength and risk of default, and required all self-insured operators to post security equal to 100 percent of their projected black lung liabilities. Id. Coal mine operators were instructed to post this security within one year of promulgation. “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.” 20 CFR 726.104(c), 89 FR at 100319. The 2024 regulations also removed the option to establish new Internal Revenue Code Section 501(c)(21) trust funds for securing a mine operator's estimated liabilities, but continued to allow existing funds to serve as security. 26 U.S.C. 501(c)(21), 20 CFR 726.104(b)(4), 89 FR at 100308, 100319. The Department now believes that the current 2024 rule is prohibitive and potentially detrimental to the coal industry by requiring operators to secure 100% of actuarial estimated liabilities in a short period of time, regardless of the operator's financial strength. The rule was informed by prior self-insured operator bankruptcies that transferred an estimated $865 million to the Trust Fund, as outlined in the February 2020 GAO report referenced above. The requirement for 100% of actuarial estimated liabilities within one year of the operator's security determination is a substantial increase in collateral in a short period of time that now risks a negative economic impact on the coal mining industry. The financial impact to individual operators is the cost of the change in securities to meet 100% actuarial estimated liabilities within one year, an amount that ranges between $136 thousand to $343 million per operator. Meeting such a sizeable increase in a short amount of time will require operators to place more liquid assets in the approved security options, such as treasury bills or letters of credit, resulting in less working capital. That change in available assets potentially impairs their operating ability and ability to adjust to strategic changes, such as current industry growth as a result of the increased need for electricity to power AI data centers, or emergent situations where a mine becomes unable to produce due to a full or partial collapse, equipment malfunction, or maintenance. Such a heavy-handed approach to self-insurance security requirements fails to promote the stated goal of increasing domestic energy production, including coal, announced by President Donald J. Trump (Executive Order 14261, April 8, 2025). OWCP believes that this rule would best balance the needs of the Trust Fund with ensuring that miners receive the benefits to which they are entitled. As was outlined in the 2020 GAO report referenced above, prior security requirements for self-insurance authorizations were inadequate, and resulted in the $865 million transfer of liability to the Trust Fund. Further disruptions in the industry could have an equally dire effect on the Trust Fund. The 2024 rule would place an excessive burden on coal mine operators by requiring self-insured operators to pledge over $500 million in security within twelve months. This diversion of capital from operations to security would have negative impacts on both the companies operating coal mines as well as national energy requirements. This proposed rule supports growth in a critical sector and balances national security and energy interests while adequately protecting the Trust Fund. Self-insured operators would need to pledge additional security to protect the Trust Fund (over $300 million) but they would be permitted to make these allotments over a lengthier period of time, and in a manner that is most appropriate for their operations. Accordingly, the Department removed the 60-day deadline it had set by letter in January 2025 for self-insured operators to submit applications for renewal authorization under the 2024 rule. The Department sent follow-up letters to the operators in February 2025, informing them that the 60-day deadline no longer applied and they would receive further guidance after OWCP consulted with new Department leadership. In the meantime, OWCP has evaluated current self-insured operators and determined that although not all are secured at 100%, they are not currently at high risk of bankruptcy. II. Statutory Authority Section 426(a) of the BLBA, 30 U.S.C. 936(a), authorizes the Secretary of Labor to prescribe rules and regulations necessary for the administration and enforcement of the Act. III. Summary of the Proposed Rule The Department proposes this rule to balance the need to protect the Trust Fund and benefits owed to disabled miners with vital energy and national security interests. Id. The proposed rule intends to allow self-insured coal mine operators greater flexibility in securing their estimated black lung liabilities for the benefit of disabled miners. The proposed rule would establish a graduated system of security levels based on an operator's risk of default, to reflect the economic realities of the mining industry. The rule would also allow operators an extended period to post this security in order to avoid constraining vital capital that could be used in mining operations. Lastly, the Department proposes to introduce new methods for operators to post required security, while continuing to recognize existing methods. These new methods could be employed individually or in combination with other options, affording the coal mine operators the greatest flexibility in determining how they can utilize their assets to secure their liabilities. By allowing multiple options, coal mine operators can select the