EBSA
Proposed Rules
Filings Required of Multiple Employer Welfare Arrangements and Certain Other Related Entities
[ 12/6/2011]
[ PDF]
Federal Register, Volume 76 Issue 234 (Tuesday, December 6, 2011)
[Federal Register Volume 76, Number 234 (Tuesday, December 6, 2011)]
[Proposed Rules]
[Pages 76222-76235]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-30918]
[[Page 76221]]
Vol. 76
Tuesday,
No. 234
December 6, 2011
Part II
Department of Labor
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Employee Benefits Security Administration
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29 CFR Parts 2520, and 2977
Proposed Revision of the Form M-1; Proposed Revision of Annual
Information Return/Reports; Filings Required of Multiple Employer
Welfare Arrangements and Certain Other Related Entities; Ex parte Cease
and Desist and Summary Seizure Orders--Multiple Employer Welfare
Arrangements; Proposed Rules and Notices
Federal Register / Vol. 76, No. 234 / Tuesday, December 6, 2011 /
Proposed Rules
[[Page 76222]]
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DEPARTMENT OF LABOR
Employee Benefits Security Administration
29 CFR Part 2520
RIN 1210-AB51
Filings Required of Multiple Employer Welfare Arrangements and
Certain Other Related Entities
AGENCY: Employee Benefits Security Administration, Department of Labor.
ACTION: Proposed rule.
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SUMMARY: This document contains a proposed rule under title I of the
Employee Retirement Income Security Act (ERISA) that, upon adoption,
would implement reporting requirements for multiple employer welfare
arrangements (MEWAs) and certain other entities that offer or provide
health benefits for employees of two or more employers. The proposal
amends existing reporting rules to incorporate new provisions enacted
as part of the Patient Protection and Affordable Care Act (Affordable
Care Act) to more clearly address the reporting obligations of MEWAs
that are ERISA plans. This regulation is designed to impose the minimal
amount of burden on legally compliant MEWAs and entities claiming
exception (ECEs) while implementing the Secretary's authority to take
enforcement action against fraudulent or abusive MEWAs included in the
Affordable Care Act and working to protect health benefits for
businesses and their employees. This proposed rule implements the new
provisions while preserving the filing structure and provisions of the
2003 regulations which direct plan MEWAs and non-plan MEWAs to report
annually and file upon registration or origination.
Elsewhere in this edition of the Federal Register, the Employee
Benefits Security Administration (EBSA) is publishing a Notice of
Proposed Rulemaking related to the Secretary's new enforcement
authority with respect to MEWAs and Notices of proposed revisions of
the Form M-1 and the Form 5500.
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: Suzanne Bach or Kevin Horahan,
Employee Benefits Security Administration, Department of Labor, at
(202) 693-8335. 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.
Department of Labor. Comments to the Department of Labor,
identified by RIN 1210-AB51, by one of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Email: E-HPSCAMEWARegistration.EBSA@dol.gov.
Mail or Hand Delivery: Office of Health Plan Standards and
Compliance Assistance, Employee Benefits Security Administration, Room
N-5653, U.S. Department of Labor, 200 Constitution Avenue NW.,
Washington, DC 20210, Attention: RIN 1210-AB51; MEWA Registration
Proposed Regulation.
Comments received by the Department of Labor will be posted without
change to http://www.regulations.gov and http://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
The Health Insurance Portability and Accountability Act of 1996
(Pub. L. 104-191, 110 Stat. 1936) (1996)) (HIPAA) amended ERISA to
provide for, among other things, improved portability and continuity of
health insurance coverage. HIPAA also added section 101(g) to ERISA, 29
U.S.C. 1021(g), providing the Secretary with the authority to require,
by regulation, annual reporting by MEWAs that are not ERISA-covered
plans. Section 6606 of the Patient Protection and Affordable Care Act
(Affordable Care Act), Pub. L. 111-148, 124 Stat. 119 (2010), amended
section 101(g) of ERISA to require that such MEWAs register with the
Department prior to operating in a State. Specifically, this section
now provides that multiple employer welfare arrangements providing
benefits consisting of medical care (within the meaning of section
733(a)(2) of ERISA, 29 U.S.C. 1191b(a)(2)) which are not ERISA-covered
group health plans must register with the Secretary prior to operating
in a State. The Secretary may also, by regulation, direct such multiple
employer welfare arrangements to report, not more frequently than
annually, in such form and such manner as the Secretary specifies for
the purpose of determining the extent to which the requirements of part
7 of subtitle B of title I of ERISA are being carried out in connection
with such benefits.
The term ``multiple employer welfare arrangement'' is defined in
section 3(40) of ERISA, 29 U.S.C. 1002(40) in pertinent part, as an
employee welfare benefit plan, or any other arrangement (other than an
employee welfare benefit plan), which is established or maintained for
the purpose of offering or providing medical benefits to the employees
of two or more employers (including one or more self-employed
individuals), or to their beneficiaries, except that such term does not
include any such plan or other arrangement which is established or
maintained under or pursuant to one or more agreements which the
Secretary finds to be collective bargaining agreements, by a rural
electric cooperative, or by a rural telephone cooperative association.
For purposes of this definition, two or more trades or businesses,
whether or not incorporated, shall be deemed a single employer if such
trades or businesses are within the same control group. The term
``control group'' means a group of trades or businesses under common
control, and the determination of whether a trade or business is under
``common control'' with another trade or business shall be determined
under regulations of the Secretary applying principles similar to the
principles applied in determining whether employees of two or more
trades or businesses are treated as employed by a single employer under
section 4001(b) of ERISA, 29 U.S.C. 1301(b), except that, for purposes
of this paragraph, common control shall not be based on an interest of
less than 25 percent.\1\
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\1\ This provision was added to ERISA by section 302(b) of the
Multiple Employer Welfare Arrangement Act of 1983, Public Law 97-
473, 96 Stat. 2611, 2612 which also amended section 514(b) of ERISA,
29 U.S.C. 1144(a). Section 514(a) of ERISA provides that State laws
that relate to employee benefit plans are generally preempted by
ERISA. Section 514(b) sets forth several exceptions to the general
rule of section 514(a) and subjects employee benefit plans that are
MEWAs to various levels of State regulation depending on whether the
MEWA is fully insured. Sec. 302(b), Public Law 97-473, 96 Stat.
2611, 2613 (29 U.S.C. 1144(b)(6)).
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The original MEWA reporting requirement created under HIPAA was
enacted in response to a 1992 General
[[Page 76223]]
Accounting Office (GAO) report.\2\ In the report, the GAO detailed a
history of MEWA fraud and abuse.\3\ The GAO recommended that the
Department develop a mechanism to help States identify MEWAs. The
Secretary exercised the authority under the HIPAA provision by creating
the Form M-1 under a 2000 interim final rule and 2003 final rule,\4\
which generally require non-plan and ERISA-covered MEWAs (and certain
other entities that offer or provide group health benefits to the
employees of two or more employers) to file the Form M-1 annually with
the Secretary. The final rule generally directed the administrator of a
MEWA, whether or not an ERISA-covered group health plan, (and 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. The
purpose of this form is to allow the Department to determine whether
the requirements of part 7 are being met. Part 7 of ERISA includes
statutory amendments made by HIPAA and other statutes for which MEWAs
must annually report compliance. These include, but are not limited to,
the Patient Protection and Affordable Care Act of 2010 (Pub. L. 111-
148, 124 Stat. 119), and the Health Care and Education Reconciliation
Act (Pub. L. 111-152, 124 Stat. 1029) (these are collectively known as
the ``Affordable Care Act''), the Paul Wellstone and Pete Domenici
Mental Health Parity and Addiction Equity Act of 2008 (Div. C, title V,
Subtitle B of Pub. L. 110-343, 122 Stat. 3881), and the Genetic
Information Nondiscrimination Act of 2008 (Pub. L. 110-233, 122 Stat.
881).
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\2\ See, Employee Benefits: States Need Labor's Help Regulating
Multiple Employer Welfare Arrangements, March 1992, GAO/HRD-92-40.
\3\ For example, the 1992 GAO report indicated that between 1988
and 1991, MEWAs left at least 398,000 participants and beneficiaries
with over $123 million in unpaid claims. Meanwhile more than 600
MEWAs failed to comply with State insurance laws. See supra note 2.
\4\ 65 FR 715 (02/11/2000) and 68 FR 17494 (04/09/2003). The
Form M-1 has been updated and is reissued each year in December by
the Department and modified periodically to address changes to the
statutory provisions in part 7 of ERISA.
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Despite the reporting rules, many of the MEWA abuses discussed in
the GAO report persist today. MEWAs frequently are marketed by
unlicensed entities that avoid State insurance reserve, contribution,
and consumer protection requirements. By avoiding these requirements,
such entities often are able to market insurance coverage at rates
substantially lower than licensed insurers, making them particularly
attractive to some small employers that find it difficult to obtain
affordable health insurance for their employees. Unfortunately, due to
insufficient funding and inadequate reserves, and in some situations,
excessive administrative fees and fraud, some MEWAs have become
insolvent and unable to pay medical benefit claims. Therefore, affected
employees and their dependents have become financially responsible for
paying medical claims they presumed were covered by insurance after
paying health insurance premiums to MEWAs that become insolvent. The
unfortunate reality is that currently, the Department often does not
find out about insolvent or fraudulent MEWAs until significant harm has
occurred to employers and participants. Furthermore, while the
Department--often working with State insurance departments--has had
some success with both civil and criminal cases against MEWA operators,
the monetary judgments are often uncollectible leaving the employers
and/or individual participants without coverage for claims that are
sometimes very large. This proposal implements the statutory
requirements in a way that limits the burden on legitimate MEWAs but
gives the Secretary, employers, and the participants and beneficiaries
of the plans those employers sponsor additional information about these
entities and a stronger enforcement scheme. Having this information
will aid the enforcement and prevention of fraudulent and insolvent
MEWAs.\5\
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\5\ See, United States v. Edwards, plea agreement, 1:05CR 265
(M.D.N.C. 2006) (In 2005, a MEWA operator, whom the Department
showed collected over 36 million dollars in healthcare insurance
premiums and failed to obtain health insurance coverage for its
employer clients which resulted in thousands of uncovered employees
and approximately $8 million in unpaid claims) see also Solis v.
