skip to page content
Secretary of Labor Thomas E. Perez
     DOL Home > Federal Register > Notices > EBSA
EBSA Notices

Proposed Revision of Annual Information Return/Reports   [12/6/2011]
[PDF]
Federal Register, Volume 76 Issue 234 (Tuesday, December 6, 2011)
[Federal Register Volume 76, Number 234 (Tuesday, December 6, 2011)]
[Notices]
[Pages 76252-76258]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-30919]


-----------------------------------------------------------------------

DEPARTMENT OF LABOR

Employee Benefits Security Administration

RIN 1210-AB51


Proposed Revision of Annual Information Return/Reports

AGENCY: Employee Benefits Security Administration, Department of Labor

ACTION: Notice of proposed forms revisions.

-----------------------------------------------------------------------

SUMMARY: This document contains proposed revisions to the Form 5500 
Annual Return/Report filed by administrators of employee benefit plans. 
The proposed revisions are intended to enhance the Department of 
Labor's ability to enforce the reporting requirements for multiple 
employer welfare arrangements (MEWAs) under Title I of the Employee 
Retirement Income Security Act of 1974, as amended (ERISA).

DATES: Written comments on the proposed regulations should be submitted 
to the Department of Labor on or before March 5, 2012.

FOR FURTHER INFORMATION CONTACT: Janet K. Song, Office of Regulations 
and Interpretations, Employee Benefits Security Administration, 
Department of Labor, at (202) 693-8523. This is not a toll-free number.

ADDRESSES: Written comments may be submitted to the address specified 
below. All comments will be made available to the public. Warning: Do 
not include any personally identifiable information (such as name, 
address, or other contact information) or confidential business 
information that you do not want publicly disclosed. All comments may 
be posted on the Internet and can be retrieved by most Internet search 
engines. Comments may be submitted anonymously.
    Comments may be submitted to the Department of Labor, identified by 
RIN 1210-AB51, by one of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Email: e-ORI@dol.gov.
     Mail or Hand Delivery: Office of Regulations and 
Interpretations, Employee Benefits Security Administration, Room N-
5655, U.S. Department of Labor, 200 Constitution Avenue NW., 
Washington, DC 20210, Attention: RIN 1210-AB51.
    Comments received by the Department of Labor will be posted without 
change to http://www.regulations.gov and http://

[[Page 76253]]

www.dol.gov/ebsa, and made available for public inspection at the 
Public Disclosure Room, N-1513, Employee Benefits Security 
Administration, 200 Constitution Avenue NW., Washington, DC 20210.

SUPPLEMENTARY INFORMATION:

I. Background

    Under Titles I and IV of ERISA, and the Internal Revenue Code 
(Code), as amended, and regulations issued thereunder, pension and 
welfare benefit plans are generally required to file an annual report 
concerning, among other things, the financial condition and operation 
of the plans. Filing the Form 5500 Annual Return/Report of Employee 
Benefit Plan (Form 5500 Annual Return/Report), including any required 
attachments and schedules, generally satisfies the annual reporting 
requirements. The Form 5500 Annual Return/Report is the principal 
source of information and data concerning the operations, funding and 
investments of pension and welfare benefit plans. The Form 5500 Annual 
Return/Report constitutes an integral part of the enforcement, research 
and policy development programs of the Department of Labor 
(Department), the Internal Revenue Service, and the Pension Benefit 
Guaranty Corporation, and is a source of information and data for use 
by other federal agencies, Congress, and the private sector in 
assessing employee benefit, tax, and economic trends and policies. The 
Form 5500 Return/Report also serves as the primary means by which the 
operations of plans can be monitored by participants, beneficiaries, 
and the general public.
    In addition to filing the Form 5500 Annual Return/Report, certain 
employee welfare benefit plans that are multiple employer welfare 
arrangements (MEWAs), as defined in section 3(40) of ERISA, are also 
subject to the reporting requirements under Sec.  2520.101-2, which is 
satisfied by filing a Form M-1 Report for Multiple Employer Welfare 
Arrangements (MEWAs) and Certain Other Entities Claiming Exception 
(ECEs) (Form M-1).