method or methods that best fit their business operations, and OWCP can ensure that the Trust Fund is protected in the event of default. The Department invites comments on the proposed rule from all interested parties. The Department is particularly interested in comments addressing the impact of the proposed rulemaking on coal mine operators currently participating in the self-insurance program and any resulting impact on their ability to continue participating in the program. A. General Provisions The Department is proposing a number of changes to advance the goal of protecting the Black Lung Disability Trust Fund against future insolvencies of mine operators in the coal industry. During the comment period following publication of a previous Notice of Proposed Rulemaking on this subject (88 FR 3349, January 19, 2023), the Department received a number of comments from stakeholders. Those comments have been taken into consideration during development of this proposed rule. The Department proposes to establish security levels for self-insured coal mine operators at levels that account for the financial health of the operator and accurately reflect the risk of default for the Trust Fund. The Department also proposes to allow operators to fully secure the appropriate amount of their established liabilities over the course of three years following promulgation of a Final Rule. The Department proposes to allow self-insured coal mine operators to secure their estimated liabilities through a number of new methods. These new methods provide operators with expanded options that can be tailored to specific business needs and resources. The Department expects that operators will utilize a combination of multiple methods to arrive at their total security requirement. We note that the option to use multiple instruments to secure liability is not a new authority for self-insured operators. The Department also notes that the methods proposed are merely options. Operators will not be required or encouraged to utilize any particular instrument. The Department is retaining all existing methods of securing liability, with certain limitations about how much liability may be secured through each method, as detailed below. The Department proposes to allow operators to designate a hierarchy to prioritize which method of security should be utilized first in the event of default. This new authority is intended to allow operators flexibility when purchasing security, and may result in cost savings for the purchase of particular instruments. The Department retains the ability to adjust security amounts between annual reviews when presented with material change(s) to evidence submitted after the application process is completed and prior to the next scheduled annual review. The operator will receive notification of any security requirement adjustments. B. Section-by-Section Explanation 20 CFR 726.101 Who May File and Be Authorized To Self-Insure Current § 726.101 describes the minimum requirements established by the Secretary for determining whether any particular coal mine operator may be authorized to self-insure or to renew authorization to self-insure. Current paragraph (a) is retained in its entirety. OWCP proposes revising paragraph (b), to update the minimum requirements that must be met by an operator seeking authorization or reauthorization to self-insure. OWCP proposes adding a new requirement that first-time applicants provide, at minimum, $400,000 in security in order to be authorized to self-insure their liabilities. 6 If the present and future estimated liabilities of the operator exceed $400,000 at the time of application or during annual reviews in the first three years of the operator's self-insurance authorization, the operator will be required to provide 100% of their present and future estimated liabilities as security. If the estimated liabilities are less than $400,000 or if OWCP determines that the estimated liabilities cannot be reasonably estimated due to limited historical claims experience and exposure data, the operator will be required to provide $400,000 in security. This requirement will only apply to the first three years in which the new applicant is authorized to self-insure. After three years, the operator will be subject to the requirements outlined in § 726.105 below and required to post security at a level based on the operator's risk of default; they may withdraw any excess security that was required from them in the first three years of their self-insurance authorization. Previously, operators were not permitted to self-insure within the first three years of commencing mining operations. These revisions will allow new operators to self-insure, provided that they secure a minimum of $400,000 of estimated liabilities. This change allows flexibility to new operators to determine the best methods for securing liabilities, while protecting the Trust Fund. 6  Based on historical practices and its experience administering the self-insurance program under the Black Lung Benefits Act, OWCP has determined a $400,000 minimum security requirement is appropriate given the financial profile of companies it typically authorizes for self-insurance. Given the foregoing changes, OWCP proposes to retain in its entirety and renumber current paragraph (b)(1) as paragraph (b)(2), and current paragraph (b)(2) as paragraph (b)(3). Current paragraphs (c) and (d) are retained in their entirety. OWCP also proposes to add a new paragraph (e), which will specify which entities may apply for authorization to self-insure or to renew authorization to self-insure. OWCP proposes using the same language for this paragraph as appears in current § 726.102(c), and will remove the language from that section. New paragraph (e) also provides that if a parent corporation's self-insurance authorization includes subsidiary corporations, the parent will remain liable for claims based on employment with such subsidiaries regardless of any sale or transfer of the subsidiaries. 