W.I.N. Ass'n, L.L.C., et. al., slip op. 4:11-cv-00616 (S.D. Tex.
2011) (the Department investigated a MEWA which failed to make
payments on health care claims, charged excessive fees, engaged in
self-dealing, and failed to disclose fees to the client employers in
the plan. The Department obtained a Consent Judgment and Order
against the MEWA operators for leaving hundreds of participants
without coverage and permanently enjoining them from acting as
fiduciaries in the future. Also, the court authorized the Secretary
to bring a collection action for the plan losses against one of the
MEWA operators relative to his ability to restore those plan
losses.)
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Pursuant to the Affordable Care Act's change to section 101(g) of
ERISA, this proposed rule would amend the 2003 final rule, as well as
the rules related to annual reports required of MEWAs that are group
health plans, and solicit comments regarding the restructured reporting
requirements. Specifically, the Affordable Care Act amended section
101(g) of ERISA to require MEWAs that provide benefits consisting of
medical care (within the meaning of section 733(a)(2) of ERISA) which
are not group health plans to register with the Secretary prior to
their operating in a State, in addition to reporting annually regarding
their compliance with part 7 of ERISA including the Public Health
Service Act (PHS Act) market reforms incorporated by reference in
section 715 of ERISA. These proposed regulations implement the 101(g)
MEWA registration provision which directs MEWAs to report compliance
with the part 7 rules including the PHS Act sections 2701 through 2728.
By requiring MEWAs to register with the Department before operating in
a State by filing the Form M-1 to provide additional information, this
proposed rule would enhance the State and Federal governments' joint
mission to prevent and take enforcement action against fraudulent and
abusive MEWAs and limit the losses suffered by American workers, their
families, and businesses in instances when abusive MEWAs become
insolvent and fail to reimburse medical claims.
The Affordable Care Act reorganizes, amends, and adds to the
provisions in part A of title XXVII of the PHS Act, 42 U.S.C. 300gg-1
et seq., relating to group health plans and health insurance issuers in
the group and individual markets. The term ``group health plan'' is
defined in title XXVII of the PHS Act, part 7 of ERISA, and chapter 100
of the Code and includes both insured and self-insured group health
plans. The Affordable Care Act adds section 715(a)(1) to ERISA, 29
U.S.C. 1185d(a)(1), and section 9815(a)(1) to the Internal Revenue Code
(the Code), 26 U.S.C. 9815(a)(1), to incorporate the provisions of part
A of title XXVII of the PHS Act into ERISA and the Code, and make them
applicable to group health plans, and health insurance issuers
providing health insurance coverage in connection with group health
plans. The PHS Act sections incorporated by this reference are sections
2701 through 2728. PHS Act sections 2701 through 2719A are
substantially new, though they incorporate some provisions of prior
law. PHS Act sections 2722 through 2728 are sections of prior law
renumbered, with some, mostly minor, changes. Section 1251 of the
Affordable Care Act, as modified by section 10103 of the Affordable
Care Act and section 2301 of the Reconciliation Act, 42 U.S.C. 18011,
specifies that certain plans or coverage existing as of the date of
enactment (i.e., grandfathered health plans) are only subject to
certain provisions.
[[Page 76224]]
II. Overview of Proposal
A. Proposed Amendment to 29 CFR Sec. 2520.101-2 Under ERISA Section
101(g)
These proposed rules would amend existing filing rules for MEWAs
and ECEs in order to implement changes made to ERISA section 101(g) in
the Affordable Care Act. Like the 2003 regulations, ECEs and MEWAs are
treated largely the same for filing purposes. The main distinction in
filing requirements is that ECEs are only subject to annual M-1 filings
for the first three years following an origination event. We preserved
this special rule included in the 2003 regulations for ECEs as well as
e the special filing events applicable to MEWAs. In keeping with this
structure, we propose to extend the new filing events prescribed by the
Affordable Care Act provision to MEWAs and ECEs alike.
Paragraph (a) of the proposal sets forth section 101(g) of ERISA
that directs MEWAs that provide benefits consisting of medical care
(within the meaning of section 733(a)(2) of ERISA) to register with the
Secretary prior to operating in a State, and to report annually
regarding compliance with part 7 of ERISA. While the language in
section 101(g) of ERISA only applies to MEWAs that are not group health
plans (``non-plan MEWAs''), the proposal preserves the structure
promulgated as part of the final 2003 regulations, which required both
MEWAs that are group health plans (``plan MEWAs'') and non-plan MEWAs
to file the Form M-1, based on authority found in sections 505 and 734
of ERISA. 29 U.S.C. 1135 and 1191c. Section 505 of ERISA states that
the Secretary may prescribe such regulations as she finds necessary or
appropriate to carry out the provisions of Title I of ERISA. Section
734 of ERISA allows the Secretary to promulgate such regulations as may
be necessary or appropriate to carry out the provisions of part 7 of
ERISA.
Paragraph (b) defines the terms used in the proposal, with some
additions and modifications from the 2003 final rule. Amended paragraph
(c) sets forth the requirement that, with certain exceptions, all MEWAs
and certain entities that claim not to be a MEWA solely due to the
exception in section 3(40)(A)(i) of ERISA (referred to as Entities
Claiming Exception or ECEs) file reports with the Department.
Paragraph (d) describes how MEWAs and ECEs will comply with the
proposed rule by filing the Form M-1, and the conditions under which
the Secretary may reject a filing.
Paragraph (e) sets forth the times when MEWAs and ECEs will file
the Form M-1. Paragraph (f) directs that the Form M-1 be filed
electronically. In addition to minimizing errors and providing faster
access to reported data, electronic filing will also be less burdensome
on the filer. Once information about the MEWA or ECE is entered into
the system, filers will have the option of allowing the system to copy
information provided on a past filing into a new filing. This transfer
of past information provides filers an easy way to update or verify
information. The information provided through Form M-1 filings will
then be accessible by the public and other interested parties such as
State regulators.
Paragraph (g) explains the civil penalties that may result from a
failure to comply with the proposed rule. Civil penalties for failure
to file a report required by ERISA section 101(g) or Sec. 2520.101-2
have been applicable for non-plan MEWAs under ERISA section 502(c)(5)
since May 1, 2000. Under these proposed regulations, the Department has
extended similar civil penalties for a failure to file an annual report
by plan MEWAs under ERISA section 502(c)(2).
Also, new criminal penalties were added by the Affordable Care Act
under ERISA section 519 for any person who knowingly submits false
statements or false representations of fact in filing reports required
under the proposal. See paragraph 2 below for these changes that are
being proposed to Sec. Sec. 2520.103-1, 104-20, and 104-41 to further
enhance the Department's ability to enforce these provisions with
regard to MEWAs that are group health plans.
1. Basis and Scope
These proposed regulations set forth rules implementing section
101(g) of ERISA, as amended by section 6606 of the Affordable Care Act,
which directs MEWAs that are not group health plans to register with
the Secretary prior to operating in a State. These proposed regulations
also update the existing requirement in section 101(g) of ERISA that
MEWAs, which are group health plans, and certain other entities
claiming an exception, file the Form M-1 upon the occurrence of
specified events as well as annually.
2. Definitions
a. Operating. Paragraph (b)(8) of the proposed rule adds a
definition of ``operating,'' and defines it as any activity including
but not limited to marketing, soliciting, providing, or offering to
provide benefits consisting of medical care. This definition, which
includes marketing and administrative activities, governs registration
and origination filing events for the Form M-1 filing for MEWAs and
ECEs.
b. Origination. In order to implement the Affordable Care Act
amendment to ERISA section 101(g), the Department amended the 2003
filing rules. The rule is meant to apply equally to MEWAs and ECEs. The
2003 rules treated MEWAs and ECEs equally for purposes of special
filings by having a combined rule for both of these entities to
determine if special filings were necessary which relied on the
origination definition. The Department concluded it to be more
responsive to the change in the section 101(g) statutory language to
now refer to special filings by MEWAs as a registration. The effect of
this is that MEWAs and ECEs are no longer collectively referencing the
term origination, but now have separate origination and registration
terms--albeit subject to the same special filing events.
The proposed rule first indicates events which require a special
filing in the definition of origination. A special filing is required
when (in the case of an ECE):
``(i) The ECE first begins operating (within the meaning of (b)(8)
of this section) with regard to the employees of two or more employers
(including one or more self-employed individuals); (ii) The ECE, while
required to report pursuant to paragraph (c)(1)(ii) of this section,
begins operating in any additional State; (iii) The ECE begins
operating following a merger with another ECE (unless all of the ECEs
that participate in the merger previously were last originated at least
three years prior to the merger); (iv) The number of employees
receiving coverage for medical care under the ECE is at least 50
percent greater than the number of such employees on the last day of
the previous calendar year (unless the increase is due to a merger with
another ECE under which all ECEs that participate in the merger were
last originated at least three years prior to the merger); or (v) The
ECE experiences a material change in the information reported on the
most recently filed Form M-1 as defined by the Form M-1 instructions.
Event (i) Was modified to comply with the new statutory requirement
that filings be made prior to operating in a State. Events (ii) and (v)
are new special filing events which were added to instruct entities to
re-file with the Department so that it has the most up-to-date
information.
c. Reporting. The proposed rule adds a definition of ``reporting.''
``Reporting''
[[Page 76225]]
or ``to report'' means to file the Form M-1 as required pursuant to
section 101(g) of ERISA; Sec. 2520.101-2; or the instructions to the
Form M-1. The term ``reporting'' is used in order to correspond to the
terminology of Sec. 2560.502c-5 which uses the generic term ``report''
to describe the Form M-1 filing process, including the annual report,
registration, and origination filings.
d. State. The proposed rule adds a definition of ``State'' and
defines the term by reference to Sec. 2590.701-2. This definition was
added because MEWAs must register, and ECEs must make an origination
filing, prior to operating in a State.
3. Persons Required To Report
Paragraph (c) of the proposed rule sets forth the persons required
to report under the proposed rule. As under the 2003 final rule, the
proposed rule directs the administrator of a MEWA that provides
benefits consisting of medical care, whether or not the MEWA is a group
health plan, to file the Form M-1. It also requires filing by the
administrator of an ECE that offers or provides coverage consisting of
medical care during the first three years after the ECE is originated.
