(a) General. (1) Under the authority of section 103(a)(3)(A) of the
Act, the Secretary may waive the requirements of section 103(a)(3)(A) in
the case of a plan for which simplified annual reporting has been
prescribed in accordance with section 104(a)(2) of the Act.
(2) Under the authority of section 104(a)(3) of the Act the
Secretary may
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exempt any employee welfare benefit plan from certain annual reporting
requirements.
(b) Application. (1)(i) The administrator of an employee pension
benefit plan for which simplified annual reporting has been prescribed
in accordance with section 104(a)(2)(A) of the Act and Sec. 2520.104-41
is not required to comply with the annual reporting requirements
described in paragraph (c) of this section, provided that with respect
to each plan year for which the waiver is claimed--
(A)(1) At least 95 percent of the assets of the plan constitute
qualifying plan assets within the meaning of paragraph (b)(1)(ii) of
this section, or
(2) Any person who handles assets of the plan that do not constitute
qualifying plan assets is bonded in accordance with the requirements of
section 412 of the Act and the regulations issued thereunder, except
that the amount of the bond shall not be less than the value of such
assets;
(B) The summary annual report, described in Sec. 2520.104b-10,
includes, in addition to any other required information:
(1) Except for qualifying plan assets described in paragraph
(b)(1)(ii)(A), (B) and (F) of this section, the name of each regulated
financial institution holding (or issuing) qualifying plan assets and
the amount of such assets reported by the institution as of the end of
the plan year;
(2) The name of the surety company issuing the bond, if the plan has
more than 5% of its assets in non-qualifying plan assets;
(3) A notice indicating that participants and beneficiaries may,
upon request and without charge, examine, or receive copies of, evidence
of the required bond and statements received from the regulated
financial institutions describing the qualifying plan assets; and
(4) A notice stating that participants and beneficiaries should
contact the Regional Office of the U.S. Department of Labor's Employee
Benefits Security Administration if they are unable to examine or obtain
copies of the regulated financial institution statements or evidence of
the required bond, if applicable; and
(C) in response to a request from any participant or beneficiary,
the administrator, without charge to the participant or beneficiary,
makes available for examination, or upon request furnishes copies of,
each regulated financial institution statement and evidence of any bond
required by paragraph (b)(1)(i)(A)(2).
(ii) For purposes of paragraph (b)(1), the term ``qualifying plan
assets'' means:
(A) Qualifying employer securities, as defined in section 407(d)(5)
of the Act and the regulations issued thereunder;
(B) Any loan meeting the requirements of section 408(b)(1) of the
Act and the regulations issued thereunder;
(C) Any assets held by any of the following institutions:
(1) A bank or similar financial institution as defined in Sec.
2550.408b-4(c);
(2) An insurance company qualified to do business under the laws of
a state;
(3) An organization registered as a broker-dealer under the
Securities Exchange Act of 1934; or
(4) Any other organization authorized to act as a trustee for
individual retirement accounts under section 408 of the Internal Revenue
Code.
(D) Shares issued by an investment company registered under the
Investment Company Act of 1940;
(E) Investment and annuity contracts issued by any insurance company
qualified to do business under the laws of a state; and,
(F) In the case of an individual account plan, any assets in the
individual account of a participant or beneficiary over which the
participant or beneficiary has the opportunity to exercise control and
with respect to which the participant or beneficiary is furnished, at
least annually, a statement from a regulated financial institution
referred to in paragraphs (b)(1)(ii)(C), (D) or (E) of this section
describing the assets held (or issued) by such institution and the
amount of such assets.
(iii)(A) For purposes of this paragraph (b)(1), the determination of
the percentage of all plan assets consisting of qualifying plan assets
with respect to a given plan year shall be made in the same manner as
the amount of the
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bond is determined pursuant to Sec. Sec. 2580.412-11, 2580.412-14, and
2580.412-15.
(B) Examples. Plan A, which reports on a calendar year basis, has
total assets of $600,000 as of the end of the 1999 plan year. Plan A's
assets, as of the end of year, include: investments in various bank,
insurance company and mutual fund products of $520,000; investments in
qualifying employer securities of $40,000; participant loans, meeting
the requirements of ERISA section 408(b)(1), totaling $20,000; and a
$20,000 investment in a real estate limited partnership. Because the
only asset of the plan that does not constitute a ``qualifying plan
asset'' is the $20,000 real estate investment and that investment
represents less than 5% of the plan's total assets, no bond would be
required under the proposal as a condition for the waiver for the 2000
plan year. By contrast, Plan B also has total assets of $600,000 as of
the end of the 1999 plan year, of which $558,000 constitutes
``qualifying plan assets'' and $42,000 constitutes non-qualifying plan
assets. Because 7%--more than 5%--of Plan B's assets do not constitute
``qualifying plan assets,'' Plan B, as a condition to electing the
waiver for the 2000 plan year, must ensure that it has a fidelity bond
in an amount equal to at least $42,000 covering persons handling non-
qualifying plan assets. Inasmuch as compliance with section 412 requires
the amount of bonds to be not less than 10% of the amount of all the
plan's funds or other property handled, the bond acquired for section
412 purposes may be adequate to cover the non-qualifying plan assets
without an increase (i.e., if the amount of the bond determined to be
needed for the relevant persons for section 412 purposes is at least
$42,000). As demonstrated by the foregoing example, where a plan has
more than 5% of its assets in non-qualifying plan assets, the bond
required by the proposal is for the total amount of the non-qualifying
plan assets, not just the amount in excess of 5%.
(2) The administrator of an employee welfare benefit plan that
covers fewer than 100 participants at the beginning of the plan year is
not required to comply with annual reporting requirements described in
paragraph (c) of this section.
(c) Waiver. The administrator of a plan described in paragraph
(b)(1) or (2) of this section is not required to:
(1) Engage an independent qualified public accountant to conduct an
examination of the financial statements of the plan;
(2) Include within the annual report the financial statements and
schedules prescribed in section 103(b) of the Act and Sec. Sec.
2520.103-1, 2520.103-2, and 2520.103-10; and
(3) Include within the annual report a report of an independent
qualified public accountant as prescribed in section 103(a)(3)(A) of the
Act and Sec. 2520.103-1.
(d) Limitations. (1) The waiver described in this section does not
affect the obligation of a plan described in paragraph (b) (1) or (2) of
this section to file a Form 5500 ``Annual Return/Report of Employee
Benefit Plan,'' including any required schedules or statements
prescribed by the instructions to the form. See Sec. 2520.104-41.
(2) For purposes of this section, an employee pension benefit plan
for which simplified annual reporting has been prescribed includes an
employee pension benefit plan which elects to file a Form 5500 as a
small plan pursuant to Sec. 2520.103-1(d) with respect to the plan year
for which the waiver is claimed. See Sec. 2520.104-41.
(3) For purposes of this section, an employee welfare benefit plan
that covers fewer than 100 participants at the beginning of the plan
year includes an employee welfare benefit plan which elects to file a
Form 5500 as a small plan pursuant to Sec. 2520.103-1(d) with respect
to the plan year for which the waiver is claimed. See Sec. 2520.104-41.
(4) A plan that elects to file a Form 5500 as a large plan pursuant
to Sec. 2520.103-1(d) may not claim a waiver under this section.
[43 FR 10151, Mar. 10, 1978, as amended at 43 FR 14010, Apr. 4, 1978; 45
FR 51447, Aug. 1, 1980; 54 FR 8629, Mar. 1, 1989; 65 FR 21085, Apr. 19,
2000; 65 FR 62973, Oct. 19, 2000] 