20 CFR 726.102 Application for Authority To Become a Self-Insurer; How Filed; Information To Be Submitted Current § 726.102 provides requirements for filing an application for authorization to self-insure or renew authorization to self-insure, detailing what information must be submitted with an application and how to file it. Current paragraphs (a) and (b)(1) through (b)(6) are retained in their entirety. OWCP proposes revising paragraph (b)(7). Current paragraph (b)(7) grants OWCP discretion to request additional information or evidence from an applicant. OWCP proposes deleting and replacing current paragraph (b)(7) to identify the exact financial documentation that must be submitted in order to calculate security requirements under § 726.105. OWCP's proposed paragraph (b)(7) will require an applicant to include the most recent long-term credit rating report issued by a nationally recognized statistical rating organization within the past 18 months at the time of application, if such a report exists. This change is intended to provide OWCP with an independent and standardized assessment of the applicant's creditworthiness, to use in conjunction with other information requested in paragraph (b). OWCP proposes to add a new paragraph (b)(8). The proposed paragraph (b)(8) provides the documentation an applicant must submit for OWCP to use in accordance with the financial scoring systems known as the Altman Z-score  7 and Ohlson O-score. 8 OWCP proposes to use the Altman Z-score and Ohlson O-Score as part of its calculations to determine the amount of security the applicant must submit under § 726.105. To calculate these scores, OWCP will require audited financial statements for the most recent and prior fiscal years, including balance sheets, income statements, cash flow statements, financial statement notes, and market capitalization data for publicly traded companies. OWCP performed a retrospective analysis on previous bankruptcies that discharged unsecured liabilities to the Black Lung Disability Trust Fund (BLDTF). The proposed methodology would have been successful in identifying the growing risk of default and would have resulted in requiring higher levels of security at the critical time. 7  The Altman Z-score is a financial metric used to predict the likelihood of a company entering bankruptcy within the next two years and is widely used in the financial industry. This score uses information directly from the company's balance sheets and income statements. Retrospective studies have shown that it is a reasonably efficient predictor of financial distress, particularly for manufacturing and similar industries. The formula considers: short-term liquidity; reliance on debt financing; operating efficiency; leverage; and revenue generation. 8  The Ohlson O-Score is a credit scoring system that is used to predict the likelihood of a company going bankrupt within the next two years. The Ohlson O-Score uses a formula derived from nine variables: total assets; total liabilities; working capital; current liabilities; current assets; total liabilities to total assets; net income; funds from operations; and if a net loss has occurred for the last two years. OWCP proposes to add a new paragraph (b)(9) that will allow OWCP to request additional information or evidence not outlined in paragraphs (b)(1) through (b)(8). OWCP may request additional information related to the supporting documentation submitted by the applicant as provided by paragraphs (b)(1) through (b)(8). OWCP's request will detail the reasons for requesting additional information. An example of this would be OWCP's request for additional information because there is a note in the financial statement that necessitates clarification before review of the application can continue. OWCP proposes retaining the language contained in current § 726.102(c) in its entirety and renumbering current § 726.102(c) as the new § 726.101(e). 20 CFR 726.103 Application for Authority To Self-Insure; Effect of Regulations Contained in This Part Current § 726.103 provides that each of the regulations, interpretations and requirements contained in this part 726, including those described in subpart C related to insurance contracts, are binding upon each applicant for self-insurance authorization, 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. OWCP proposes revising this section for clarification in response to a court decision that called into question OWCP's ability to hold liable a parent company based on its self-insurance of a subsidiary when the miner last worked there, if the parent later sold the subsidiary. ( See Hobet Mining Co. v. Director, OWCP and Horace Meredith, 156 F.4th 385 (4th Cir. 2025). OWCP proposes to add a new sentence clarifying that an applicant's consent to be bound by all requirements in this part includes, but is not limited to, § 726.203's insurance endorsement, which applies to any self-insurer. For instance, a parent company whose self-insurance authorization includes a subsidiary company shall remain liable for federal black lung claims based on employment with that subsidiary, regardless of any sale or transfer of the subsidiary. 