Proposed Revision of Annual Information Return/Reports, 76252-76258 [2011-30919]
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76252
Federal Register / Vol. 76, No. 234 / Tuesday, December 6, 2011 / Notices
Form M–1 would require an entity to
report individuals associated with the
entity as follows: agent for service of
process or registered agent; members of
the Board, officers, trustees, custodians;
promoters and/or agents responsible for
marketing; any person, financial
institution or other entity holding
assets; any actuaries providing services;
any third party administrator (TPA)
with whom the MEWA or ECE has a
contract with; any person or entity that
has authority or control over the assets
of the MEWA or ECE or over assets paid
to the entity by plans or employers for
the provision of benefits; any person or
entity that has discretionary authority
control, or responsibility with respect to
the administration of the MEWA or ECE
or any benefit program offered by it; and
information regarding any merger with
another filing entity. Additionally, the
proposed Form M–1 would require the
filing entity to respond to several ‘‘yes
or no’’ questions with respect to the
entity’s assets and the fiduciaries
responsible for those assets.
Part II of the proposed Form M–1
includes information previously
contained in Part III of the Form M–1
and includes several modifications
which capture information regarding
entities that are operating in a State.
Pursuant to the definition of
‘‘operating’’ in the proposed regulations
published elsewhere in today’s edition
of the Federal Register, these
modifications may apply to entities that
are not actively providing coverage.
The information collected in Part III
of the proposed Form M–1 (previously
designated as Part IV) remains generally
unchanged, except information
regarding legal proceedings is now
included in Part II.
Corresponding changes were also
made to the Form M–1 Instructions
including the line-by-line instructions
to reflect these revisions to the Form M–
1. More details on filing requirements
are available in the Notice of Proposed
Rulemaking published elsewhere in this
edition of the Federal Register. The Self
Compliance Tool, which may be used to
help assess an entity’s compliance with
part 7 of ERISA, will continue to be
included in the Form M–1 instructions.
The current version of that document is
available at https://www.dol.gov/ebsa.
The Self Compliance Tool undergoes
changes to reflect the current provisions
of part 7 as they become effective. While
we are accepting comments on the Form
M–1 and the Instructions, which
include the Self-Compliance tool, please
refrain from commenting on the portion
of the instructions referencing the Self
Compliance Tool in that regard.
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III. Paperwork Reduction Act
Statement
DEPARTMENT OF LABOR
According to the Paperwork
Reduction Act of 1995 (Pub. L. 104–13)
(PRA), no persons are required to
respond to a collection of information
unless such collection displays a valid
OMB control number. The Department
notes that a Federal agency cannot
conduct or sponsor a collection of
information unless it is approved by the
Office of Management and Budget
(OMB) under the PRA, and displays a
currently valid OMB control number,
and the public is not required to
respond to a collection of information
unless it displays a currently valid OMB
control number. See 44 U.S.C. 3507.
Also, notwithstanding any other
provisions of law, no person shall be
subject to penalty for failing to comply
with a collection of information if the
collection of information does not
display a currently valid OMB control
number. See 44 U.S.C. 3512.
This notice would revise the
information collection request (ICR)
titled the ‘‘Annual Report for Multiple
Employer Welfare Arrangements (Form
M–1) approved by OMB under OMB
Control Number 1210–0116, which
currently is scheduled to expire on
March 31, 2013. For the hour and cost
burden associated with this revision,
please see the proposed regulation titled
‘‘Filings Required of Multiple Employer
Welfare Arrangements and Certain
Other Entities that Offer or Provide
Coverage for Medical Care to the
Employees of Two or More Employers,’’
which is published elsewhere in today’s
issue of the Federal Register.
Statutory Authority: 29 U.S.C. 1021–1024,
1027, 1029–31, 1059, 1134 and 1135;
Secretary of Labor’s Order 3–2010, 75 FR
55354 (September 10, 2010). Sec. 2520.101–
2 also issued under 29 U.S.C. 1181–1183,
1181 note, 1185, 1185a–d, and 1191–1191c.
Sec. 2520.103–1 also issued under 26 U.S.C.
6058 note. Sec. 2520.101–6 also issued under
§ 502(a)(3), 120 Stat. 780, 940 (2006); Secs.
2520.102–3, 2520.104b–1 and 2520.104b–3
also issued under 29 U.S.C. 1003, 1181–1183,
1181 note, 1185, 1185a–d, 1191, and 1191a–
c. Secs. 2520.104b–1 and 2520.107 also
issued under 26 U.S.C. 401 note, 111 Stat.
788. Sec. 2520.101–3 is also issued under 29
U.S.C. 1021(i).
Signed at Washington, DC this 28th day of
November, 2011.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits
Security Administration.
[FR Doc. 2011–30920 Filed 12–5–11; 8:45 am]
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Employee Benefits Security
Administration
RIN 1210–AB51
Proposed Revision of Annual
Information Return/Reports
Employee Benefits Security
Administration, Department of Labor
ACTION: Notice of proposed forms
revisions.