II. Multiple Employer Welfare Arrangements

    The Health Insurance Portability and Accountability Act of 1996 
(HIPAA) (Pub. L. 104-191, 110 Stat. 1936) amended ERISA to provide for, 
among other things, improved portability and continuity of health 
insurance coverage. HIPAA added section 101(g) to ERISA, providing the 
Secretary of Labor (Secretary) with the authority to establish, by 
regulation, annual reporting by MEWAs that are not themselves plans 
within the meaning of ERISA section 3(3) (non-plan MEWAs). The purpose 
of the reporting requirement was to determine whether MEWAs were in 
compliance with the requirements created by HIPAA. The Patient 
Protection and Affordable Care Act (Affordable Care Act), Public Law 
111-148, 124 Stat. 119 (2010), amended section 101(g) of ERISA to 
require non-plan MEWAs to register with the Department prior to 
operating in a State.
    On February 11, 2000, the Department published an interim final 
rule implementing the Form M-1 regulation under Sec.  2520.101-2. 65 FR 
715. On April 9, 2003, the Department published the final rule. 68 FR 
17494. ERISA section 101(g) only applies to non-plan MEWAs. In order to 
effectuate MEWA compliance, however, and based on the authority found 
in ERISA sections 505 and 734,\1\ the 2003 Form M-1 regulation requires 
the administrators of both plan and non-plan MEWAs, as well as certain 
other entities that offer or provide health benefits to the employees 
of two or more employers, to file the Form M-1 with the Secretary.
---------------------------------------------------------------------------

    \1\ In the preamble to the 2000 interim final rule, the 
Department explained ``[a]n important reason for requiring these 
groups to file is that the administrator of a MEWA may incorrectly 
determine that it is a group health plan or that it is established 
or maintained pursuant to a collective bargaining agreement. A 
reporting requirement limited only to MEWAs that are not group 
health plans may not result in reporting by many such MEWAs, thus 
greatly reducing the value of the data collected.'' See 65 FR 7152, 
7153, (Feb. 11, 2000).
---------------------------------------------------------------------------

    Although ERISA sections 505 and 734 provided the Secretary with the 
authority to require plan MEWAs to comply with the Form M-1 reporting 
requirements of Sec.  2520.101-2, only non-plan MEWAs are subject to 
civil penalties under ERISA section 502(c)(5) for failure to comply 
with the Form M-1 requirements.\2\
---------------------------------------------------------------------------

    \2\ Pursuant to ERISA section 502(c)(5), a civil penalty of up 
to $1,100 (or higher amount if adjusted pursuant to the Federal 
Civil Penalties Inflation Adjustment Act of 1990, as amended) a day 
may be assessed for each day a non-plan MEWA fails to file a 
complete Form M-1.
---------------------------------------------------------------------------

III. Discussion of the Proposed Revisions

1. Proposed Regulatory Amendments

    The Department is simultaneously publishing a Notice of Proposed 
Rulemaking in today's Federal Register that, upon adoption, would amend 
the existing Form M-1 requirements under Sec.  2520.101-2, propose 
implementation of new registration requirements enacted by the 
Affordable Care Act, and propose amendments to the Department's annual 
reporting regulations to strengthen the Form M-1 requirements for 
MEWAs. To reflect the proposed regulatory amendments to the Form 5500 
reporting requirements, the Department is proposing to revise the Form 
5500 Annual Return/Report and instructions as follows.

2. Plan MEWA Filing Requirement

    Section 2520.104-20 and the instructions for the Form 5500 and Form 
5500-SF provide for exemption from certain reporting and disclosure 
requirements under Title I of ERISA, including the requirement to file 
Form 5500 Annual Return/Report, for unfunded, fully insured, or 
combination unfunded/fully insured welfare plans that cover fewer than 
100 participants. Under the proposed amendments to Sec.  2520.103-
1(c)(2) and Sec.  2520.104-20, and revisions to the instructions for 
Form 5500 and Form 5500-SF, all plan MEWAs subject to the Form M-1 
requirements would be required to file Form 5500 Annual Return/Report, 
regardless of the plan size. The limited exemption under Sec.  
2520.104-20 would be removed for plan MEWAs subject to the Form M-1 
requirements. In addition, such plan MEWAs would not be eligible to 
file the Form 5500-SF.\3\
---------------------------------------------------------------------------

    \3\ The Form 5500-SF does not include specific Schedule A 
insurance information, and the Department believes that plan MEWAs 
subject to this proposal that claim to provide insured benefits 
should be required to complete the Schedule A so that enforcement 
officials and the public have information about the insurance policy 
and insurance company through which the MEWA is providing insurance 
coverage.
---------------------------------------------------------------------------

    As discussed in the Paperwork Reduction Act statement, below, the 
Department believes that the number of plan MEWAs affected by the 
proposed removal of the exemption under Sec.  2520.104-20 would be 
small. Nevertheless, the Department believes that the proposed change 
is necessary because all MEWAs are subject to the existing (and 
proposed) Form M-1 requirements under Sec.  2520.101-2, regardless of 
the size of the entity. Unless all plan MEWAs are required to file the 
Form 5500 Annual Return/Report (with the proposed questions regarding 
Form M-1 compliance), the Department would have no way to enforce the 
Form M-1 requirements against MEWAs that might mischaracterize 
themselves as being eligible for the exemption under Sec.  2520.104-20.
    Moreover, the burden of preparing and filing the Form 5500 Annual 
Return/Report for the few small unfunded/fully insured plan MEWAs 
affected by the proposal would be minimized because, in addition to 
being

[[Page 76254]]

eligible for the simplified annual reporting requirements for small 
welfare plans provided under Sec.  2520.104-41, these plan MEWAs would 
be exempt under Sec.  2520.104-44 from completing Schedule I (Financial 
Information). Thus, these plan MEWAs would only need to file a Form 
5500 and, if applicable, Schedule A (Insurance Information) and 
Schedule G, Part III (to report any nonexempt transactions).