20 CFR 726.104 Action by OWCP Upon Application of Operator OWCP proposes revising § 726.104 to focus on the actions OWCP will take upon receipt of applications and how much time operators will have to phase in their required security amounts. OWCP proposes to move references to the forms of security that operators may use from § 726.104 to § 726.106. Current paragraph (a) is retained in its entirety. OWCP proposes to make stylistic changes to paragraph (a). No alteration in meaning either results from or is intended by these changes. OWCP proposes retaining the portion of paragraph (b) that provides that OWCP will notify an operator that it may give security in an amount fixed by OWCP. OWCP proposes removing paragraphs (b)(1), (b)(2), (b)(3), and (b)(4), which list the acceptable types of security in the current rule, and will instead provide this information in § 726.106. OWCP proposes to substantially revise paragraph (c) to change the period of time and process through which operators may phase in their security, after the initial self-insurance review under these new regulations. Current paragraph (c) requires operators to phase in their security within one year. OWCP proposes to revise this phased approach by allowing approved operators to reach full security over the course of three years commencing with OWCP's acceptance of the first security deposit. The first security deposit for year one will be equal to at least 34% of the operator's overall security amount. For the following year, designated as year two, the second annual security deposit will be at least 33%, bringing the total security submitted to at least 67% of the operator's total security requirement. At year three, the remaining balance or 33% of security will be submitted, bringing the operator to its total calculated security. OWCP will notify the operator of the amounts and submission deadline for each security deposit after the initial review under these revised regulations. In this notification, OWCP will typically provide operators thirty calendar days to submit their payments, which can be extended for good cause. This change to the phase-in period is in recognition that some self-insured mine operators are currently severely under-secured and requiring them to attain even a low-level tier of security could put a strain on their financial capital at a time when both coal mine expansion is crucial and the industry continues to shoulder significant regulatory burdens elsewhere. In response to prior self-insurance rulemaking, operators have opposed the narrow timeframes allotted for submission of additional securities, arguing that anything less than a three-year phased in approach is not only unworkable, but arbitrary and capricious. Therefore, developing a longer phase-in approach and providing coal mine operators an established annual period to scale up their security would reduce that burden for entities that are not already at their required security level. This approach will also allow OWCP to take into account various factors that may affect the amount of security required each year of the three-year period, including the operator's assessed risk of default and the amount of security that the operator has already deposited. Furthermore, allowing operators a reasonable time to reach full security will protect the Trust Fund from absorbing the consequences of any potential default caused by operators being unable to reach full security on a truncated timeline. The three-year phase-in approach is only applicable for submitting security to attain total security after the initial review conducted under these revised regulations. Operators will not be afforded additional years to attain total security with each review of a subsequent application for reauthorization. OWCP proposes to revise paragraph (d) to provide that initial self-insurance authorization is contingent upon and effective upon receipt of either the full security amount or the first security deposit under paragraph (c) of this section, in addition to a completed form OWCP-1 Agreement and Undertaking. OWCP proposes to revise paragraph (e)(2) to provide that renewed self-insurance authorization is contingent upon and effective upon receipt of either the full security amount or the first security deposit under paragraph (c) of this section, in addition to a completed form OWCP-1 Agreement and Undertaking. The rest of current paragraph (e) is retained in its entirety. OWCP proposes to make stylistic changes to the rest of paragraph (e). No alteration in meaning either results from or is intended by these changes. OWCP proposes to revise paragraph (f) to clarify that an applicant who cannot satisfy its security requirements has 30 calendar days after OWCP issues notification of its decision to obtain and submit proof of a commercial policy or contract of insurance. 