AGENCY:
This document contains
proposed revisions to the Form 5500
Annual Return/Report filed by
administrators of employee benefit
plans. The proposed revisions are
intended to enhance the Department of
Labor’s ability to enforce the reporting
requirements for multiple employer
welfare arrangements (MEWAs) under
Title I of the Employee Retirement
Income Security Act of 1974, as
amended (ERISA).
DATES: Written comments on the
proposed regulations should be
submitted to the Department of Labor on
or before March 5, 2012.
FOR FURTHER INFORMATION CONTACT:
Janet K. Song, Office of Regulations and
Interpretations, Employee Benefits
Security Administration, Department of
Labor, at (202) 693–8523. This is not a
toll-free number.
ADDRESSES: Written comments may be
submitted to the address specified
below. All comments will be made
available to the public. Warning: Do not
include any personally identifiable
information (such as name, address, or
other contact information) or
confidential business information that
you do not want publicly disclosed. All
comments may be posted on the Internet
and can be retrieved by most Internet
search engines. Comments may be
submitted anonymously.
Comments may be submitted to the
Department of Labor, identified by RIN
1210–AB51, by one of the following
methods:
• Federal eRulemaking Portal: https://
www.regulations.gov. Follow the
instructions for submitting comments.
• Email: e-ORI@dol.gov.
• Mail or Hand Delivery: Office of
Regulations and Interpretations,
Employee Benefits Security
Administration, Room N–5655, U.S.
Department of Labor, 200 Constitution
Avenue NW., Washington, DC 20210,
Attention: RIN 1210–AB51.
Comments received by the
Department of Labor will be posted
without change to https://
www.regulations.gov and https://
SUMMARY:
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www.dol.gov/ebsa, and made available
for public inspection at the Public
Disclosure Room, N–1513, Employee
Benefits Security Administration, 200
Constitution Avenue NW., Washington,
DC 20210.
SUPPLEMENTARY INFORMATION:
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I. Background
Under Titles I and IV of ERISA, and
the Internal Revenue Code (Code), as
amended, and regulations issued
thereunder, pension and welfare benefit
plans are generally required to file an
annual report concerning, among other
things, the financial condition and
operation of the plans. Filing the Form
5500 Annual Return/Report of
Employee Benefit Plan (Form 5500
Annual Return/Report), including any
required attachments and schedules,
generally satisfies the annual reporting
requirements. The Form 5500 Annual
Return/Report is the principal source of
information and data concerning the
operations, funding and investments of
pension and welfare benefit plans. The
Form 5500 Annual Return/Report
constitutes an integral part of the
enforcement, research and policy
development programs of the
Department of Labor (Department), the
Internal Revenue Service, and the
Pension Benefit Guaranty Corporation,
and is a source of information and data
for use by other federal agencies,
Congress, and the private sector in
assessing employee benefit, tax, and
economic trends and policies. The Form
5500 Return/Report also serves as the
primary means by which the operations
of plans can be monitored by
participants, beneficiaries, and the
general public.
In addition to filing the Form 5500
Annual Return/Report, certain
employee welfare benefit plans that are
multiple employer welfare arrangements
(MEWAs), as defined in section 3(40) of
ERISA, are also subject to the reporting
requirements under § 2520.101–2,
which is satisfied by filing a Form M–
1 Report for Multiple Employer Welfare
Arrangements (MEWAs) and Certain
Other Entities Claiming Exception
(ECEs) (Form M–1).
II. Multiple Employer Welfare
Arrangements
The Health Insurance Portability and
Accountability Act of 1996 (HIPAA)
(Pub. L. 104–191, 110 Stat. 1936)
amended ERISA to provide for, among
other things, improved portability and
continuity of health insurance coverage.
HIPAA added section 101(g) to ERISA,
providing the Secretary of Labor
(Secretary) with the authority to
establish, by regulation, annual
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reporting by MEWAs that are not
themselves plans within the meaning of
ERISA section 3(3) (non-plan MEWAs).
The purpose of the reporting
requirement was to determine whether
MEWAs were in compliance with the
requirements created by HIPAA. The
Patient Protection and Affordable Care
Act (Affordable Care Act), Public Law
111–148, 124 Stat. 119 (2010), amended
section 101(g) of ERISA to require nonplan MEWAs to register with the
Department prior to operating in a State.
On February 11, 2000, the Department
published an interim final rule
implementing the Form M–1 regulation
under § 2520.101–2. 65 FR 715. On
April 9, 2003, the Department published
the final rule. 68 FR 17494. ERISA
section 101(g) only applies to non-plan
MEWAs. In order to effectuate MEWA
compliance, however, and based on the
authority found in ERISA sections 505
and 734,1 the 2003 Form M–1 regulation
requires the administrators of both plan
and non-plan MEWAs, as well as certain
other entities that offer or provide
health benefits to the employees of two
or more employers, to file the Form M–
1 with the Secretary.