3. Form 5500--New MEWA Information

    Under the Notice of Proposed Rulemaking, content of the annual 
report under Sec.  2520.103-1 would be amended to require a plan MEWA 
subject to the Form M-1 requirements to include a proof of compliance 
with Sec.  2520.101-2 (filing the Form M-1) as part of the Form 5500 
Annual Return/Report. Accordingly, the Department is proposing to add a 
new Part III to the Form 5500, which would ask for information 
regarding whether an employee welfare benefit plan is a MEWA subject to 
the Form M-1 requirements, and if so, whether the plan is currently in 
compliance with the Form M-1 requirements under Sec.  2520.101-2. Plan 
administrators that indicate the plan is a MEWA subject to the Form M-1 
requirements will also be required to enter a Receipt Confirmation Code 
for the most recent Form M-1 filed with the Department. Failure to 
answer the Form M-1 compliance questions will result in rejection of 
the Form 5500 Annual Return/Report as incomplete and civil penalties 
may be assessed pursuant to ERISA section 502(c)(2).

IV. Findings on the Revised Form 5500 Annual Return/Report as a Limited 
Exemption and Simplified Reporting

    Section 104(a)(2)(A) of ERISA authorizes the Secretary to prescribe 
by regulation simplified reporting for pension plans that cover fewer 
than 100 participants. Section 104(a)(3) of ERISA authorizes the 
Secretary to exempt any welfare plan from all or part of the reporting 
and disclosure requirements of Title I of ERISA or to provide 
simplified reporting and disclosure if the Secretary finds that such 
requirements are inappropriate as applied to such plans. Section 110 of 
ERISA permits the Secretary to prescribe for pension plans alternative 
methods of complying with any of the reporting and disclosure 
requirements if the Secretary finds that: (1) The use of the 
alternative method is consistent with the purposes of Title I of ERISA, 
provides adequate disclosure to plan participants and beneficiaries, 
and provides adequate reporting to the Secretary; (2) the application 
of the statutory reporting and disclosure requirements would increase 
costs to the plan or impose unreasonable administrative burdens with 
respect to the operation of the plan; and (3) the application of the 
statutory reporting and disclosure requirements would be adverse to the 
interests of plan participants in the aggregate. For purposes of Title 
I of ERISA, the filing of a completed Form 5500 Annual Return/Report, 
including the filing by eligible plans of the Form 5500-SF, in 
accordance with the instructions and related regulations, generally 
would constitute compliance with the simplified report, limited 
exemption and/or alternative method of compliance in Sec.  2520.103-1. 
In addition, section 505 of ERISA authorizes the Secretary to prescribe 
such regulations as the Secretary finds necessary or appropriate to 
carry out the provisions of Title I of ERISA.
    In revising the Form 5500 Annual Return/Report and making the 
amendments to the Department's annual reporting regulations, the 
Department has attempted to balance the needs of participants and 
beneficiaries and the Department to obtain information necessary to 
protect ERISA rights and interests with the costs attendant with the 
reporting of information to the federal government. The Department 
finds under sections 104(a)(2)(A) and 104(a)(3) of ERISA that the use 
of the Form 5500 Annual Return/Report, with the proposed new Form M-1 
compliance questions, is consistent with the purposes of Title I of 
ERISA and provides adequate disclosure to participants and 
beneficiaries and adequate reporting to the Secretary.
    The use of the Form 5500 Annual Return/Report, including the 
proposed new Form M-1 compliance questions, will relieve plan MEWAs 
from increased costs and unreasonable administrative burdens by 
providing a standardized format that facilitates reporting, eliminates 
duplicative reporting requirements, and simplifies the content of the 
annual report in general. Taking into account the above, the Department 
has determined that the proposed revisions to the Form 5500 Annual 
Return/Report are necessary and appropriate to carry out the provisions 
of Title I of ERISA. The proposed revised Form 5500 Annual Return/
Report provides for the reporting and disclosure of financial and other 
plan information described in section 103 of ERISA in a uniform, 
efficient, and understandable manner, thereby facilitating the 
disclosure of such information to plan participants and beneficiaries.