20 CFR 726.105 Fixing the Amount of Security Current § 726.105 provides that any operator approved to self-insure must submit security equal to 100 percent of its actuarial estimated liabilities (all present and future liabilities) as determined by OWCP based on the actuarial report or reports submitted by the applicant (or on file with OWCP), other information submitted with the operator's application, or any other materials or information that OWCP deems relevant. OWCP proposes to delete current § 726.105 and replace it with a new § 726.105. Proposed § 726.105 would provide that any operator approved to self-insure must submit security according to a multi-tiered risk-focused framework. This new model is designed around financial assessments based on accepted accounting standards and principles. This approach is also consistent with methodologies outlined in the National Association of Insurance Commissioners Financial Condition Examiners Handbook. OWCP will use the self-insured coal mine operator's financial strength to determine the percentage of their total estimated liability which would require security annually. By setting required security amounts at manageable levels, OWCP seeks to prevent a negative impact on coal mine operations while protecting the Trust Fund from absorbing the negative effects of coal-industry disruptions and insolvencies. New paragraph (a) describes the methodology used by OWCP to determine the amount of security an operator must provide to self-insure their liabilities under the Act. OWCP will determine the financial position of the applicant by the credit rating report submitted in accordance with new § 726.102, in conjunction with the financial metrics outlined in new paragraph (b) of this section. If no external credit rating exists, OWCP will perform an assessment based upon information submitted by the applicant. The risk assessment will place each operator within one of seven tiers with the most financially secure entities required to secure less of their liabilities, while operators who are financially riskier would be required to secure a higher percentage. OWCP proposes new paragraph (b), which will provide that the amount of required security is determined by calculating a Composite Solvency Score that evaluates the financial health of the operator using a combination of metrics in accordance with actuarial standards. OWCP shall calculate the Composite Solvency Score for each self-insured operator based upon three factors. OWCP proposes new paragraph (b)(2), which will list the three financial indicators it will use to determine the Composite Solvency Score: (i) the company's credit rating; (ii) the company's Altman Z-score; and (iii) and the company's Ohlson O-score. Subparagraph (b)(2)(i) explains that OWCP will review an operator's most recent long-term credit rating from a nationally recognized statistical rating organization, such as Fitch Ratings, Moody's Investors Service or Standard and Poor's. Subparagraphs (b)(2)(ii) and (b)(2)(iii) explain that OWCP will also factor the Altman Z-score and Ohlson O-score into its calculation of the Composite Solvency Score. New paragraph (c) provides the procedure OWCP will follow to calculate the Composite Solvency Score. New paragraph (c)(1) provides the formulas for calculating each of the metrics. New paragraph (c)(2) describes how the scores for each metric will be normalized so that the results can be weighted into a composite score. This step is necessary in the scoring process because each of the metrics is expressed on a different scale. A consistent, normalized, scale is applied to ensure that equivalent levels of risk are represented comparably across all metrics. New paragraph (c)(3) provides the final formula OWCP will use to calculate the Composite Solvency Score. New paragraph (d) provides that after calculating the Composite Solvency Score, OWCP will assign an operator to the appropriate tier of scores and will require the operator to secure the appropriate percentage of their estimated liability based on that tier. The tier structure outlined in paragraph (d) represents OWCP's planned structure for the first year of implementing any final rule arising from this proposed rule. OWCP will update this tier structure periodically by published subregulatory guidance. These adjustments will be based on actuarially assessed economic factors involving the industry. New paragraph (e) provides that OWCP reserves the right to conduct its own independent financial analysis. 20 CFR 726.106 Type of Security OWCP proposes amending § 726.106 to list the acceptable types of security, a change from where they appear in the current rule, § 726.104(b), and to allow operators to utilize new methods to secure liabilities. OWCP proposes to amend paragraph (a) to reiterate that multiple forms of security may be utilized to attain the fixed security amount. Current paragraph (b) is retained in its entirety. OWCP proposes to revise paragraph (c) to add that deposits of negotiable securities must be in compliance with § 726.107. OWCP proposes to add paragraph (d) to describe a letter of credit as an acceptable type of security. Letters of credit are described as acceptable types of security in the current rule at § 726.104(b)(3), but the current rule notes that letters of credit are not sufficient by themselves to satisfy an operator's security obligations. OWCP proposes to more definitively limit the portion of a self-insured operator's estimated liabilities that can be secured by a letter of credit, requiring that a letter of credit may only be used to secure fifty percent of an operator's estimated liability. In the event of an insolvency, a letter of credit does not provide priority over other creditors. In order to protect the Trust Fund while still allowing flexibility, OWCP would limit the amount of estimated liability that can be secured through a letter of