(a) Scope. Under the authority of section 104(a)(3) of the Act, the
administrator of any employee welfare benefit plan which covers fewer
than 100 participants at the beginning of the plan year and which meets
the requirements of paragraph (b) of this section is exempted from
certain reporting and disclosure provisions of the Act. Specifically,
the administrator of such plan is not required to file with the
Secretary a terminal report or furnish upon written request of any
participant or beneficiary a copy of any terminal report as required by
section 104(b)(4) of the Act.
(b) Application. This exemption applies only to welfare plans, each
of which has fewer than 100 participants at the beginning of the plan
year and which are part of a group insurance arrangement if such
arrangement:
(1) Provides benefits to the employees of two or more unaffiliated
employers, but not in connection with a multiemployer plan as defined in
section 3(37) of the Act and any regulations prescribed under the Act
concerning section 3(37);
(2) Fully insures one or more welfare plans of each participating
employer through insurance contracts purchased solely by the employers
or purchased partly by the employers and partly by their participating
employees, with all benefit payments made by the insurance company:
Provided, That--
(i) Contributions by participating employees are forwarded by the
employers within three months of receipt,
(ii) Refunds, to which contributing participants are entitled, are
returned to them within three months of receipt, and
(iii) Contributing participants are informed upon entry into the
plan of the provisions of the plan concerning the allocation of refunds;
and
(3) Uses a trust (or other entity such as a trade association) as
the holder of the insurance contracts and uses a trust as the conduit
for payment of premiums to the insurance company.
(c) Limitations. This exemption does not exempt the administrator of
an employee benefit plan from any other
[[Page 418]]
requirement of title I of the Act, including the provisions which
require that plan administrators furnish copies of the summary plan
description to participants and beneficiaries (section 104(b)(1)), file
an annual report with the Secretary of Labor (section 104(a)(1)) and
furnish certain documents to the Secretary of Labor upon request
(section 104(a)(6)), and authorize the Secretary of Labor to collect
information and data from employee benefit plans for research and
analysis (section 513).
(d) Examples. (1) A welfare plan has 25 participants at the
beginning of the plan year. It is part of a group insurance arrangement
of a trade association which provides benefits to employees of two or
more unaffiliated employers, but not in connection with a multiemployer
plan as defined in the Act. Plan benefits are fully insured pursuant to
insurance contracts purchased with premium payments derived half from
employee contributions (which the employer forwards within three months
of receipt) and half from the general assets of each participating
employer. Refunds to the plan are paid to participating employees within
three months of receipt as provided in the plan and as described to each
participant upon entering the plan. The trade association holds the
insurance contracts. A trust acts as a conduit for payments, receiving
premium payments from participating employers and paying the insurance
company. The plan appoints the trade association as its plan
administrator. The association, as plan administrator, provides summary
plan descriptions to participants and beneficiaries, enlisting the help
of participating employers in carrying out this distribution. The plan
administrator also makes copies of certain plan documents available to
the plan's principal office and such other places as necessary to give
participants reasonable access to them. The plan administrator files
with the Secretary an annual report covering activities of the plan, as
required by the Act and such regulations as the Secretary may issue. The
exemption provided by this section applies because the conditions of
paragraph (b) have been satisfied.
(2) Assume the same facts as paragraph (d)(1) of this section except
that the premium payments for the insurance company are paid from the
trust to an independent insurance brokerage firm acting as the agent of
the insurance company. The trade association is the holder of the
insurance contract. The plan appoints an officer of the participating
employer as the plan administrator. The officer, as plan administrator,
performs the same reporting and disclosure functions as the
administrator in paragraph (d)(1) of this section, enlisting the help of
the association in providing summary plan descriptions and necessary
information. The exemption provided by this section applies.
(3) The facts are the same as paragraph (d)(1) of this section
except the welfare plan has 125 participants at the beginning of the
plan year. The exemption provided by this section does not apply because
the plan had 100 or more participants at the beginning of the plan year.
See, however, Sec. 2520.104-43.
(4) The facts are the same as paragraph (d)(2) of this section
except the welfare plan has 125 participants. The exemption provided by
this section does not apply because the plan had 100 or more
participants at the beginning of the plan year. See, however, Sec.
2520.104-43.
(e) Applicability date. For purposes of paragraph (b)(3) of this
section, the arrangement may continue to use an entity (such as a trade
association) as the conduit for the payment of insurance premiums to the
insurance company for reporting years of the arrangement beginning
before January 1, 2001.
[43 FR 10149, Mar. 10, 1978, as amended at 65 FR 21084, Apr. 19, 2000;
67 FR 776, Jan. 7, 2002] 