Although ERISA sections 505 and 734
provided the Secretary with the
authority to require plan MEWAs to
comply with the Form M–1 reporting
requirements of § 2520.101–2, only nonplan MEWAs are subject to civil
penalties under ERISA section 502(c)(5)
for failure to comply with the Form M–
1 requirements.2
III. Discussion of the Proposed
Revisions
1. Proposed Regulatory Amendments
The Department is simultaneously
publishing a Notice of Proposed
Rulemaking in today’s Federal Register
that, upon adoption, would amend the
existing Form M–1 requirements under
§ 2520.101–2, propose implementation
of new registration requirements
enacted by the Affordable Care Act, and
propose amendments to the
Department’s annual reporting
1 In the preamble to the 2000 interim final rule,
the Department explained ‘‘[a]n important reason
for requiring these groups to file is that the
administrator of a MEWA may incorrectly
determine that it is a group health plan or that it
is established or maintained pursuant to a collective
bargaining agreement. A reporting requirement
limited only to MEWAs that are not group health
plans may not result in reporting by many such
MEWAs, thus greatly reducing the value of the data
collected.’’ See 65 FR 7152, 7153, (Feb. 11, 2000).
2 Pursuant to ERISA section 502(c)(5), a civil
penalty of up to $1,100 (or higher amount if
adjusted pursuant to the Federal Civil Penalties
Inflation Adjustment Act of 1990, as amended) a
day may be assessed for each day a non-plan
MEWA fails to file a complete Form M–1.
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regulations to strengthen the Form M–
1 requirements for MEWAs. To reflect
the proposed regulatory amendments to
the Form 5500 reporting requirements,
the Department is proposing to revise
the Form 5500 Annual Return/Report
and instructions as follows.
2. Plan MEWA Filing Requirement
Section 2520.104–20 and the
instructions for the Form 5500 and
Form 5500–SF provide for exemption
from certain reporting and disclosure
requirements under Title I of ERISA,
including the requirement to file Form
5500 Annual Return/Report, for
unfunded, fully insured, or combination
unfunded/fully insured welfare plans
that cover fewer than 100 participants.
Under the proposed amendments to
§ 2520.103–1(c)(2) and § 2520.104–20,
and revisions to the instructions for
Form 5500 and Form 5500–SF, all plan
MEWAs subject to the Form M–1
requirements would be required to file
Form 5500 Annual Return/Report,
regardless of the plan size. The limited
exemption under § 2520.104–20 would
be removed for plan MEWAs subject to
the Form M–1 requirements. In
addition, such plan MEWAs would not
be eligible to file the Form 5500–SF.3
As discussed in the Paperwork
Reduction Act statement, below, the
Department believes that the number of
plan MEWAs affected by the proposed
removal of the exemption under
§ 2520.104–20 would be small.
Nevertheless, the Department believes
that the proposed change is necessary
because all MEWAs are subject to the
existing (and proposed) Form M–1
requirements under § 2520.101–2,
regardless of the size of the entity.
Unless all plan MEWAs are required to
file the Form 5500 Annual Return/
Report (with the proposed questions
regarding Form M–1 compliance), the
Department would have no way to
enforce the Form M–1 requirements
against MEWAs that might
mischaracterize themselves as being
eligible for the exemption under
§ 2520.104–20.
Moreover, the burden of preparing
and filing the Form 5500 Annual
Return/Report for the few small
unfunded/fully insured plan MEWAs
affected by the proposal would be
minimized because, in addition to being
3 The Form 5500–SF does not include specific
Schedule A insurance information, and the
Department believes that plan MEWAs subject to
this proposal that claim to provide insured benefits
should be required to complete the Schedule A so
that enforcement officials and the public have
information about the insurance policy and
insurance company through which the MEWA is
providing insurance coverage.
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eligible for the simplified annual
reporting requirements for small welfare
plans provided under § 2520.104–41,
these plan MEWAs would be exempt
under § 2520.104–44 from completing
Schedule I (Financial Information).
Thus, these plan MEWAs would only
need to file a Form 5500 and, if
applicable, Schedule A (Insurance
Information) and Schedule G, Part III (to
report any nonexempt transactions).
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3. Form 5500—New MEWA Information
Under the Notice of Proposed
Rulemaking, content of the annual
report under § 2520.103–1 would be
amended to require a plan MEWA
subject to the Form M–1 requirements to
include a proof of compliance with
§ 2520.101–2 (filing the Form M–1) as
part of the Form 5500 Annual Return/
Report. Accordingly, the Department is
proposing to add a new Part III to the
Form 5500, which would ask for
information regarding whether an
employee welfare benefit plan is a
MEWA subject to the Form M–1
requirements, and if so, whether the
plan is currently in compliance with the
Form M–1 requirements under
§ 2520.101–2. Plan administrators that
indicate the plan is a MEWA subject to
the Form M–1 requirements will also be
required to enter a Receipt Confirmation
Code for the most recent Form M–1 filed
with the Department. Failure to answer
the Form M–1 compliance questions
will result in rejection of the Form 5500
Annual Return/Report as incomplete
and civil penalties may be assessed
pursuant to ERISA section 502(c)(2).