V. Paperwork Reduction Act Statement

    According to the Paperwork Reduction Act of 1995 (Pub. L. 104-13) 
(PRA), no persons are required to respond to a collection of 
information unless such collection displays a valid OMB control number. 
The Department notes that a Federal agency cannot conduct or sponsor a 
collection of information unless it is approved by the Office of 
Management and Budget (OMB) under the PRA, and displays a currently 
valid OMB control number, and the public is not required to respond to 
a collection of information unless it displays a currently valid OMB 
control number. See 44 U.S.C. 3507. Also, notwithstanding any other 
provisions of law, no person shall be subject to penalty for failing to 
comply with a collection of information if the collection of 
information does not display a currently valid OMB control number. See 
44 U.S.C. 3512.
    The Department has filed a revision with OMB regarding the impact 
this notice would have on the information collection request titled 
``Form 5500, Annual Return/Report of Employee Benefit Plan,'' which is 
approved by OMB under OMB Control Number 1210-0110 and currently 
scheduled to expire on March 31, 2014. The proposed regulation titled 
``Filings Required of Multiple Employer Welfare Arrangements and 
Certain Other Entities that Offer or Provide Coverage for Medical Care 
to the Employees of Two or More Employers,'' published elsewhere in 
today's issue of the Federal Register, would revise the content of the 
Form 5500 Annual Return/Report to require an ERISA-covered plan MEWA 
that is subject to Form M-1 requirements to include a proof of filing 
the Form M-1 as part of the Form 5500 Annual Return/Report. 
Accordingly, the Department is proposing to add a new Part III to the 
Form 5500, which would ask for information regarding whether the 
employee welfare benefit plan is a MEWA subject to the Form M-1 
requirements, and if so, whether the plan is currently in compliance 
with the Form M-1 requirements under Sec.  2520.101-2. Plan 
administrators that indicate the plan is a MEWA subject to the Form M-1 
requirements also would be required to enter a Receipt Confirmation 
Code for the most recent Form M-1 filed with the Department. Failure to 
answer the Form M-1 compliance questions will result in rejection of 
the Form 5500 Annual Return/Report as incomplete and civil penalties 
may be assessed pursuant to ERISA section 502(c)(2). The

[[Page 76255]]

Department believes that the burden associated with this revision would 
be de minimis, because plan administrators would know whether the plan 
MEWA is subject to and in compliance with the Form M-1 requirements, 
and they would have the Receipt Confirmation Code for the most recent 
Form M-1 filing readily available.
    The proposed rule also would require all plan MEWAs subject to the 
Form M-1 requirements to file the Form 5500 Annual Return/Report, 
regardless of the plan size. The limited exemption for certain small 
welfare plans under Sec.  2520.104-20 would be removed for plan MEWAs 
subject to the Form M-1 requirements. In addition, such plan MEWAs 
would not be eligible to file the Form 5500-SF. Although the Department 
does not have sufficient data to estimate the number of plan MEWAs that 
would be affected by this revision, it expects the number to be small, 
because 90% of MEWAs that file the Form M-1 with the Department cover 
more than 100 participants. Moreover, as discussed earlier in this 
notice, the burden of preparing and filing the Form 5500 Annual Return/
Report for the few small unfunded/fully insured plan MEWAs affected by 
the proposal would be minimal, because, in addition to being eligible 
for the simplified annual reporting requirements for small welfare 
plans provided under Sec.  2520.104-41, these plan MEWAs would be 
exempt under Sec.  2520.104-44 from completing Schedule I (Financial 
Information). Thus, the affected plan MEWAs would only need to file a 
Form 5500 and, if applicable, Schedule A and Schedule G, Part III (to 
report any nonexempt transactions). The Department estimates that 
affected MEWAs would incur a cost of $450 to engage a third-party 
service provider to prepare the form and schedules for submission.

Appendix A--Proposed Changes to Existing Form 5500--New Part III Added

BILLING CODE 4510-29-P
[GRAPHIC] [TIFF OMITTED] TN06DE11.000

Appendix B--Proposed Changes to Form 5500 Instructions

    The proposed changes to the instructions to the Form 5500 are as 
follows:

[[Page 76256]]

[GRAPHIC] [TIFF OMITTED] TN06DE11.001


[[Page 76257]]


[GRAPHIC] [TIFF OMITTED] TN06DE11.002


[[Page 76258]]


[GRAPHIC] [TIFF OMITTED] TN06DE11.003

Appendix C--Proposed Changes to Existing Form 5500-SF Instructions

General Changes

    The instructions to the Form 5500-SF will be updated to clarify 
that plan MEWAs subject to Form M-1 filing requirements are not 
eligible to file the Form 5500-SF and must file the Form 5500, with all 
required schedules and attachments. The proposed changes are as 
follows:
[GRAPHIC] [TIFF OMITTED] TN06DE11.004


    Signed at Washington, DC this 28th day of November, 2011.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits Security Administration, 
Department of Labor.
[FR Doc. 2011-30919 Filed 12-5-11; 8:45 am]
BILLING CODE 4510-29-C