credit. OWCP proposes to add paragraph (e) to describe a Section 501(c)(21) trust as an acceptable type of security. OWCP proposes to reintroduce the option for operators to provide security in the form of a new 501(c)(21) trust. The 2024 rulemaking restricted the use of new trusts, and mandated that only trusts in existence prior to publication of the final rule would be allowed. See 89 FR 100304, 100305 (December 12, 2024). In the 2024 rule, OWCP noted that 501(c)(21) trusts had proven to be a less reliable form of security. Id. A number of commenters expressed disagreement with this change. In part, commenters disputed the Department's authority to remove this kind of security instrument and noted that 501(c)(21) trusts are not inherently riskier to the Trust Fund. Id. at 100308. The Department explained in the 2024 Final Rule that while the Department is not concerned about the riskiness of investments in 501(c)(21) trusts, it is concerned about the risk that money in such trusts may fall below necessary security amounts because the trusts can be used to pay claims and other expenses. Id.; see also 26 U.S.C. 501(c)(21)(A). OWCP now proposes to permit the use of new 501(c)(21) trusts as security, but to protect against the risk described here, OWCP proposes to require that an operator secure no more than fifty percent of its estimated liabilities using such a trust. The operator would be required to secure the remaining liabilities with another method or combination of methods. OWCP proposes to add paragraph (f) to allow self-insured operators to secure a portion of their liabilities using reinsurance policies. Reinsurance policies under this new subsection will be limited to stop-loss or catastrophic coverage, and must not exceed 90% of the operator's total security amount. A reinsurance policy must be utilized in conjunction with one or more other types of security, and those other types of security will act as the self-insured retention limit that must be exhausted before the reinsurance policy becomes responsible. Similar to other commercial insurance, as provided in 20 CFR 726.202, a reinsurance contract can be underwritten by any stock company or mutual company or association, or with any other person, or fund, including any State fund while such company, association, person, or fund is authorized under the law of any State to insure workers' compensation. All reinsurance contracts will be subject to the same requirements of commercial insurance contracts under the Act and regulations, including 30 U.S.C. 933(b) (required provisions of insurance contracts) and 933(c) (cancellation of insurance contracts), and 20 CFR 726.201-213. OWCP proposes to incorporate the provisions of 20 CFR 726.203-207 into § 726.106(f). OWCP proposes to add paragraph (g) to allow self-insured operators to secure their liabilities using a guaranty from a parent company. The parent company will irrevocably and unconditionally, and jointly and severally, guarantee self-insured obligations allocated to the operator under the Act, either in part or in full, as allowed by OWCP. The guaranty must be submitted on parent company letterhead and contain language as required by OWCP. The guaranty shall be continuous in form and remain in full force and effect until authorized cancellation or release by OWCP. The existence of a parental guaranty does not eliminate liability for a subsidiary company, nor does the absence of a parental guaranty alter the liability of a parent company under the Act and implementing regulations. Because the success of a parental guaranty as self-insurance security will depend on the parent company's risk of default, OWCP proposes to allow a parent company to secure more than 50% of its subsidiary's estimated liabilities if the parent company has a Composite Solvency Score of at least 90 under § 726.105(d), and to secure less than 50% of its subsidiary's estimated liabilities if the parent company has a Composite Solvency Score of at least 70. No parent company with a Composite Solvency Score under 70 will be permitted to guarantee its subsidiary's liabilities. OWCP proposes to add paragraph (h) to allow an operator to create a hierarchy to determine which security instrument is to be the primary payor, secondary payor, and so forth, in the event of a partial default. Allowing the operator to determine the order in which funds should be recovered may influence the price of the instrument. A hierarchy of this type would not alleviate the operator's responsibility to secure the required amount of estimated liabilities, and would pose no additional risks to the Black Lung Disability Trust Fund in the event of a default. 20 CFR 726.107 How Negotiable Securities Are Handled Current § 726.107 is retained in its entirety. 20 CFR 726.108 Withdrawal of Securities Current § 726.108 is retained with minor changes. 20 CFR 726.109 Adjustments in the Amount of Security Current paragraph (a) provides OWCP with discretion to increase security between annual reauthorization reviews when OWCP determines that the security on deposit is less than 100% of the self-insurer's estimated liabilities. OWCP proposes revising § 726.109(a) to reflect the change in percentage of estimated liabilities that will be required for security under § 726.105 and to allow OWCP to decrease, rather than only increase, an operator's security between annual reauthorization reviews. OWCP proposes adding subparagraphs (1) and (2) to explain the conditions that would necessitate a security adjustment. Most notably, if evidence alters an operator's Composite Solvency Score, then OWCP may deem it necessary to adjust the amount of total security or scheduled phase-in deposits. See §§ 726.105, and 726.112. Current § 726.109(b) is retained in its entirety. 