4. Information To Be Reported
Paragraph (d) of the proposed rule clarifies that the reporting
requirements of Sec. 2520.101-2 will only be satisfied by filing a
completed copy of the Form M-1, including any additional statements
pursuant to the Form M-1 Instructions.
5. Reporting Requirements and Timing
Paragraph (e) of the proposed rule retains from the 2003 final
rule's standards that both MEWAs and ECEs must file the Form M-1
annually, with ECEs only having to file annually for the first 3 years
following an origination.
As mentioned previously, MEWAs and ECEs are also subject to special
filings in certain circumstances. Special filing events were included
in the 2003 regulation, but have been relabeled and expanded to
implement statutory language under the proposed rules. To clarify the
new section 101(g) registration standard for MEWAs and make parallel
changes to the origination events for ECEs, the proposed rule contains
five registration and origination events for MEWAs and ECEs, only one
of which is new (a second filing event existed in the 2003 rules but
has been modified).
The 2003 regulation generally requires a special filing when a MEWA
or ECE (1) Begins operating or providing coverage for medical care to
employees of two or more employers; (2) begins offering or providing
coverage for medical care to employees of two or more employers after a
merger with another MEWA or ECE; or (3) increases the number of
employees receiving medical care under the MEWA or ECE by at least 50
percent over the number of employees on the last day of the previous
calendar year. These filing events are generally preserved in the
proposed rules. However, the first event was modified to conform to the
statutory language under ERISA section 101(g) directing MEWAs to
register with the Secretary by filing a Form M-1 prior to operating in
any State. Additionally, the proposed rule directs that a filing be
made in the event a MEWA or ECE expands its operations into additional
States or experiences a material change as defined in the Form M-1
instructions. This filing event was added to direct an entity to update
its Form M-1 filing in the event that it experiences changes in its
financial or custodial information. In the event an entity experiences
a material change, the online filing system will allow them to log on
to the online filing system, give them the option of importing data
from its most recent completed filing, and make the necessary changes.
The Department is particularly interested in receiving comments on this
requirement. Consistent with the 2003 regulations, while this rule
directs MEWAs to submit filings for the duration of their existence,
ECEs are only required to file during the three year period following
an origination event that is not a material change. ECEs that
experience a material change must file during this period but are not
required to file beyond that three year period.
The proposed rule also applies new timing standards on MEWAs and
ECEs for these special filings. Under the 2003 regulations, MEWAs and
ECEs file the Form M-1 within 90 days of the occurrence of a special
filing event. The proposed rule directs entities to file 30 days prior
to or within 30 days of the event, depending on the type. The timing
requirements implement section 6606 of the Affordable Care Act which
says that the filling must happen ``prior to operating in a State'' and
will also facilitate the Department's timely receipt of information
related to the other special filing events described above.
A provision is included in the proposed rule to discourage
``blanket filings,'' i.e., registration or origination filings that
cover multiple States, unless the filer expects to begin operating in
all the named States in the near future. Blanket filings that list
States where the filer has no immediate intent to operate could
frustrate the law's goal of gathering and maintaining timely and
accurate information on MEWAs. Under this provision, a filing is
considered lapsed with respect to a State if benefits consisting of
medical care are not offered or provided in the State (or States)
during the calendar year immediately following the filing. A new filing
would be submitted if the filer intends to continue to operate in that
State.
To minimize the burden of compliance, we propose to permit MEWAs
and ECEs to make a single filing to satisfy multiple filing events so
long as the filing is timely for each filing.
As in the 2003 rule, filing extensions are available in this
proposal. Any filing deadline that is a Saturday, Sunday, or federal
holiday is automatically extended to the next business day. A more
substantial extension is available for MEWAs and ECEs that request such
an extension following the procedure outlined in the Instructions to
the Form M-1.
6. Electronic Filing
Paragraph (f) of the proposed rule eliminates the option to file a
paper copy of the completed Form M-1. As is now the case for all Form
5500 Annual Report filings, and consistent with the goals of E-
government, as recognized by the Government Paperwork Elimination Act
\6\ and the E-Government Act of 2002,\7\ we propose that the Form M-1
be filed electronically. Electronic filing of benefit plan information,
among other program strategies, would facilitate EBSA's achievement of
its Strategic Goal to ``assure the security of the retirement, health
and other workplace related benefits of American workers and their
families.'' EBSA's strategic goal directly supports the Secretary of
Labor's Strategic Goal to ``secure health benefits.'' \8\ A cornerstone
of our enforcement program is the collection, analysis, and disclosure
of benefit plan information. Electronic filing will minimize errors and
provide faster access to reported data, assisting EBSA in its
enforcement, oversight, and disclosure roles and ultimately enhancing
the security of plan benefits. Electronic filing of the M-1 would also
reduce the paperwork burden and costs
[[Page 76226]]
related to printing and mailing forms and, with the use of secure
account access, allow updating of previously reported information to
facilitate simplified future reporting. Finally, consistent with
current practice, the information would be available for reference by
participants, beneficiaries, participating employers, and other
interested parties such as State regulators.
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\6\ Title XVII, Public Law 105-277, 112 Stat. 2681 (Oct. 21,
1998).
\7\ Public Law 107-347, 116 Stat. 2899 (Dec. 17, 2002).
\8\ For further information on the Department of Labor's
Strategic Plan and EBSA's relationship to it, see http://www.dol.gov/_sec/stratplan/.
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7. Penalties
a. Civil penalties and procedures. The proposed rule retains the
references to section 502(c)(5) of ERISA, 29 U.S.C. 1132(c)(5) and
Sec. 2560.502c-5 regarding civil penalties and procedures.
b. Criminal penalties and procedures. The Affordable Care Act
section 6601 added ERISA section 519 which prohibits a person from
making false statements or representations of fact in connection with a
MEWAs financial condition, the benefits it provides, or its regulatory
status as it relates to marketing or sale of a MEWA. The Affordable
Care Act also amended ERISA section 501(b) to impose criminal penalties
on any person who is convicted of violating the prohibition in ERISA
section 519. The proposed rule adds a cross-reference to section 501(b)
and 519 of ERISA, 29 U.S.C. 1131 and 1149 for the purpose of
implementing these new rules as they relate to filing a Form M-1 prior
to operating in a State or other registration and origination filings.
c. Cease and desist and summary seizure and procedures. Section
6605 of the Affordable Care Act adds section 521 to ERISA, which
authorizes the Secretary to issue cease and desist orders, without
prior notice or a hearing, when it appears to the Secretary that the
alleged conduct of a MEWA is ``fraudulent, or creates an immediate
danger to the public safety or welfare, or is causing or can be
reasonably expected to cause significant, imminent, and irreparable
public injury.'' This section also allows the Secretary to issue an
order to seize the assets of a MEWA that the Secretary determines to be
in a financially hazardous condition. The regulation providing guidance
on the cease and desist orders and summary seizure rules published
elsewhere in this Federal Register also include regulatory guidance on
the procedural rules for this process. A cease and desist order
containing a prohibition against transacting business with any MEWA or
plan would prevent the MEWA or a person from avoiding the cease and
desist order by shutting the MEWA down and re-establishing it in a new
location or under a new identity.
As such, the proposed rule adds a cross-reference to section 521 of
ERISA and Sec. 2560.521 regarding the Secretary's authority to issue
cease and desist and summary seizure orders.
B. Proposed Amendment to Regulations Under ERISA Section 104(a)(1), 29
U.S.C. 1024(a)(1)
Additional changes are being proposed to further enhance the
Department's ability to enforce Sec. 2520.101-2. The primary change is
the addition of a new paragraph (f) to Sec. 2520.103-1 regarding the
content of the annual report. As part of this proposal, existing
paragraph (f) of Sec. 2520.103-1 would be redesignated paragraph (g),
but would be otherwise unchanged. New Sec. 2520.103-1(f) would apply
to all MEWAs that are ERISA-covered plans and that are subject to the
requirements of Sec. 2520.101-2. This change provides that all such
MEWAs must prove compliance with Sec. 2520.101-2 (filing the Form M-1)
in order to satisfy the annual reporting requirements of Sec.
2520.103-1. Pursuant to ERISA section 502(c)(2), 29 U.S.C. 1132(c)(2),
a plan administrator who fails to file a Form 5500 Annual Return/Report
with a proof of compliance with Sec. 2520.101-2 may be subject to a
civil penalty of up to $1,100 a day (or higher amount if adjusted
pursuant to the Federal Civil Penalties Inflation Adjustment Act of
1990, as amended) for each day a plan administrator fails or refuses to
file a complete report. Although ERISA sections 505 and 734 give the
Secretary the authority to require MEWAs that are group health plans to
comply with the requirements of Sec. 2520.101-2, there is, however, no
corresponding ERISA civil penalty for a failure to comply with those
requirements. These proposed changes to the Form 5500 annual reporting
requirements for MEWAs that are group health plans will enhance the
Department's ability to enforce the Form M-1 requirements and ensure
that MEWAs are subject to the same rules under the law.
Conforming changes adding references to new Sec. 2520.103-1(f) are
proposed for Sec. Sec. 2520.103-1(a)(2), (b), (c) and Sec. 2520.104-
41. A corresponding change is also proposed for Sec. 2520.104-20 to
eliminate the limited filing exemption for insured or unfunded, fully
insured, or combination unfunded/fully insured plan MEWAs with fewer
than 100 participants. It is important to note that while the addition
of Sec. 2520.103-1(f) and the change to Sec. 2520.104-20 would
eliminate the annual reporting exemption for such plan MEWAs with fewer
than 100 participants, these plan MEWAs are subject to the existing
(and proposed) standards of Sec. 2520.101-2. Moreover, the impact of
satisfying the annual reporting would be substantially less burdensome
because in addition to being eligible for the simplified annual
reporting for small welfare plans, these plan MEWAs would be exempt
under Sec. 2520.104-44 from completing Schedule I (Financial
Information).\9\ Thus, these changes give the Secretary an important
enforcement tool while imposing minimal burden on plan MEWAs. Because
it is not clear that there are any unfunded/fully insured plan MEWAs
with fewer than 100 participants, the Department does not believe this
is overly burdensome but rather ensures that all MEWAs are treated the
same. Nonetheless, the Department is particularly interested in
receiving comments regarding any undue burden this elimination may
create.
