(a) General. (1) The purpose of this section is to clarify the
definition of the terms ``employee welfare benefit plan'' and ``welfare
plan'' for purposes of title I of the Act and this chapter by
identifying certain practices which do not constitute employee welfare
benefit plans for those purposes. In addition, the practices listed in
this section do not constitute employee pension benefit plans within the
meaning of section 3(2) of the Act, and, therefore, do not constitute
employee benefit plans within the meaning of section 3(3). Since under
section 4(a) of the Act, only employee benefit plans within the meaning
of section 3(3) are subject to title I of the Act, the practices listed
in this section are not subject to title I.
(2) The terms ``employee welfare benefit plan'' and ``welfare plan''
are defined in section 3(1) of the Act to include plans providing ``(i)
medical, surgical, or hospital care or benefits, or benefits in the
event of sickness, accident, disability, death or unemployment, or
vacation benefits, apprenticeship or other training programs, or day
care centers, scholarship funds, or prepaid legal services, or (ii) any
benefit described in section 302(c) of the Labor Management Relations
Act, 1947 (other than pensions on retirement or death, and insurance to
provide such pensions).'' Under this definition, only plans which
provide benefits described in section 3(1)(A) of the Act or in section
302(c) of the Labor-Management Relations Act, 1947 (hereinafter ``the
LMRA'') (other than pensions on retirement or death) constitute welfare
plans. For example, a system of payroll deductions by an employer for
deposit in savings accounts owned by its employees is not an employee
welfare benefit plan within the meaning of section 3(1) of the Act
because it does not provide benefits described in section 3(1)(A) of the
Act or section 302(c) of the LMRA. (In addition, if each employee has
the right to withdraw the balance in his or her account at any time,
such a payroll savings plan does not meet the requirements for a pension
plan set forth in section 3(2) of the Act and, therefore, is not an
employee benefit plan within the meaning of section 3(3) of the Act).
(3) Section 302(c) of the LMRA lists exceptions to the restrictions
contained in subsections (a) and (b) of that section on payments and
loans made by an employer to individuals and groups representing
employees of the employer. Of these exceptions, only those contained in
paragraphs (5), (6), (7) and (8) describe benefits provided through
employee benefit plans. Moreover, only paragraph (6) describes benefits
not described in section 3(1)(A) of the Act. The benefits described in
section 302(c)(6) of the LMRA but not in section 3(1)(A) of the Act are
``* * * holiday, severance or similar benefits''. Thus, the effect of
section 3(1)(B) of the Act is to include within the definition
of ``welfare plan'' those plans which provide holiday and severance
benefits, and benefits which are similar (for example, benefits which
are in substance severance benefits, although not so characterized).
(4) Some of the practices listed in this section as excluded from
the definition of ``welfare plan'' or mentioned as examples of general
categories of excluded practices are inserted in response to questions
received by the Department of Labor and, in the Department's judgment,
do not represent borderline cases under the definition in section 3(1)
of the Act. Therefore, this section should not be read as implicitly
indicating the Department's views on the possible scope of section 3(1).
(b) Payroll practices. For purposes of title I of the Act and this
chapter, the terms ``employee welfare benefit plan'' and ``welfare
plan'' shall not include--
(1) Payment by an employer of compensation on account of work
performed by an employee, including compensation at a rate in excess of
the normal rate of compensation on account of performance of duties
under other than ordinary circumstances, such as--
(i) Overtime pay,
(ii) Shift premiums,
(iii) Holiday premiums,
(iv) Weekend premiums;
(2) Payment of an employee's normal compensation, out of the
employer's general assets, on account of periods of time during which
the employee is physically or mentally unable to perform his or her
duties, or is otherwise absent for medical reasons (such as pregnancy, a
physical examination or psychiatric treatment); and
(3) Payment of compensation, out of the employer's general assets,
on account of periods of time during which the employee, although
physically and mentally able to perform his or her duties and not absent
for medical reasons (such as pregnancy, a physical examination or
psychiatric treatment) performs no duties; for example--
(i) Payment of compensation while an employee is on vacation or
absent on a holiday, including payment of premiums to induce employees
to take vacations at a time favorable to the employer for business
reasons,
(ii) Payment of compensation to an employee who is absent while on
active military duty,
(iii) Payment of compensation while an employee is absent for the
purpose of serving as a juror or testifying in official proceedings,
(iv) Payment of compensation on account of periods of time during
which an employee performs little or no productive work while engaged in
training (whether or not subsidized in whole or in part by Federal,
State or local government funds), and
(v) Payment of compensation to an employee who is relieved of duties
while on sabbatical leave or while pursuing further education.