IV. Findings on the Revised Form 5500
Annual Return/Report as a Limited
Exemption and Simplified Reporting
Section 104(a)(2)(A) of ERISA
authorizes the Secretary to prescribe by
regulation simplified reporting for
pension plans that cover fewer than 100
participants. Section 104(a)(3) of ERISA
authorizes the Secretary to exempt any
welfare plan from all or part of the
reporting and disclosure requirements
of Title I of ERISA or to provide
simplified reporting and disclosure if
the Secretary finds that such
requirements are inappropriate as
applied to such plans. Section 110 of
ERISA permits the Secretary to
prescribe for pension plans alternative
methods of complying with any of the
reporting and disclosure requirements if
the Secretary finds that: (1) The use of
the alternative method is consistent
with the purposes of Title I of ERISA,
provides adequate disclosure to plan
participants and beneficiaries, and
provides adequate reporting to the
Secretary; (2) the application of the
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statutory reporting and disclosure
requirements would increase costs to
the plan or impose unreasonable
administrative burdens with respect to
the operation of the plan; and (3) the
application of the statutory reporting
and disclosure requirements would be
adverse to the interests of plan
participants in the aggregate. For
purposes of Title I of ERISA, the filing
of a completed Form 5500 Annual
Return/Report, including the filing by
eligible plans of the Form 5500–SF, in
accordance with the instructions and
related regulations, generally would
constitute compliance with the
simplified report, limited exemption
and/or alternative method of
compliance in § 2520.103–1. In
addition, section 505 of ERISA
authorizes the Secretary to prescribe
such regulations as the Secretary finds
necessary or appropriate to carry out the
provisions of Title I of ERISA.
In revising the Form 5500 Annual
Return/Report and making the
amendments to the Department’s annual
reporting regulations, the Department
has attempted to balance the needs of
participants and beneficiaries and the
Department to obtain information
necessary to protect ERISA rights and
interests with the costs attendant with
the reporting of information to the
federal government. The Department
finds under sections 104(a)(2)(A) and
104(a)(3) of ERISA that the use of the
Form 5500 Annual Return/Report, with
the proposed new Form M–1
compliance questions, is consistent with
the purposes of Title I of ERISA and
provides adequate disclosure to
participants and beneficiaries and
adequate reporting to the Secretary.
The use of the Form 5500 Annual
Return/Report, including the proposed
new Form M–1 compliance questions,
will relieve plan MEWAs from
increased costs and unreasonable
administrative burdens by providing a
standardized format that facilitates
reporting, eliminates duplicative
reporting requirements, and simplifies
the content of the annual report in
general. Taking into account the above,
the Department has determined that the
proposed revisions to the Form 5500
Annual Return/Report are necessary and
appropriate to carry out the provisions
of Title I of ERISA. The proposed
revised Form 5500 Annual Return/
Report provides for the reporting and
disclosure of financial and other plan
information described in section 103 of
ERISA in a uniform, efficient, and
understandable manner, thereby
facilitating the disclosure of such
information to plan participants and
beneficiaries.
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V. Paperwork Reduction Act Statement
According to the Paperwork
Reduction Act of 1995 (Pub. L. 104–13)
(PRA), no persons are required to
respond to a collection of information
unless such collection displays a valid
OMB control number. The Department
notes that a Federal agency cannot
conduct or sponsor a collection of
information unless it is approved by the
Office of Management and Budget
(OMB) under the PRA, and displays a
currently valid OMB control number,
and the public is not required to
respond to a collection of information
unless it displays a currently valid OMB
control number. See 44 U.S.C. 3507.
Also, notwithstanding any other
provisions of law, no person shall be
subject to penalty for failing to comply
with a collection of information if the
collection of information does not
display a currently valid OMB control
number. See 44 U.S.C. 3512.
The Department has filed a revision
with OMB regarding the impact this
notice would have on the information
collection request titled ‘‘Form 5500,
Annual Return/Report of Employee
Benefit Plan,’’ which is approved by
OMB under OMB Control Number
1210–0110 and currently scheduled to
expire on March 31, 2014. The proposed
regulation titled ‘‘Filings Required of
Multiple Employer Welfare
Arrangements and Certain Other
Entities that Offer or Provide Coverage
for Medical Care to the Employees of
Two or More Employers,’’ published
elsewhere in today’s issue of the
Federal Register, would revise the
content of the Form 5500 Annual
Return/Report to require an ERISAcovered plan MEWA that is subject to
Form M–1 requirements to include a
proof of filing the Form M–1 as part of
the Form 5500 Annual Return/Report.
Accordingly, the Department is
proposing to add a new Part III to the
Form 5500, which would ask for
information regarding whether the
employee welfare benefit plan is a
MEWA subject to the Form M–1
requirements, and if so, whether the
plan is currently in compliance with the
Form M–1 requirements under
§ 2520.101–2. Plan administrators that
indicate the plan is a MEWA subject to
the Form M–1 requirements also would
be required to enter a Receipt
Confirmation Code for the most recent
Form M–1 filed with the Department.