---------------------------------------------------------------------------
\9\ These plan MEWAs would only need to file Form 5500 annual
return/report and, if applicable, Schedule A (Insurance Information)
and Schedule G, Part III (nonexempt transactions). They would not be
eligible to file the Form 5500-SF (Short Form 5500 Annual Return/
Report of Small Employee Benefit Plan) under Sec. 2520.104-41 and
Sec. 2520.103-1(c)(2)(ii). The Form 5500-SF does not include
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. In addition, an unrelated technical
correction to Sec. 2520.104-41 is being included in this rulemaking
to add an express reference to the Form 5500-SF.
---------------------------------------------------------------------------
III. Regulatory Impact Analysis
A. Executive Order 12866
Under Executive Order 12866, the Department must determine whether
a regulatory action is ``significant'' and therefore subject to the
requirements of the Executive Order and subject to review by the Office
of Management and Budget (OMB). Under section 3(f) of the Executive
Order, a ``significant regulatory action'' is an action that is likely
to result in a rule (1) Having an annual effect on the economy of $100
million or more, or adversely and materially affecting a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety, or State, local or tribal governments or communities
(also referred to as ``economically significant''); (2) creating
serious inconsistency or otherwise interfering with an action taken or
planned by another agency; (3) materially altering
[[Page 76227]]
the budgetary impacts of entitlement grants, user fees, or loan
programs or the rights and obligations of recipients thereof; or (4)
raising novel legal or policy issues arising out of legal mandates, the
President's priorities, or the principles set forth in the Executive
Order. OMB has determined that this action is not economically
significant within the meaning of section 3(f)(1) of the Executive
Order but is significant under section 3(f)(4) of the Executive Order,
because it raises novel legal or policy issues arising from the
President's priorities.
The Department estimates that the total cost of this proposed rule
would be approximately $124,300 in the first year, or an average of
approximately $272 for each of the 457 entities expected to file the
Form M-1. These costs are all associated with the information
collection request contained in this proposal and, therefore, are
discussed in the Paperwork Reduction Act Section, below.
1. Summary and Need for Regulatory Action
As discussed earlier in this preamble, section 6606 of the
Affordable Care Act amended section 101(g) of ERISA to require the
Secretary of Labor to promulgate regulations requiring MEWAs providing
medical care benefits (within the meaning of section 733(a)(2) of
ERISA) that are not ERISA-covered group health plans (non-plan MEWAs)
to register with the Secretary before operating in a State.
Before this proposed amendment, ERISA section 101(g) permitted the
Secretary to establish an annual reporting requirement on non-plan
MEWAs that provide medical care benefits to determine whether such
MEWAs comply with the requirements of Part 7 of ERISA. The Secretary
exercised this authority by creating the Form M-1 under a 2000 interim
final rule and 2003 final rule.\10\
---------------------------------------------------------------------------
\10\ 65 FR 715 (02/11/2000) and 68 Fed. Reg. 17494 (04/09/2003).
The Form M-1 has been updated and is reissued each year in December
by the Department and modified periodically to address changes to
the statutory provisions in part 7 of ERISA.
---------------------------------------------------------------------------
The original MEWA reporting requirement was enacted by Congress as
part of the Health Insurance Portability and Accountability Act of 1996
in response to a 1992 General Accounting Office (GAO) recommendation
contained in a GAO report.\11\ As discussed above, the GAO recommended
that the Department develop a mechanism to help States identify
fraudulent and abusive MEWAs. The HIPAA provision led to the
Department's creation of the Form M-1, which generally requires non-
plan and ERISA-covered MEWAs (and certain other entities that offer or
provide group health benefits to the employees of two or more
employers) to file Form M-1 annually with the Secretary.
---------------------------------------------------------------------------
\11\ See, Employee Benefits: States Need Labor's Help Regulating
Multiple Employer Welfare Arrangements, March 1992, GAO/HRD-92-40.
---------------------------------------------------------------------------
In addition to amending the Department's MEWA reporting regulation
to require MEWAs to register with the Secretary before operating in a
State, these proposed rules also direct Form M-1 filers to provide
additional information regarding the MEWA or ECE and apply new timing
standards for the special filings that are made when a MEWA's or ECE's
status changes. These amendments will aid the Department in its
oversight of MEWAs consistent with its expanded authority provided by
the Affordable Care Act \12\ and allow it to provide critical
information to State insurance departments that coordinate their
investigations and enforcement actions against fraudulent and abusive
MEWAs with the Department.
---------------------------------------------------------------------------
\12\ As part of the Affordable Care Act, Congress also enacted
ERISA section 521, which authorized the Secretary to issue cease and
desist orders, without prior notice or a hearing, when it appears to
the Secretary that a MEWA's alleged conduct is fraudulent, creates
an immediate danger to the public safety or welfare, or causes or
can reasonably be expected to cause significant, imminent, and
irreparable public injury. Section 521 also authorizes the Secretary
to issue a summary order to seize the assets of a MEWA that the
Secretary determines to be in financially hazardous condition. The
Department also is proposing rules for these provisions, which are
published elsewhere in today's Federal Register.
---------------------------------------------------------------------------
Over the last several years, the Department has observed a downward
trend in the number of MEWAs that file the Form M-1, raising concerns
that some existing MEWAs are not filing the form. Under the 2003
regulations, the Department has the ability to impose penalties on
ERISA-covered MEWAs that fail to file the M-1 only in limited
circumstances and if a determination regarding plan status were made by
the Secretary. To address this issue and encourage compliance with the
M-1 filing requirement, the Department also is proposing as part of
this regulatory action to amend the Form 5500 annual reporting
standards by requiring all ERISA-covered MEWAs, including MEWAs with
less than 100 participants,\13\ to file Form 5500 and provide on the
form proof of a timely filed Form M-1 in order for the plan
administrator to avoid the Department's imposition of ERISA section
502(c)(2) penalties.\14\
---------------------------------------------------------------------------
\13\ The proposal would remove the small welfare plan filing
exemption under Sec. 2520.104-20. Currently, under Sec. 2520.104-
20, small insured or unfunded welfare benefit plans, including small
plan MEWAs, are exempt from certain reporting and disclosure
provisions, including the requirement to file an annual Form 5500.
By removing this exemption, all plan MEWAs will now be required to
file a Form 5500 with a proof of filing a timely Form M-1 filing in
order to satisfy the annual reporting requirements under ERISA
Sections 103 and 104. However, small insured and unfunded plan MEWAs
would be exempt under Sec. 2520.104-44 from completing Schedule I
(Financial Information). As with other small welfare benefit plans
subject to the annual reporting requirements, small plan MEWAs would
be required to complete Schedule A (Insurance Information), if
applicable.
\14\ If a MEWA fails to prove that it filed the M-1 on its Form
5500, it could be subject to a civil penalty of up to $1,000 a day
for each day the plan administrator fails or refuses to file a
complete report.
---------------------------------------------------------------------------
These proposed amendments to the Department's MEWA reporting
standards would provide a cost effective means to implement the
expanded MEWA reporting as enacted in the Affordable Care Act. As
stated above, the Department estimates that the average cost for each
entity that the Department expects to file the revised form would
average approximately $272.
2. Benefits of Proposed Rule
As discussed earlier in this preamble, section 6606 of the
Affordable Care Act amended section 101(g) of ERISA directing the
Secretary of Labor to promulgate regulations requiring MEWAs providing
medical care benefits (within the meaning of section 733(a)(2) of
ERISA) that are not ERISA-covered group health plans (non-plan MEWAs)
to register with the Secretary before operating in a State. By
implementing this statutory amendment, the Department would receive
prior notice of a MEWA's intention to commence operations in a State.
Such notification would help the Department and State insurance
commissioners to ensure that MEWAs are being lawfully operated and that
sufficient insurance has been purchased or adequate reserves
established to pay benefit claims before the MEWAs begin operating \15\
in a State. The proposed rule would improve MEWA compliance and deter
fraudulent and abusive MEWA practices, thereby protecting and securing
the benefits of participants and beneficiaries by ensuring that MEWA
assets are preserved and benefits timely paid. These potential benefits
have not been
[[Page 76228]]
quantified, but the Department expects that they will more than justify
their costs.
---------------------------------------------------------------------------
\15\ Section 2520.101-2(b)(8) of the proposed rule provides that
the term ``operating'' means any activity including but not limited
to marketing, soliciting, providing, or offering to provide medical
care benefits.
---------------------------------------------------------------------------
3. Costs of Proposed Rule
The costs of the proposed rule are associated with the amendments
to the Form M-1 and Form 5500 reporting requirements and are therefore
discussed in the Paperwork Reduction Act section, below.
B. Paperwork Reduction Act
As part of its continuing effort to reduce paperwork and respondent
burden, the Department of Labor conducts a preclearance consultation
program to provide the general public and Federal agencies with an
opportunity to comment on proposed and continuing collections of
information in accordance with the Paperwork Reduction Act of 1995 (PRA
95) (44 U.S.C. 3506(c)(2)(A)). This helps to ensure that requested data
can be provided in the desired format, reporting burden (time and
financial resources) is minimized, collection instruments are clearly
understood, and the impact of collection requirements on respondents
can be properly assessed. Currently, the Department is soliciting
comments concerning the proposed information collection request (ICR)
included in this proposed rule. A copy of the ICR may be obtained by
contacting the individual identified below in this notice. The
Department has submitted a copy of the proposed information collection
to OMB in accordance with 44 U.S.C. 3507(d) for review of its
information collections. The Department and OMB are particularly
interested in comments that:
Evaluate whether the proposed collection of information is
necessary for the proper performance of the functions of the agency,
including whether the information will have practical utility;
Evaluate the accuracy of the agency's estimate of the
burden of the collection of information, including the validity of the
methodology and assumptions used;
Enhance the quality, utility, and clarity of the
information to be collected; and
Minimize the burden of the collection of information on
those who are to respond, including through the use of appropriated
automated, electronic, mechanical, or other technological collection
techniques or other forms of information technology, e.g., permitting
electronic submission of responses.
Comments should be sent to the Office of Information and Regulatory
Affairs, Office of Management and Budget, Room 10235, New Executive
Office Building, Washington, DC 20503; Attention: Desk Officer for the
Employee Benefits Security Administration. Although comments may be
submitted through February 6, 2012. Address requests for copies of the
ICR to G. Christopher Cosby, Office of Policy and Research, U.S.