(c) On-premises facilities. For purposes of title I of the Act and
this chapter, the terms ``employee welfare benefit plan'' and ``welfare
plan'' shall not include--
(1) The maintenance on the premises of an employer or of an employee
organization of recreation, dining or other facilities (other than day
care centers) for use by employees or members; and
(2) The maintenance on the premises of an employer of facilities for
the treatment of minor injuries or illness or rendering first aid in
case of accidents occurring during working hours.
(d) Holiday gifts. For purposes of title I of the Act and this
chapter the terms ``employee welfare benefit plan'' and ``welfare plan''
shall not include the distribution of gifts such as turkeys or hams by
an employer to employees at Christmas and other holiday seasons.
(e) Sales to employees. For purposes of title I of the Act and this
chapter, the terms ``employee welfare benefit plan'' and ``welfare
plan'' shall not include the sale by an employer to employees of an
employer, whether or not at prevailing market prices, of articles or
commodities of the kind which the employer offers for sale in the
regular course of business.
(f) Hiring halls. For purposes of title I of the Act and this
chapter, the terms ``employee welfare benefit plan'' and ``welfare
plan'' shall not include the maintenance by one or more employers,
employee organizations, or both, of a hiring hall facility.
(g) Remembrance funds. For purposes of title I of the Act and this
chapter,
the terms ``employee welfare benefit plan'' and ``welfare plan'' shall
not include a program under which contributions are made to provide
remembrances such as flowers, an obituary notice in a newspaper or a
small gift on occasions such as the sickness, hospitalization, death or
termination of employment of employees, or members of an employee
organization, or members of their families.
(h) Strike funds. For purposes of title I of the Act and this
chapter, the terms ``employee welfare benefit plan'' and ``welfare
plan'' shall not include a fund maintained by an employee organization
to provide payments to its members during strikes and for related
purposes.
(i) Industry advancement programs. For purposes of title I of the
Act and this chapter, the terms ``employee welfare benefit plan'' and
``welfare plan'' shall not include a program maintained by an employer
or group or association of employers, which has no employee participants
and does not provide benefits to employees or their dependents,
regardless of whether the program serves as a conduit through which
funds or other assets are channelled to employee benefit plans covered
under title I of the Act.
(j) Certain group or group-type insurance programs. For purposes of
title I of the Act and this chapter, the terms ``employee welfare
benefit plan'' and ``welfare plan'' shall not include a group or group-
type insurance program offered by an insurer to employees or members of
an employee organization, under which
(1) No contributions are made by an employer or employee
organization;
(2) Participation the program is completely voluntary for employees
or members;
(3) The sole functions of the employer or employee organization with
respect to the program are, without endorsing the program, to permit the
insurer to publicize the program to employees or members, to collect
premiums through payroll deductions or dues checkoffs and to remit them
to the insurer; and
(4) The employer or employee organization receives no consideration
in the form of cash or otherwise in connection with the program, other
than reasonable compensation, excluding any profit, for administrative
services actually rendered in connection with payroll deductions or dues
checkoffs.
(k) Unfunded scholarship programs. For purposes of title I of the
Act and this chapter, the terms ``employe welfare benefit plan'' and
``welfare plan'' shall not include a scholarship program, including a
tuition and education expense refund program, under which payments are
made solely from the general assets of an employer or employee
organization.
[40 FR 34530, Aug. 15, 1975]