Failure to answer the Form M–1
compliance questions will result in
rejection of the Form 5500 Annual
Return/Report as incomplete and civil
penalties may be assessed pursuant to
ERISA section 502(c)(2). The
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Department believes that the burden
associated with this revision would be
de minimis, because plan administrators
would know whether the plan MEWA is
subject to and in compliance with the
Form M–1 requirements, and they
would have the Receipt Confirmation
Code for the most recent Form M–1
filing readily available.
The proposed rule also would require
all plan MEWAs subject to the Form M–
1 requirements to file the Form 5500
Annual Return/Report, regardless of the
plan size. The limited exemption for
certain small welfare plans under
§ 2520.104–20 would be removed for
plan MEWAs subject to the Form M–1
requirements. In addition, such plan
MEWAs would not be eligible to file the
Form 5500–SF. Although the
Department does not have sufficient
data to estimate the number of plan
MEWAs that would be affected by this
revision, it expects the number to be
small, because 90% of MEWAs that file
the Form M–1 with the Department
cover more than 100 participants.
Moreover, as discussed earlier in this
notice, the burden of preparing and
filing the Form 5500 Annual Return/
Report for the few small unfunded/fully
insured plan MEWAs affected by the
proposal would be minimal, because, in
addition to being eligible for the
simplified annual reporting
requirements for small welfare plans
76255
provided under § 2520.104–41, these
plan MEWAs would be exempt under
§ 2520.104–44 from completing
Schedule I (Financial Information).
Thus, the affected plan MEWAs would
only need to file a Form 5500 and, if
applicable, Schedule A and Schedule G,
Part III (to report any nonexempt
transactions). The Department estimates
that affected MEWAs would incur a cost
of $450 to engage a third-party service
provider to prepare the form and
schedules for submission.
Appendix A—Proposed Changes to
Existing Form 5500—New Part III
Added
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Appendix B—Proposed Changes to
Form 5500 Instructions
The proposed changes to the
instructions to the Form 5500 are as
follows:
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Federal Register / Vol. 76, No. 234 / Tuesday, December 6, 2011 / Notices
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General Changes
attachments. The proposed changes are
as follows:
Signed at Washington, DC this 28th day of
November, 2011.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits
Security Administration, Department of
Labor.
EN06DE11.004</GPH>
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The instructions to the Form 5500–SF
will be updated to clarify that plan
MEWAs subject to Form M–1 filing
requirements are not eligible to file the
Form 5500–SF and must file the Form
5500, with all required schedules and
[FR Doc. 2011–30919 Filed 12–5–11; 8:45 am]
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Appendix C—Proposed Changes to
Existing Form 5500–SF Instructions
]]>Agencies
[Federal Register Volume 76, Number 234 (Tuesday, December 6, 2011)]
[Notices]
[Pages 76252-76258]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-30919]
-----------------------------------------------------------------------
DEPARTMENT OF LABOR
Employee Benefits Security Administration
RIN 1210-AB51
Proposed Revision of Annual Information Return/Reports
AGENCY: Employee Benefits Security Administration, Department of Labor
ACTION: Notice of proposed forms revisions.
-----------------------------------------------------------------------
SUMMARY: This document contains proposed revisions to the Form 5500
Annual Return/Report filed by administrators of employee benefit plans.
The proposed revisions are intended to enhance the Department of
Labor's ability to enforce the reporting requirements for multiple
employer welfare arrangements (MEWAs) under Title I of the Employee
Retirement Income Security Act of 1974, as amended (ERISA).
DATES: Written comments on the proposed regulations should be submitted
to the Department of Labor on or before March 5, 2012.
FOR FURTHER INFORMATION CONTACT: Janet K. Song, Office of Regulations
and Interpretations, Employee Benefits Security Administration,
Department of Labor, at (202) 693-8523. This is not a toll-free number.
ADDRESSES: Written comments may be submitted to the address specified
below. All comments will be made available to the public. Warning: Do
not include any personally identifiable information (such as name,
address, or other contact information) or confidential business
information that you do not want publicly disclosed. All comments may
be posted on the Internet and can be retrieved by most Internet search
engines. Comments may be submitted anonymously.
Comments may be submitted to the Department of Labor, identified by
RIN 1210-AB51, by one of the following methods:
Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments.
Email: e-ORI@dol.gov.
Mail or Hand Delivery: Office of Regulations and
Interpretations, Employee Benefits Security Administration, Room N-
5655, U.S. Department of Labor, 200 Constitution Avenue NW.,
Washington, DC 20210, Attention: RIN 1210-AB51.
Comments received by the Department of Labor will be posted without
change to https://www.regulations.gov and https://
[[Page 76253]]
www.dol.gov/ebsa, and made available for public inspection at the
Public Disclosure Room, N-1513, Employee Benefits Security
Administration, 200 Constitution Avenue NW., Washington, DC 20210.