Department of Labor, Employee Benefits Security Administration, 200
Constitution Avenue NW., Room N 5647, Washington, DC 20210. Telephone
(202) 219-8410; Fax: (202) 219-4745. These are not toll free numbers.
Between 2006 and 2009, an average of 457 entities filed Form M-1
with the Department (a high of 508 in 2006 and a low of 397 in 2009).
Of the total filings, on average, 197 were submitted via mail and 260
were submitted electronically through the Form M-1 electronic filing
system provided by the Department via the Internet. The fraction filing
electronic returns has been increasing and reached nearly 65 percent in
2009. This proposed rule will require all filings to be submitted
electronically.
As discussed above and pursuant to section 6606, the proposed rule
would amend the information required to be disclosed on the Form M-1 by
adding new data elements. Therefore, the Department assumes that all
MEWA plan administrators that file the Form M-1 in-house (an estimated
10 percent of filers) would spend two hours familiarizing themselves
with the changes to the form that would be made by the proposed
regulation. This would result in a total hour burden of 92 hours (46
MEWAs * 2 hours). The Department estimates that Part I of the Form (the
identifying information) would require five minutes to complete. The
time required to complete Part II would vary based on the number of
States in which the entity provides coverage, and the Department
estimates that this would require 60 minutes for single-State filers
and 120 minutes for multi-State filers. The Department expects the time
required to complete Part III would be 15 minutes for fully-insured
filers and 30 minutes for self-insured filers. Table 1 below summarizes
the estimates of time required to complete each part of the form. Based
on the foregoing, the Department estimates that the total hour burden
for MEWAs to file the Form M-1 using in-house resources would be 178
hours in the first year with an equivalent cost of $16,200 assuming all
work will be performed by an employee benefits professional at $91.21
per hour.\16\ The cost to submit electronic filings would be
negligible.
---------------------------------------------------------------------------
\16\ EBSA estimates of labor rates include wages, other
benefits, and overhead based on the National Occupational Employment
Survey (May 2009, Bureau of Labor Statistics) and the Employment
Cost Index (October 2010, Bureau of Labor Statistics).
---------------------------------------------------------------------------
The Department estimates that the annual hour burden for Form M-1
filings prepared in-house in subsequent years would be approximately 94
hours as summarized in Table 2.\17\ The Department estimate is based on
the assumption that approximately 41 new MEWAs \18\ will file the Form
M-1 each year, and thus, approximately four new MEWAs will prepare Form
M-1 in-house. The Department estimates that it would take two hours for
these administrators, resulting in an hour burden of eight hours. The
Department estimates that MEWAs preparing the form in-house would spend
four hours completing part I, 68 hours completing Part II, and 15 hours
completing part III. The equivalent cost of this annual hour burden is
estimated to be $8,600, assuming a $91.21 hourly labor rate for an
employee benefits professional.
---------------------------------------------------------------------------
\17\ These are rounded values. The totals may differ slightly as
a result.
\18\ There were 46 MEWA originations in 2006, 52 originations in
2007 and 26 originations in 2008. This averages to 41 originations
per year.
Table 1--Time To Fill Out Form
[Minutes]
----------------------------------------------------------------------------------------------------------------
Fully-insured Self-insured
----------------------------------------------------------------------------------------------------------------
Multi
One State Multi States One State States
----------------------------------------------------------------------------------------------------------------
New Filing................................................. 120 120 120 120
Part I..................................................... 5 5 5 5
Part II.................................................... 60 120 60 120
[[Page 76229]]
Part III................................................... 15 15 30 30
----------------------------------------------------------------------------------------------------------------
Table 2--Hour Burden To Prepare Form M-1, In-House Preparation
----------------------------------------------------------------------------------------------------------------
Fully-insured Self-insured
-----------------------------------------------------
Multi Total
One State Multi States One State States
----------------------------------------------------------------------------------------------------------------
Number of MEWAs............................... 16 17 8 5 46
Review: Year 1................................ 32 34 16 10 92
New Filing: Subsequent Years.................. 3 3 1 1 8
Part I........................................ 1 1 1 0.5 4
Part II....................................... 16 33 8 11 68
Part III...................................... 4 4 4 3 15
-----------------------------------------------------------------
Total Time: Year 1........................ 53 73a 29 24 178
Total Time: Subsequent Years.............. 24 41 14 15 94
----------------------------------------------------------------------------------------------------------------
1. Cost Burden
The Department assumes that 90 percent of the 457 MEWAs (411 MEWAs)
that will file the Form M-1 will use third-party service providers to
complete and submit the Form M-1.\19\ Because the Department is
proposing to add additional data elements to the form, the Department
assumes that in the year of implementation, all service providers would
spend additional time familiarizing themselves with the changes. The
Department estimates that MEWAs that use third party service providers
would incur the cost of one hour for service providers to review the
new rule as service providers likely will provide this service for
multiple MEWAs and therefore spread this burden across multiple MEWAs.
This results in a one-time cost burden of $37,500 (411 MEWAs * 1 hour *
$91.21).
---------------------------------------------------------------------------
\19\ This assumption is made in connection with EBSA's principal
reporting form, the Form 5500, and was validated through a filer
survey.
---------------------------------------------------------------------------
The total estimated cost burden for preparing the form is arrived
at by multiplying the number of filers (found in Table 3) by the amount
of time required to prepare the documents (Table 1) and multiplying
this result by the hourly cost of an employee benefits professional
($91.21 dollars an hour). Based on the foregoing, the total cost burden
for MEWAs that use purchased third-party resources to file the M-1 form
is $108,100 hours in the first year and $70,700 in later years. Table 3
summarizes the estimates of the cost burden.
Table 3--Cost Burden To Prepare Form M-1, Third-Party Preparation
----------------------------------------------------------------------------------------------------------------
Fully-insured Self-insured
-----------------------------------------------------
Multi Total
One State Multi States One State States
----------------------------------------------------------------------------------------------------------------
Number of MEWAs............................... 140 149 73 49 411
Review: Year 1................................ $12,800 $13,600 $6,700 $4,500 $37,500
New Filing: Subsequent Years.................. $0 $0 $0 $0 $0
Part I........................................ $1,100 $1,100 $600 $400 $3,100
Part II....................................... $12,800 $27,100 $6,600 $8,900 $55,400
Part III...................................... $3,200 $3,400 $3,300 $2,200 $12,100
-----------------------------------------------------------------
Total Time: Year 1........................ $29,800 $45,200 $17,200 $15,900 $108,100
Total Time: Subsequent Years.............. $17,100 $31,600 $10,500 $11,500 $70,700
----------------------------------------------------------------------------------------------------------------
Note: The displayed numbers are rounded to the nearest hundred and therefore may not add up to the totals.
The proposed regulations direct an ERISA-covered plan MEWA that is
subject to Form M-1 requirements to include proof of filing the Form M-
1 as part of the Form 5500. 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 the 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 Department believes that the burden associated with this
revision would be
[[Page 76230]]
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 regulations also would remove the exemption from
filing the Form 5500 for ERISA-covered MEWAs that are unfunded or
insured and have fewer than 100 participants. Following the methodology
used to calculate the burden in the Form 5500 regulations, the
Department estimates that small ERISA-covered MEWAs filing a Form 5500
and completing Schedule A and Part III of Schedule G would incur an
annual cost of $450 to engage a third-party service provider to prepare
the form and schedules for submission. The Department does not have
sufficient data to determine the number of small, ERISA-covered MEWAs
that would be required to file the Form 5500 under the proposed rule,
but believes that the number of such MEWAs would be small, because 90
percent of MEWAs that file Form M-1 with the Department cover more than
100 participants.
2. Cost to the Government
The Department estimates that the cost to the Federal government to
process Form M-1s is approximately $7,200. This includes the cost to
process online submissions and maintain the processing system, and was
estimated by the offices within EBSA that are responsible for
overseeing these activities.
Table 4--Cost of Federal Government of Form M-1
------------------------------------------------------------------------
------------------------------------------------------------------------
Processing of M1 Forms:
Online...................................................... $2,200
Maintenance of System....................................... 5,000
---------
Total..................................................... 7,200
------------------------------------------------------------------------
These paperwork burden estimates are summarized as follows:
Type of Review: Revised collection.
Agency: Employee Benefits Security Administration, Department of
Labor.
Title: MEWA Form M-1.
OMB Control Number: 1210-0116.
Affected Public: Business or other for-profit; not-for-profit
institutions.
Estimated Number of Respondents: 457 (first year); 457 (three-year
average).
Estimated Number of Responses: 457 (first year); 457 (three-year
average).
Frequency of Response: Annually.
Estimated Annual Burden Hours: 178 (first year); 122 (three-year
average).
Estimated Annual Burden Cost: $108,100 (first year); $83,200
(three-year average).
C. Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) imposes
certain requirements with respect to Federal rules that are subject to
the notice and comment requirements of section 553(b) of the
Administrative Procedure Act (5 U.S.C. 551 et seq.) and are likely to
have a significant economic impact on a substantial number of small
entities. Unless an agency certifies that a rule will not have a
significant economic impact on a substantial number of small entities,
section 603 of the RFA requires the agency to present an initial
regulatory flexibility analysis at the time of the publication of the
notice of proposed rulemaking describing the impact of the rule on
small entities. Small entities include small businesses, organizations
and governmental jurisdictions.
The Department does not have data regarding the total number of
MEWAs that currently exist. The best information the Department has to
estimate the number of MEWAs is based on filing of the Form M-1, which
is an annual report that MEWAs and certain collectively bargained
arrangements file with the Department. Nearly 400 MEWAs filed the Form
M-1 with the Department in 2009, the latest year for which data is
available.
The Small Business Administration uses a size standard of less than
$7 million in average annual receipts as the cut off for small business
in the finance and insurance sector.\20\ While the Department does not
collect revenue information on the Form M-1, it does collect data
regarding the number of participants covered by MEWAs that file Form M-
1 and can use participant data and average premium data to determine
the number of MEWAs that are small entities, because their revenues do
not exceed the $7 million threshold. For 2009, the average single
coverage annual premium was $4,717 and the average annual family
coverage premium was $12,696.\21\ Combining these premium estimates
with estimates of the ratio of policies to the covered population from
the Current Population Survey at employers with less than 500 workers
(0.309 for single coverage and 0.217 for family coverage), the
Department estimates that 60 percent of MEWAs (243 MEWAs) are small
entities.