20 CFR 726.110 Filing of Agreement and Undertaking OWCP proposes revising § 726.110 to remove reporting requirements, which will instead be part of § 726.112. Current § 726.110 provides additional conditions that must be met prior to an operator receiving authorization to self-insure. Specifically, an operator must execute and file a form Agreement and Undertaking, in which the operator agrees to the terms of its self-insurance authorization. These requirements are set out in current paragraphs (a) and (b), which are retained in their entirety. OWCP proposes to make stylistic changes to paragraphs (a) and (b). No alteration in meaning either results from or is intended by these changes. OWCP proposes to remove paragraphs (c) and (d) from this section. These paragraphs provide requirements that operators notify OWCP of certain changes and allow OWCP to require certain information from operators. OWCP proposes moving these provisions to § 726.112, Reporting Required of Self-Insurer; Examination of Accounts of Self-Insurer. 20 CFR 726.111 Notice of Authorization To Self-Insure Current § 726.111 is retained in its entirety. 20 CFR 726.112 Reporting Required of Self-Insurer; Examination of Accounts of Self-Insurer Current § 726.112 provides reporting requirements of authorized self-insurers, including the examination of books of account, records, and other documentation to verify evidence submitted as part of the application process. OWCP proposes revising the language contained within paragraphs (a) and (b) to better explain conditions that would require an operator to provide additional information or necessitate inspection of financial documentation. When evidence suggests that the operator is neglecting duties as required under 726.110, OWCP may request supplemental documentation confirming all benefits payable have been rendered when due and proper security limits as required under § 726.105 are being maintained. OWCP proposes retaining the language contained in current § 726.110(c) and renumbering as new § 726.112(c). New paragraph (c) will provide the requirements that operators notify OWCP of certain changes to operations covered under the self-insurance authorization. Also, OWCP proposes revising the language of current § 726.110(d) and renumbering as new § 726.112(d). New paragraph (d) will provide that OWCP may require an operator to provide supplemental information upon notification of changes under paragraph (c) of this section only if it determines that the operator's total security under 726.105 will be impacted. Given the foregoing changes, OWCP proposes to renumber current paragraph (c) as paragraph (e) and retain the language in its entirety. 20 CFR 726.113 Disclosure of Confidential Information Current § 726.113 is retained with non-substantive, editorial revisions to improve clarity. 20 CFR 726.114 Authorization and Reauthorization Timeframes Current § 726.114 is retained with non-substantive, editorial revisions to improve clarity. 20 CFR 726.115 Revocation of Authorization To Self-Insure Current § 726.115 is retained in its entirety. 20 CFR 726.116 Appeal Process Section 726.116 establishes the steps an applicant must undertake to appeal a self-insurance determination made by OWCP. Current paragraph (a) provides that an applicant may file an appeal in writing with the Director of OWCP in the form and manner prescribed by OWCP within 30 days of the issuance of a self-insurance determination. The 30-day deadline may not be extended. OWCP proposes to retain the substance of this paragraph but clarify that an appeal must be made within 30 calendar days of the issuance of a self-insurance determination. Current paragraph (b) provides that an applicant may submit a brief in support of its appeal, but no further evidence not provided with the initial application. OWCP proposes to amend this paragraph to allow applicants an opportunity to submit additional evidence in support of an appeal. Current paragraph (b) also provides that OWCP may extend an applicant's deadline to submit briefing for up to 30 days upon a showing of good cause, up to a maximum of two extensions. OWCP proposes revising paragraph (b) to allow OWCP to extend an applicant's deadline upon a showing of good cause, without limiting the extensions to 30 days or a maximum of two extensions. OWCP proposes these changes because the Department believes the current provisions do not allow enough opportunity for applicants to submit evidence or enough time to do so. Current paragraph (c) sets forth the process for requesting an informal conference on an appeal. Current subparagraph (c)(1) provides that an applicant may request in writing an informal conference when it submits its brief in support of an appeal. To provide greater flexibility to applicants, OWCP proposes slightly revising subparagraph (c)(1) to reflect that an applicant may request an informal conference when submitting its brief and evidence or when submitting any new evidence in support of its appeal. Current subparagraph (c)(2) is retained in its entirety. Current subparagraph (c)(3) provides that if an applicant does not request a conference, OWCP may decide the appeal without one or schedule an informal c