SUPPLEMENTARY INFORMATION:
I. Background
Under Titles I and IV of ERISA, and the Internal Revenue Code
(Code), as amended, and regulations issued thereunder, pension and
welfare benefit plans are generally required to file an annual report
concerning, among other things, the financial condition and operation
of the plans. Filing the Form 5500 Annual Return/Report of Employee
Benefit Plan (Form 5500 Annual Return/Report), including any required
attachments and schedules, generally satisfies the annual reporting
requirements. The Form 5500 Annual Return/Report is the principal
source of information and data concerning the operations, funding and
investments of pension and welfare benefit plans. The Form 5500 Annual
Return/Report constitutes an integral part of the enforcement, research
and policy development programs of the Department of Labor
(Department), the Internal Revenue Service, and the Pension Benefit
Guaranty Corporation, and is a source of information and data for use
by other federal agencies, Congress, and the private sector in
assessing employee benefit, tax, and economic trends and policies. The
Form 5500 Return/Report also serves as the primary means by which the
operations of plans can be monitored by participants, beneficiaries,
and the general public.
In addition to filing the Form 5500 Annual Return/Report, certain
employee welfare benefit plans that are multiple employer welfare
arrangements (MEWAs), as defined in section 3(40) of ERISA, are also
subject to the reporting requirements under Sec. 2520.101-2, which is
satisfied by filing a Form M-1 Report for Multiple Employer Welfare
Arrangements (MEWAs) and Certain Other Entities Claiming Exception
(ECEs) (Form M-1).
II. Multiple Employer Welfare Arrangements
The Health Insurance Portability and Accountability Act of 1996
(HIPAA) (Pub. L. 104-191, 110 Stat. 1936) amended ERISA to provide for,
among other things, improved portability and continuity of health
insurance coverage. HIPAA added section 101(g) to ERISA, providing the
Secretary of Labor (Secretary) with the authority to establish, by
regulation, annual reporting by MEWAs that are not themselves plans
within the meaning of ERISA section 3(3) (non-plan MEWAs). The purpose
of the reporting requirement was to determine whether MEWAs were in
compliance with the requirements created by HIPAA. The Patient
Protection and Affordable Care Act (Affordable Care Act), Public Law
111-148, 124 Stat. 119 (2010), amended section 101(g) of ERISA to
require non-plan MEWAs to register with the Department prior to
operating in a State.
On February 11, 2000, the Department published an interim final
rule implementing the Form M-1 regulation under Sec. 2520.101-2. 65 FR
715. On April 9, 2003, the Department published the final rule. 68 FR
17494. ERISA section 101(g) only applies to non-plan MEWAs. In order to
effectuate MEWA compliance, however, and based on the authority found
in ERISA sections 505 and 734,\1\ the 2003 Form M-1 regulation requires
the administrators of both plan and non-plan MEWAs, as well as certain
other entities that offer or provide health benefits to the employees
of two or more employers, to file the Form M-1 with the Secretary.
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\1\ In the preamble to the 2000 interim final rule, the
Department explained ``[a]n important reason for requiring these
groups to file is that the administrator of a MEWA may incorrectly
determine that it is a group health plan or that it is established
or maintained pursuant to a collective bargaining agreement. A
reporting requirement limited only to MEWAs that are not group
health plans may not result in reporting by many such MEWAs, thus
greatly reducing the value of the data collected.'' See 65 FR 7152,
7153, (Feb. 11, 2000).
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Although ERISA sections 505 and 734 provided the Secretary with the
authority to require plan MEWAs to comply with the Form M-1 reporting
requirements of Sec. 2520.101-2, only non-plan MEWAs are subject to
civil penalties under ERISA section 502(c)(5) for failure to comply
with the Form M-1 requirements.\2\
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\2\ Pursuant to ERISA section 502(c)(5), a civil penalty of up
to $1,100 (or higher amount if adjusted pursuant to the Federal
Civil Penalties Inflation Adjustment Act of 1990, as amended) a day
may be assessed for each day a non-plan MEWA fails to file a
complete Form M-1.
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III. Discussion of the Proposed Revisions
1. Proposed Regulatory Amendments
The Department is simultaneously publishing a Notice of Proposed
Rulemaking in today's Federal Register that, upon adoption, would amend
the existing Form M-1 requirements under Sec. 2520.101-2, propose
implementation of new registration requirements enacted by the
Affordable Care Act, and propose amendments to the Department's annual
reporting regulations to strengthen the Form M-1 requirements for
MEWAs. To reflect the proposed regulatory amendments to the Form 5500
reporting requirements, the Department is proposing to revise the Form
5500 Annual Return/Report and instructions as follows.
2. Plan MEWA Filing Requirement
Section 2520.104-20 and the instructions for the Form 5500 and Form
5500-SF provide for exemption from certain reporting and disclosure
requirements under Title I of ERISA, including the requirement to file
Form 5500 Annual Return/Report, for unfunded, fully insured, or
combination unfunded/fully insured welfare plans that cover fewer than
100 participants. Under the proposed amendments to Sec. 2520.103-
1(c)(2) and Sec. 2520.104-20, and revisions to the instructions for
Form 5500 and Form 5500-SF, all plan MEWAs subject to the Form M-1
requirements would be required to file Form 5500 Annual Return/Report,
regardless of the plan size. The limited exemption under Sec.