---------------------------------------------------------------------------
\20\ U.S. Small Business Administration, ``Table of Small
Business Size Standards Matched to North American Industry
Classification System Codes,'' http://www.sba.gov/sites/default/files/Size_Standards_Table.pdf.
\21\ Kaiser Family Foundation and Health Research Educational
Trust ``Employer Health Benefits, 2009 Annual Survey.'' The reported
numbers are from Exhibit 1.2 and are for the category Annual, all
Small Firms (3-199 workers).
---------------------------------------------------------------------------
While this number is a relatively large fraction of all MEWAs, it
is about 7 percent when expressed as a fraction of all participants
covered by MEWAs. In addition, the Department notes that the reporting
burden that would be imposed on all MEWAs by the proposed rule is
estimated as an average cost of $272 for each MEWA filing Form M-1. For
all but the smallest MEWAs (less than 15 participants), this represents
less than one-half of one percent of revenues.
The proposed regulations also would remove the exemption from
filing the Form 5500 for ERISA-covered MEWAs that are unfunded or
insured, fully insured, or combination unfunded/fully insured covering
fewer than 100 participants. As discussed in the PRA section above, the
Department estimates that these small ERISA-covered MEWAs would incur
an annual cost of $450 to engage a third-party service provider to
prepare the form and schedules for submission. The Department does not
have sufficient data to determine the number of small plan MEWAs that
would be required to file the Form 5500 under the proposed rule. About
10 percent (48) of MEWAs filing Form M-1 in 2009 had less than 100
participants. However, the 2009 Form M-1 lacks information on the
source of funding to determine which of these small MEWAs would be
subject to the proposed rule.
Accordingly, the Department hereby certifies that this proposed
regulation would not have a significant economic impact on a
substantial number of small entities. The Department invites public
comments regarding this finding.
D. Unfunded Mandates Reform Act
For purposes of the Unfunded Mandates Reform Act of 1995 (2 U.S.C.
1501 et seq.), as well as Executive Order 12875, this proposed rule
does not include any federal mandate that may result in expenditures by
State, local, or tribal governments, or the private sector, which may
impose an annual burden of $100 million.
E. Executive Order 13132
When an agency promulgates a regulation that has federalism
implications, Executive Order 13132 (64 FR 43255, August 10, 1999),
requires the Agency to provide a federalism summary impact statement.
Pursuant to section 6(c) of the Order, such a statement must include a
description of the extent of the agency's consultation with State and
local officials, a summary of the nature of their concerns and the
agency's position supporting the
[[Page 76231]]
need to issue the regulation, and a statement of the extent to which
the concerns of the State have been met.
This regulation has federalism implications, because the States and
the Federal government share dual jurisdiction over MEWAs that are
employee benefit plans or hold plan assets. Generally, States are
primarily responsible for overseeing the financial soundness and
licensing of MEWAs under State insurance laws. The Department enforces
ERISA's fiduciary responsibility provisions against MEWAs that are
ERISA plans or hold plan assets.
Over the years, the Department and State insurance departments have
worked closely and coordinated their investigations and other actions
against fraudulent and abusive MEWAs. For example, EBSA regional
offices have met with State officials in their regions and supported
their enforcement efforts to shut down fraudulent and abusive MEWAs. By
requiring MEWAs to register with Department before operating in a State
by filing Form M-1 and to provide additional information, this proposed
rule would enhance the State and Federal governments' joint mission to
take enforcement action against fraudulent and abusive MEWAs and limit
the losses suffered by American workers, their families, and businesses
when abusive MEWAs become insolvent and fail to reimburse medical
claims.
List of Subjects in 29 CFR Part 2520
Accounting, Employee benefit plans, Pensions, Reporting and
recordkeeping requirements.
DEPARTMENT OF LABOR
Employee Benefits Security Administration
29 CFR Chapter XXV
For the reasons set out in the preamble, part 2520 of Chapter XXV
of Title 29 of the Code of Federal Regulations is amended as follows:
PART 2520--[AMENDED]
1. The authority for part 2520 is revised to read:
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 Sec.
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;
2. Section 2520.101-2 is revised to read as follows:
Sec. 2520.101-2 Filing by Multiple Employer Welfare Arrangements and
Certain Other Related Entities.
(a) Basis and scope. Section 101(g) of the Employee Retirement
Income Security Act (ERISA), as amended by the Patient Protection and
Affordable Care Act, requires the Secretary of Labor (the Secretary) to
establish, by regulation, a requirement that multiple employer welfare
arrangements (MEWAs) providing benefits that consist of medical care
(as described in paragraph (b)(6), below), which are not group health
plans, register with the Secretary prior to operating in a State.
Section 101(g) also permits the Secretary to require, by regulation,
such MEWAs to report, not more frequently than annually, in such form
and manner as the Secretary may require, for the purpose of determining
the extent to which the requirements of part 7 of subtitle B of title I
of ERISA (part 7) are being carried out in connection with such
benefits. Section 734 of ERISA provides that the Secretary may
promulgate such regulations as may be necessary or appropriate to carry
out the provisions of part 7. This section sets out requirements for
reporting by MEWAs that provide benefits that consist of medical care
and by certain entities that claim not to be a MEWA solely due to the
exception in section 3(40)(A)(i) of ERISA (referred to in this section
as Entities Claiming Exception or ECEs). The reporting requirements
apply regardless of whether the MEWA or ECE is a group health plan.
(b) Definitions. As used in this section, the following definitions
apply:
(1) Administrator means--(i) The person specifically so designated
by the terms of the instrument under which the MEWA or ECE is operated;
(ii) If the MEWA or ECE is a group health plan and the
administrator is not so designated, the plan sponsor (as defined in
section 3(16)(B) of ERISA); or
(iii) In the case of a MEWA or ECE for which an administrator is
not designated and a plan sponsor cannot be identified, jointly and
severally, the person or persons actually responsible (whether or not
so designated under the terms of the instrument under which the MEWA or
ECE is operated) for the control, disposition, or management of the
cash or property received by or contributed to the MEWA or ECE,
irrespective of whether such control, disposition, or management is
exercised directly by such person or persons or indirectly through an
agent, custodian, or trustee designated by such person or persons.
(2) Entity Claiming Exception (ECE) means an entity that claims it
is not a MEWA on the basis that the entity is established or maintained
pursuant to one or more agreements that the Secretary finds to be
collective bargaining agreements within the meaning of section
3(40)(A)(i) of ERISA and Sec. 2510.3-40.
(3) Excepted benefits means excepted benefits within the meaning of
section 733(c) of ERISA and Sec. 2590.701-2.
(4) Group health plan means a group health plan within the meaning
of section 733(a) of ERISA and Sec. 2590.701-2.
(5) Health insurance issuer means a health insurance issuer within
the meaning of section 733(b)(2) of ERISA and Sec. 2590.701-2.
(6) Medical care means medical care within the meaning of section
733(a)(2) of ERISA and Sec. 2590.701-2.
(7) Multiple employer welfare arrangement (MEWA) means a multiple
employer welfare arrangement within the meaning of section 3(40) of
ERISA.
(8) Operating means any activity including but not limited to
marketing, soliciting, providing, or offering to provide benefits
consisting of medical care.
(9) Origination means the occurrence of any of the following events
(and an ECE is considered to have been originated when any of the
following events occurs)--
(i) The ECE begins operating with regard to the employees of two or
more employers (including one or more self-employed individuals);
(ii) The ECE, while required to report pursuant to paragraph
(c)(1)(ii) of this section, begins operating in any additional State;
(iii) The ECE begins operating following a merger with another ECE
(unless all of the ECEs that participate in the merger previously were
last originated at least three years prior to the merger);
(iv) The number of employees receiving coverage for medical care
under the ECE is at least 50 percent greater than the number of such
employees on the last day of the previous calendar year (unless the
increase is due to a merger with another ECE under which all ECEs that
participate in the merger were last originated at least three years
prior to the merger); or
(v) The ECE, during the three-year period following an event
described in (b)(9)(i)-(iv) above, experiences a
[[Page 76232]]
material change as defined in the Form M-1 instructions.
(10) Reporting or to report means to file the Form M-1 as required
pursuant to sections 101(g); Sec. 2520.101-2; or the instructions to
the Form M-1.
(11) State means State within the meaning of Sec. 2590.701-2.
(c) Persons required to report--(1) General rule. Except as
provided in paragraph (c)(2) of this section, the following persons are
required to report under this section:
(i) The administrator of a MEWA regardless of whether the entity is
a group health plan; and
(ii) The administrator of an ECE during the three year period
following an event described in (b)(9)(i)-(iv).
(2) Exceptions--(i) Nothing in this paragraph (c) shall be
construed to require reporting under this section by the administrator
of a MEWA or ECE described under this paragraph (c)(2)(i).
(A) A MEWA or ECE licensed or authorized to operate as a health
insurance issuer in every State in which it offers or provides coverage
for medical care to employees;
(B) A MEWA or ECE that provides coverage that consists solely of
excepted benefits, which are not subject to part 7. If the MEWA or ECE
provides coverage that consists of both excepted benefits and other
benefits for medical care that are not excepted benefits, the
administrator of the MEWA or ECE is required to report under this
section;
(C) A MEWA or ECE that is a group health plan not subject to ERISA,
including a governmental plan, church plan, or a plan maintained solely
for the purpose of complying with workmen's compensation laws, within
the meaning of sections (4)(b)(1), 4(b)(2), or 4(b)(3) of ERISA,
respectively; or
(D) A MEWA or ECE that provides coverage only through group health
plans that are not covered by ERISA, including governmental plans,
church plans, or plans maintained solely for the purpose of complying
with workmen's compensation laws within the meaning of sections
4(b)(1), 4(b)(2), or 4(b)(3) of ERISA, respectively (or other
arrangements not covered by ERISA, such as health insurance coverage
offered to individuals other than in connection with a group health
plan, known as individual market coverage);
(ii) Nothing in this paragraph (c) shall be construed to require
reporting under this section by the administrator of an entity that
would not constitute a MEWA or ECE but for the following circumstances
under this paragraph (c)(2)(ii).
(A) The entity provides coverage to the employees of two or more
trades or businesses that share a common control interest of at least
25 percent at any time during the plan year, applying the principles
similar to the principles of section 414(c) of the Internal Revenue
Code;
(B) The entity provides coverage to the employees of two or more
employers due to a change in control of businesses (such as a merger or
acquisition) that occurs for a purpose other than avoiding Form M-1
filing and is temporary in nature. For purposes of this paragraph,
``temporary'' means the MEWA or ECE does not extend beyond the end of
the plan year following the plan year in which the change in control
occurs; or
(C) The entity provides coverage to persons (excluding spouses and
dependents) who are not employees or former employees of the plan
sponsor, such as non-employee members of the board of directors or
independent contractors, and the number of such persons who are not
employees or former employees does not exceed one percent of the total
number of employees or former employees covered under the arrangement,
determined as of the last day of the year to be reported or, determined
as of the 60th day following the date the MEWA or ECE began operating
in a manner such that a filing is required pursuant to paragraph
(e)(2)(ii), (iii), or (iv) of this section.
(3) Examples. The rules of this paragraph (c) are illustrated by
the following examples:
Example 1. (i) Facts. MEWA A begins operating by offering
coverage to the employees of two or more employers on January 1,
2012. MEWA A is licensed or authorized to operate as a health
insurance issuer in every State in which it offers coverage for
medical care to employees.
(ii) Conclusion. In this Example 1, the administrator of MEWA A
is not required to report via Form M-1. MEWA A meets the exception
to the filing requirement in paragraph (c)(2)(i)(A) of this section
because it is licensed or authorized to operate as a health
insurance issuer in every State in which it offers coverage for
medical care to employees.
Example 2. (i) Facts. Company B maintains a group health plan
that provides benefits for medical care for its employees (and their
dependents). Company B establishes a joint venture in which it has a
25 percent stock ownership interest, determined by applying the
principles under section 414(c) of the Internal Revenue Code, and
transfers some of its employees to the joint venture. Company B
continues to cover these transferred employees under its group
health plan.
(ii) Conclusion. In this Example 2, the administrator is not
required to file the Form M-1 because Company B's group health plan
meets the exception to the filing requirement in paragraph
(c)(2)(ii)(A) of this section. This is because Company B's group
health plan would not constitute a MEWA but for the fact that it
provides coverage to two or more trades or businesses that share a
common control interest of at least 25 percent.
Example 3. (i) Facts. Company C maintains a group health plan
that provides benefits for medical care for its employees. The plan
year of Company C's group health plan is the fiscal year for Company
C, which is October 1st-September 30th. Therefore, October 1, 2012-
September 30, 2013 is the 2013 plan year. Company C decides to sell
a portion of its business, Division Z, to Company D. Company C signs
an agreement with Company D under which Division Z will be
transferred to Company D, effective September 30, 2013. The change
in control of Division Z therefore occurs on September 30, 2013.
Under the terms of the agreement, Company C agrees to continue
covering all of the employees that formerly worked for Division Z
under its group health plan until Company D has established a new
group health plan to cover these employees. Under the terms of the
agreement, it is anticipated that Company C will not be required to
cover the employees of Division Z under its group health plan beyond
the end of the 2014 plan year, which is the plan year following the
plan year in which the change in control of Division Z occurred.
(ii) Conclusion. In this Example 3, the administrator of Company
C's group health plan is not required to report via Form M-1 on
March 1, 2014 for fiscal year 2013 because it is subject to the
exception to the filing requirement in paragraph (c)(2)(ii)(B) of
this section for an entity that would not constitute a MEWA but for
the fact that it is created by a change in control of businesses
that occurs for a purpose other than to avoid filing the Form M-1
and is temporary in nature. Under the exception, ``temporary'' means
the MEWA does not extend beyond the end of the plan year following
the plan year in which the change in control occurs. The
administrator is not required to file the 2013 Form M-1 because it
is anticipated that Company C will not be required to cover the
employees of Division Z under its group health plan beyond the end
of the 2014 plan year, which is the plan year following the plan
year in which the change in control of businesses occurred.
Example 4. (i) Facts. Company E maintains a group health plan
that provides benefits for medical care for its employees (and their
dependents) as well as certain independent contractors who are self-
employed individuals. The plan is therefore a MEWA. The
administrator of Company E's group health plan uses calendar year
data to report for purposes of the Form M-1. The administrator of
Company E's group health plan determines that the number of
independent contractors covered under the group health plan as of
the last day of calendar year 2012 is less than one percent of the
total number of employees and former employees covered under the
plan determined as of the last day of calendar year 2012.
(ii) Conclusion. In this Example 4, the administrator of Company
E's group health plan is not required to report via Form M-
[[Page 76233]]
1 for calendar year 2012 (a filing that is otherwise due by March 1,
2013) because it is subject to the exception to the filing
requirement provided in paragraph (c)(2)(ii)(C) of this section for
entities that cover a very small number of persons who are not
employees or former employees of the plan sponsor.
(d) Information to be reported-- (1) Any reporting required by this
section shall consist of a completed copy of the Form for Multiple
Employer Welfare Arrangements (MEWAs) and Certain Entities Claiming
Exception (ECEs) (Form M-1) and any additional statements required
pursuant to the Instructions to the Form M-1.
(2) Rejected filings.--The Secretary may reject any filing under
this section if the Secretary determines that the filing is incomplete,
in accordance with Sec. 2560.502c-5.
(3) If the Secretary rejects a filing under paragraph (d)(2) of
this section, and if a revised filing satisfactory to the Secretary is
not submitted within 45 days after the notice of rejection, the
Secretary may bring a civil action for such relief as may be
appropriate (including penalties under section 502(c)(5) of ERISA and
Sec. 2560.502c-5).
(e) Reporting requirements and timing--(1) Period for which
reporting is required. A completed copy of the Form M-1 is required to
be filed for each calendar year during all or part of which the MEWA or
ECE is operating.
(2) Filing deadline--(i)(A) General March 1 filing due date for
annual filings. Except as provided in paragraph (e)(2)(i)(B) of this
section, a completed copy of the Form M-1 is required to be filed on or
before each March 1 that follows a period for which reporting is
required (as described in paragraph (e)(1) of this section).
(B) Exception. Paragraph (e)(2)(i) of this section does not apply
to ECEs and MEWAs if, between October 1 and December 31, they
experience an origination or registration event and make the
subsequent, timely filing. Thus, no annual report is due in March if a
MEWA has a registration event or an ECE has an origination event
between October 1 and December 31. However the exception applies only
if the MEWA or ECE makes a timely filing pursuant to paragraph
(e)(2)(ii), (iii), or (iv) of this section.
(ii) Special rule requiring an Origination Filing when an ECE is
originated--(A) In general. Except as provided in paragraph
(e)(2)(ii)(B) of this section, when an ECE is originated, the
administrator of the ECE is also required to file a completed copy of
the Form M-1 30 days prior to the origination date.
(B) Exception. Paragraph (e)(2)(ii)(A) of this section does not
apply to ECEs that experience an origination as described in paragraphs
(b)(9)(iii), (iv), or (v) of this section. Such entities are required
to file a completed copy of the Form M-1 by the 30th day following the
origination date.
(iii) Special rule requiring that a MEWA register with the
Secretary prior to operating in a State--(A) In general. Except as
provided in paragraph (e)(2)(iii)(B) of this section, the administrator
of the MEWA is required to register with the Secretary by filing a
completed Form M-1 30 days prior to operating in any State.
(B) Exception. Paragraph (e)(2)(iii)(A) of this section does not
apply to MEWAs that, prior to the effective date of this section, were
already in operation in a State (or States). Such entities are required
to submit an annual filing pursuant to annual reporting rules described
in paragraph (e)(2)(i) of this section for that State (or those
States).
(iv) Special rule requiring MEWAs to make additional registration
filings. Subsequent to registering with the Secretary pursuant to
paragraph (e)(2)(iii)(A), the administrator of a MEWA shall make an
additional registration filing:
(A) 30 days prior to operating in any additional State or States
that were not indicated on a previous report filed pursuant to
paragraph (e)(2)(i) or (e)(2)(iii)(A);
(B) Within 30 days of the MEWA operating with regard to the
employees of an additional employer (or employers, including one or
more self-employed individuals) after a merger with another MEWA;
(C) Within 30 days of the date the number of employees receiving
coverage for medical care under the MEWA is at least 50 percent greater
than the number of such employees on the last day of the previous
calendar year; or
(D) Within 30 days of experiencing a material change as defined in
the Form M-1 instructions.
(v) Anti-abuse rule. If a MEWA or ECE neither offers nor provides
benefits consisting of medical care within a State during the calendar
year immediately following the year in which an origination filing is
made by the ECE pursuant to paragraph (e)(2)(ii) (due to an event
described in paragraph (b)(9)(ii)) or a registration filing is made by
the MEWA pursuant to (e)(2)(iii)(A) or (e)(2)(iv)(A), with respect to
operating in such State, such filing will be considered to have lapsed.
(vi) Multiple filings not required in certain circumstances. If
multiple filings are required under this paragraph (e)(2), a single
filing will satisfy this section so long as the filing is timely for
each required filing.
(vii) Extensions. (A) An extension may be granted for filing a
report required by paragraph (e)(2)(i)(A) of this section, if the
administrator complies with the extension procedure prescribed in the
Instructions to the Form M-1.
(B) If the filing deadline set forth in this paragraph (e)(2) is a
Saturday, Sunday, or federal holiday, the form must be filed no later
than the next business day.
(3) Examples. The rules of this paragraph (e) are illustrated by
the following examples:
Example 1. (i) Facts. MEWA A began offering coverage for medical
care to the employees of two or more employers on July 1, 2003 (and
continues to offer such coverage). MEWA A has satisfied all filing
requirements to date.
(ii) Conclusion. In this Example 1, the administrator of MEWA A
must continue to file a completed Form M-1 each year by March 1 but
the administrator is not required to register with the Secretary
because MEWA A meets the exception to the registration requirement
in paragraph (e)(2)(iii)(B) of this section and has not experienced
any event described in paragraph (e)(2)(iv) that would require
registering with the Secretary.