2520.104-20 would be removed for plan MEWAs subject to the Form M-1
requirements. In addition, such plan MEWAs would not be eligible to
file the Form 5500-SF.\3\
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\3\ The Form 5500-SF does not include specific Schedule A
insurance information, and the Department believes that plan MEWAs
subject to this proposal that claim to provide insured benefits
should be required to complete the Schedule A so that enforcement
officials and the public have information about the insurance policy
and insurance company through which the MEWA is providing insurance
coverage.
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As discussed in the Paperwork Reduction Act statement, below, the
Department believes that the number of plan MEWAs affected by the
proposed removal of the exemption under Sec. 2520.104-20 would be
small. Nevertheless, the Department believes that the proposed change
is necessary because all MEWAs are subject to the existing (and
proposed) Form M-1 requirements under Sec. 2520.101-2, regardless of
the size of the entity. Unless all plan MEWAs are required to file the
Form 5500 Annual Return/Report (with the proposed questions regarding
Form M-1 compliance), the Department would have no way to enforce the
Form M-1 requirements against MEWAs that might mischaracterize
themselves as being eligible for the exemption under Sec. 2520.104-20.
Moreover, the burden of preparing and filing the Form 5500 Annual
Return/Report for the few small unfunded/fully insured plan MEWAs
affected by the proposal would be minimized because, in addition to
being
[[Page 76254]]
eligible for the simplified annual reporting requirements for small
welfare plans provided under Sec. 2520.104-41, these plan MEWAs would
be exempt under Sec. 2520.104-44 from completing Schedule I (Financial
Information). Thus, these plan MEWAs would only need to file a Form
5500 and, if applicable, Schedule A (Insurance Information) and
Schedule G, Part III (to report any nonexempt transactions).
3. Form 5500--New MEWA Information
Under the Notice of Proposed Rulemaking, content of the annual
report under Sec. 2520.103-1 would be amended to require a plan MEWA
subject to the Form M-1 requirements to include a proof of compliance
with Sec. 2520.101-2 (filing the Form M-1) as part of the Form 5500
Annual Return/Report. Accordingly, the Department is proposing to add a
new Part III to the Form 5500, which would ask for information
regarding whether an employee welfare benefit plan is a MEWA subject to
the Form M-1 requirements, and if so, whether the plan is currently in
compliance with the Form M-1 requirements under Sec. 2520.101-2. Plan
administrators that indicate the plan is a MEWA subject to the Form M-1
requirements will also be required to enter a Receipt Confirmation Code
for the most recent Form M-1 filed with the Department. Failure to
answer the Form M-1 compliance questions will result in rejection of
the Form 5500 Annual Return/Report as incomplete and civil penalties
may be assessed pursuant to ERISA section 502(c)(2).
IV. Findings on the Revised Form 5500 Annual Return/Report as a Limited
Exemption and Simplified Reporting
Section 104(a)(2)(A) of ERISA authorizes the Secretary to prescribe
by regulation simplified reporting for pension plans that cover fewer
than 100 participants. Section 104(a)(3) of ERISA authorizes the
Secretary to exempt any welfare plan from all or part of the reporting
and disclosure requirements of Title I of ERISA or to provide
simplified reporting and disclosure if the Secretary finds that such
requirements are inappropriate as applied to such plans. Section 110 of
ERISA permits the Secretary to prescribe for pension plans alternative
methods of complying with any of the reporting and disclosure
requirements if the Secretary finds that: (1) The use of the
alternative method is consistent with the purposes of Title I of ERISA,
provides adequate disclosure to plan participants and beneficiaries,
and provides adequate reporting to the Secretary; (2) the application
of the statutory reporting and disclosure requirements would increase
costs to the plan or impose unreasonable administrative burdens with
respect to the operation of the plan; and (3) the application of the
statutory reporting and disclosure requirements would be adverse to the
interests of plan participants in the aggregate. For purposes of Title
I of ERISA, the filing of a completed Form 5500 Annual Return/Report,
including the filing by eligible plans of the Form 5500-SF, in
accordance with the instructions and related regulations, generally
would constitute compliance with the simplified report, limited
exemption and/or alternative method of compliance in Sec. 2520.103-1.
In addition, section 505 of ERISA authorizes the Secretary to prescribe
such regulations as the Secretary finds necessary or appropriate to
carry out the provisions of Title I of ERISA.
In revising the Form 5500 Annual Return/Report and making the
amendments to the Department's annual reporting regulations, the
Department has attempted to balance the needs of participants and
beneficiaries and the Department to obtain information necessary to
protect ERISA rights and interests with the costs attendant with the
reporting of information to the federal government. The Department
finds under sections 104(a)(2)(A) and 104(a)(3) of ERISA that the use
of the Form 5500 Annual Return/Report, with the proposed new Form M-1
compliance questions, is consistent with the purposes of Title I of
ERISA and provides adequate disclosure to participants and
beneficiaries and adequate reporting to the Secretary.