Example 2. (i) Facts. As of February 22, 2012, MEWA B is
preparing to operate in States Y and Z. MEWA B is not licensed or
authorized to operate as a health insurance issuer in any State and
does not meet any of the other exceptions set forth in paragraph
(c)(2) of this section.
(ii) Conclusion. In this Example 2, the administrator of MEWA B
is required to register with the Secretary by filing a completed
Form M-1 30 days prior to operating in States Y or Z. The
administrator of MEWA B must also report by filing the Form M-1
annually by every March 1 thereafter.
Example 3. (i) Facts. As of March 28, 2012, MEWA C is operating
in States V and W. MEWA C has satisfied the requirements of
(e)(2)(iii) with respect to those States. MEWA C is not licensed or
authorized to operate as a health insurance issuer in any State and
does not meet any of the other exceptions set forth in (c)(2) of
this section. On April 1, 2012 MEWA C begins operating in State X.
(ii) Conclusion. In this Example 3, the administrator of MEWA C
is required to make an additional registration filing with the
Secretary 30 days prior to operating in State X. Additionally, the
administrator of MEWA C must continue to file the Form M-1 annually
by every March 1 thereafter.
Example 4. (i) Facts. ECE A began offering coverage for medical
care to the employees of two or more employers on January 1, 2007
and ECE A has not been involved in any mergers or experienced any
other origination as described in paragraph (b)(9) of this section.
(ii) Conclusion. In this Example 4, ECE A was originated on
January 1, 2007 and has not been originated since then. Therefore,
the
[[Page 76234]]
administrator of ECE A is not required to file a Form M-1 on March
1, 2012 because the last time the ECE A was originated was January
1, 2007 which is more than 3 years prior to March 1, 2012. Further,
the ECE has satisfied its reporting requirements by making 3 timely
annual filings after its origination.
Example 5. (i) Facts. ECE B wants to begin offering coverage for
medical care to the employees of two or more employers on July 1,
2012.
(ii) Conclusion. In this Example 5, the administrator of ECE B
must file a completed Form M-1 on or before June 1, 2012 (which is
30 days prior to the origination date). In addition, the
administrator of ECE B must file an updated copy of the Form M-1 by
March 1, 2013 because the last date ECE B was originated was June 1,
2012 (which is less than 3 years prior to the March 1, 2013 due
date). Furthermore, the administrator of ECE B must file the Form M-
1 by March 1, 2014 and again by March 1, 2015 (because July 1, 2012
is less than three years prior to March 1, 2014 and March 1, 2015,
respectively). However, if ECE B is not involved in any mergers and
does not experience any other origination as described in paragraph
(b)(9) of this section, there would not be a new origination date
and no Form M-1 is required to be filed after March 1, 2015.
Example 6. (i) Facts. ECE D, which currently operates in State
A, is making preparations to operate in State B on November 1, 2012
and thus must make an origination filing by October 2, 2012 (30 days
prior to the origination date). ECE D makes this filing timely.
(ii) Conclusion. In this Example 6, ECE D experiences an
origination and makes a timely filing on October 2, 2012. Thus ECE D
is exempt from the next annual filing due March 1, 2013 pursuant to
the filing deadline exception under (e)(2)(i)(B) of this section.
However, the ECE must continue to file annual reports for the
subsequent years on March 1, 2014 and March 1, 2015.
Example 7. (i) Facts. MEWA E begins distributing marketing
materials on August 31, 2012.
(ii) Conclusion. In this Example 7, because MEWA E began
operating on August 31, 2012, the administrator of MEWA E must
register with the Secretary by filing a completed Form M-1 on or
before August 1, 2012 (30 days prior to operating in any State). In
addition, the administrator of MEWA E must file the Form M-1
annually by every March 1 thereafter.
Example 8. (i) Facts. Same facts as Example 7, but MEWA E
registers on or before August 1, 2012 by filing a Form M-1
indicating it will begin operating in every State. However, in the
calendar year immediately following the filing, MEWA E only offered
or provided benefits consisting of medical care to participants in
State Z.
(ii) Conclusion. In this Example 8, the registration for all
States (other than State Z) have lapsed under (e)(2)(v) because MEWA
E only offered or provided benefits consisting of medical care to
participants in State Z in the calendar year immediately following
the filing. If subsequently, MEWA E begins offering or providing
benefits consisting of medical care to participants in any
additional State (or States), it must make a new registration filing
pursuant to (e)(2)(iv)(A) of this section.
(f) Electronic Filing. A completed Form M-1 is filed with the
Secretary by submitting it electronically as prescribed in the
Instructions to the Form M-1.
(g) Penalties--(1) Civil penalties and procedures. For information
on civil penalties under section 502(c)(5) of ERISA for persons who
fail to file the information required under this section, see Sec.
2560.502c-5. For information relating to administrative hearings and
appeals in connection with the assessment of civil penalties under
section 502(c)(5) of ERISA, see Sec. Sec. 2570.90 through 2570.101.
(2) Criminal penalties and procedures. For information on criminal
penalties under section 519 of ERISA for persons who knowingly make
false statements or false representation of fact with regards to the
information required under this section, see section 501(b) of ERISA.
(3) Cease and desist and summary seizure orders. For information on
the Secretary's authority to issue a cease and desist or summary
seizure order under section 521 of ERISA, see Sec. 2560.521.
3. Section 2520.103-1 is amended by:
a. Revising paragraphs (a) introductory text, (a)(2), (b)
introductory text and (c)(1),
b. Amending paragraph (c)(2)(ii)(C) by removing the reference
``and'' at the end of the paragraph,
c. Removing the period at the end of paragraph (c)(2)(ii)(D) and
adding the reference ``and'' at the end of paragraph,
d. Adding a new paragraph (c)(2)(ii)(E),
e. Redesignating paragraph (f) as paragraph (g) and add a new
paragraph (f).
The revisions and additions read as follows:
Sec. 2520.103-1 Contents of the annual report.
(a) In general. The administrator of a plan required to file an
annual report in accordance with section 104(a)(1) of the Act shall
include with the annual report the information prescribed in paragraph
(a)(1) of this section or in the simplified report, limited exemption
or alternative method of compliance described in paragraph (a)(2) of
this section.
* * * * *
(2) Under the authority of subsections 104(a)(2), 104(a)(3) and 110
of the Act, and section 1103(b) of the Pension Protection Act of 2006,
a simplified report, limited exemption or alternative method of
compliance is prescribed for employee welfare and pension benefit
plans, as applicable. A plan filing a simplified report or electing the
limited exemption or alternative method of compliance shall file an
annual report containing the information prescribed in paragraph (b),
paragraph (c), or paragraph (f) of this section, as applicable, and
shall furnish a summary annual report as prescribed in Sec. 2520.104b-
10.
(b) Contents of the annual report for plans with 100 or more
participants electing the limited exemption or alternative method of
compliance. Except as provided in paragraphs (d) and (f) of this
section and in Sec. Sec. 2520.103-2 and 2520.104-44 the annual report
of an employee benefit plan covering 100 or more participants at the
beginning of the plan year which elects the limited exemption or
alternative method of compliance described in paragraph (a)(2) of this
section shall include:
* * * * *
(c) * * *
(1) Except as provided in paragraph (c)(2), (d) and (f) of this
section, and in Sec. Sec. 2520.104-43 and 2520.104a-6, the annual
report of an employee benefit plan that covers fewer than 100
participants at the beginning of the plan year shall include a Form
5500 ``Annual Return/Report of Employee Benefit Plan'' and any
statements or schedules required to be attached to the form, completed
in accordance with the instructions for the form, including Schedule A
(Insurance Information), Schedule SB (Single Employer Defined Benefit
Plan Actuarial Information), Schedule MB (Multiemployer Defined Benefit
Plan and Certain Money Purchase Plan Actuarial Information), Schedule D
(DFE/Participating Plan Information), Schedule I (Financial
Information--Small Plan), and Schedule R (Retirement Plan Information).
See the instructions for this form.
(2) * * *
(ii) * * *
(E) Is not a multiple employer welfare arrangement subject to the
filing requirements under Sec. 2520.101-2.
* * * * *
(f) Plans which are multiple employer welfare arrangements. The
annual report of an employee welfare benefit plan that is a multiple
employer welfare arrangement subject to the filing requirements under
Sec. 2520.101-2 shall include:
(1)(i) For a plan with 100 or more participants, the information
prescribed in paragraph (b) of this section; or
(ii) For a plan with fewer than 100 participants, except as
provided in
[[Page 76235]]
Sec. 2520.104-44, the information prescribed in paragraph (c) of this
section; and
(2) Any statements or information required by the instructions to
the Form 5500 relating to multiple employer welfare arrangements,
including information regarding compliance with the filing requirements
under Sec. 2520.101-2.
* * * * *
4. Section 2520.104-20 is amended by removing the reference ``and''
in paragraph (b)(2)(iii), removing the period at the end of the
sentence and adding the reference ``and'' to the end of the sentence in
paragraph (b)(3)(ii), and adding a new paragraph (b)(4) to read as
follows:
Sec. 2520.104-20 Limited exemption for certain small welfare plans.
* * * * *
(b)(4) Which are not multiple employer welfare arrangements subject
to the filing requirements under Sec. 2520.101-2.
* * * * *
5. In Sec. 2520.104-41, revise paragraph (c) to read as follows:
Sec. 2520.104-41 Simplified annual reporting requirements for plans
with fewer than 100 participants.
* * * * *
(c) Contents. The administrator of an employee pension or welfare
benefit plan described in paragraph (b) of this section shall file, in
the manner described in Sec. 2520.104a-5, a completed Form 5500
``Annual Return/Report of Employee Benefit Plan'' or, to the extent
eligible, a completed Form 5500-SF ``Short Form Annual Return/Report of
Small Employee Benefit Plan,'' and any required schedules or statements
prescribed by the instructions to the applicable form, including, if
applicable, the information described in Sec. 2520.103-1(f)(2), and,
unless waived by Sec. 2520.104-44 or Sec. 2520.104-46, a report of an
independent qualified public accountant meeting the requirements of
Sec. 2520.103-1(b).
Signed this 28th day of November 2011.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits Security Administration,
Department of Labor.
[FR Doc. 2011-30918 Filed 12-5-11; 8:45 am]
BILLING CODE 4510-29-P
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