The use of the Form 5500 Annual Return/Report, including the
proposed new Form M-1 compliance questions, will relieve plan MEWAs
from increased costs and unreasonable administrative burdens by
providing a standardized format that facilitates reporting, eliminates
duplicative reporting requirements, and simplifies the content of the
annual report in general. Taking into account the above, the Department
has determined that the proposed revisions to the Form 5500 Annual
Return/Report are necessary and appropriate to carry out the provisions
of Title I of ERISA. The proposed revised Form 5500 Annual Return/
Report provides for the reporting and disclosure of financial and other
plan information described in section 103 of ERISA in a uniform,
efficient, and understandable manner, thereby facilitating the
disclosure of such information to plan participants and beneficiaries.
V. Paperwork Reduction Act Statement
According to the Paperwork Reduction Act of 1995 (Pub. L. 104-13)
(PRA), no persons are required to respond to a collection of
information unless such collection displays a valid OMB control number.
The Department notes that a Federal agency cannot conduct or sponsor a
collection of information unless it is approved by the Office of
Management and Budget (OMB) under the PRA, and displays a currently
valid OMB control number, and the public is not required to respond to
a collection of information unless it displays a currently valid OMB
control number. See 44 U.S.C. 3507. Also, notwithstanding any other
provisions of law, no person shall be subject to penalty for failing to
comply with a collection of information if the collection of
information does not display a currently valid OMB control number. See
44 U.S.C. 3512.
The Department has filed a revision with OMB regarding the impact
this notice would have on the information collection request titled
``Form 5500, Annual Return/Report of Employee Benefit Plan,'' which is
approved by OMB under OMB Control Number 1210-0110 and currently
scheduled to expire on March 31, 2014. The proposed regulation titled
``Filings Required of Multiple Employer Welfare Arrangements and
Certain Other Entities that Offer or Provide Coverage for Medical Care
to the Employees of Two or More Employers,'' published elsewhere in
today's issue of the Federal Register, would revise the content of the
Form 5500 Annual Return/Report to require an ERISA-covered plan MEWA
that is subject to Form M-1 requirements to include a proof of filing
the Form M-1 as part of the Form 5500 Annual Return/Report.
Accordingly, the Department is proposing to add a new Part III to the
Form 5500, which would ask for information regarding whether the
employee welfare benefit plan is a MEWA subject to the Form M-1
requirements, and if so, whether the plan is currently in compliance
with the Form M-1 requirements under Sec. 2520.101-2. Plan
administrators that indicate the plan is a MEWA subject to the Form M-1
requirements also would be required to enter a Receipt Confirmation
Code for the most recent Form M-1 filed with the Department. Failure to
answer the Form M-1 compliance questions will result in rejection of
the Form 5500 Annual Return/Report as incomplete and civil penalties
may be assessed pursuant to ERISA section 502(c)(2). The
[[Page 76255]]
Department believes that the burden associated with this revision would
be de minimis, because plan administrators would know whether the plan
MEWA is subject to and in compliance with the Form M-1 requirements,
and they would have the Receipt Confirmation Code for the most recent
Form M-1 filing readily available.
The proposed rule also would require all plan MEWAs subject to the
Form M-1 requirements to file the Form 5500 Annual Return/Report,
regardless of the plan size. The limited exemption for certain small
welfare plans under Sec. 2520.104-20 would be removed for plan MEWAs
subject to the Form M-1 requirements. In addition, such plan MEWAs
would not be eligible to file the Form 5500-SF. Although the Department
does not have sufficient data to estimate the number of plan MEWAs that
would be affected by this revision, it expects the number to be small,
because 90% of MEWAs that file the Form M-1 with the Department cover
more than 100 participants. Moreover, as discussed earlier in this
notice, the burden of preparing and filing the Form 5500 Annual Return/
Report for the few small unfunded/fully insured plan MEWAs affected by
the proposal would be minimal, because, in addition to being eligible
for the simplified annual reporting requirements for small welfare
plans provided under Sec. 2520.104-41, these plan MEWAs would be
exempt under Sec. 2520.104-44 from completing Schedule I (Financial
Information). Thus, the affected plan MEWAs would only need to file a
Form 5500 and, if applicable, Schedule A and Schedule G, Part III (to
report any nonexempt transactions). The Department estimates that
affected MEWAs would incur a cost of $450 to engage a third-party
service provider to prepare the form and schedules for submission.
Appendix A--Proposed Changes to Existing Form 5500--New Part III Added
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Appendix B--Proposed Changes to Form 5500 Instructions
The proposed changes to the instructions to the Form 5500 are as
follows:
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Appendix C--Proposed Changes to Existing Form 5500-SF Instructions
General Changes
The instructions to the Form 5500-SF will be updated to clarify
that plan MEWAs subject to Form M-1 filing requirements are not
eligible to file the Form 5500-SF and must file the Form 5500, with all
required schedules and attachments. The proposed changes are as
follows:
[GRAPHIC] [TIFF OMITTED] TN06DE11.004
Signed at Washington, DC this 28th day of November, 2011.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits Security Administration,
Department of Labor.
[FR Doc. 2011-30919 Filed 12-5-11; 8:45 am]
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