Federal Register / Vol. 78, No. 41 / Friday, March 1, 2013 / Rules and Regulations 13781 

deliberations on all issues. Like all 

Committee meetings, the July 14, 2011, 

meeting was a public meeting and all 

entities, both large and small, were able 

to express views on this issue. 

A proposed rule concerning this 

action was published in the Federal 

Register on December 12, 2012 (77 FR 

73961). Copies of the rule were mailed 

or sent via facsimile to all Committee 

members and Florida citrus handlers. 

Finally, the rule was made available 

through the Internet by USDA and the 

Office of the Federal Register. A 30-day 

comment period ending January 11, 

2013, was provided to allow interested 

persons to respond to the proposal. No 

comments were received. 

A small business guide on complying 

with fruit, vegetable, and specialty crop 

marketing agreements and orders may 

be viewed at: www.ams.usda.gov/ 

MarketingOrdersSmallBusinessGuide. 

Any questions about the compliance 

guide should be sent to Jeffrey Smutny 

at the previously mentioned address in 

the FOR FURTHER INFORMATION CONTACT

section. 

After consideration of all relevant 

matter presented, including the 

information and recommendation 

submitted by the Committee and other 

available information, it is hereby found 

that this rule, as hereinafter set forth, 

will tend to effectuate the declared 

policy of the Act. 

It is further found that good cause 

exists for not postponing the effective 

date of this rule until 30 days after 

publication in the Federal Register (5 

U.S.C. 553) because Committee 

nominations are scheduled to be held in 

the spring, and these changes need to be 

in effect in advance so that industry 

stakeholders are familiar with the new 

grower districts, reapportionment, and 

qualifications prior to the nomination 

process. Further, to be effective for the 

next nomination cycle, the order 

requires that the redistricting and 

reapportionment actions be announced 

on or before March 1, 2013. Also, a 30- 

day comment period was provided for 

in the proposed rule. 

List of Subjects in 7 CFR Part 905 

Grapefruit, Oranges, Reporting and 

recordkeeping requirements, Tangelos, 

Tangerines. 

For the reasons set forth in the 

preamble, 7 CFR part 905 is amended as 

follows: 

PART 905—ORANGES, GRAPEFRUIT, 

TANGERINES, AND TANGELOS 

GROWN IN FLORIDA 

■ 1. The authority citation for 7 CFR 

part 905 continues to read as follows: 

Authority: 7 U.S.C. 601–674. 

■ 2. Section 905.114 is revised to read 

as follows: 

§ 905.114 Redistricting of citrus districts 

and reapportionment of grower members. 

Pursuant to § 905.14, the citrus 

districts and membership allotted each 

district shall be as follows: 

(a) Citrus District One shall include 

the counties of Alachua, Baker, 

Bradford, Citrus, Clay, Columbia, Duval, 

Flagler, Gilchrist, Hernando, 

Hillsborough, Lake, Levy, Marion, 

Nassau, Orange, Osceola, Pasco, 

Pinellas, Polk, Putnam, Seminole, St. 

Johns, Sumter, Suwannee, and Union 

and County Commissioner’s Districts 

One, Two, and Three of Volusia County, 

and that part of the counties of Indian 

River and Brevard not included in 

Regulation Area II. This district shall 

have two grower members and 

alternates. 

(b) Citrus District Two shall include 

the counties of Broward, Charlotte, 

Collier, Dade, De Soto, Glades, Hardee, 

Hendry, Highlands, Lee, Manatee, 

Monroe, Okeechobee, Sarasota, and that 

part of the counties of Palm Beach and 

Martin not included in Regulation Area 

II. This district shall have three grower 

members and alternates. 

(c) Citrus District Three shall include 

the County of St. Lucie and that part of 

the counties of Brevard, Indian River, 

Martin, and Palm Beach described as 

lying within Regulation Area II, and 

County Commissioner’s Districts Four 

and Five of Volusia County. This 

district shall have four grower members 

and alternates. 

■ 3. In § 905.120, add paragraph (g) to 

read as follows: 

§ 905.120 Nomination procedure. 

* * * * * 

(g) Up to four grower members may be 

growers who are also shippers, or 

growers who are also employees of 

shippers. 

Dated: February 25, 2013. 

David R. Shipman, 

Administrator, Agricultural Marketing 

Service. 

[FR Doc. 2013–04787 Filed 2–28–13; 8:45 am] 

BILLING CODE 3410–02–P 

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: Final rules. 

SUMMARY: This document contains final 

rules under Title I of the Employee 

Retirement Income Security Act (ERISA) 

that implement reporting requirements 

for multiple employer welfare 

arrangements (MEWAs) and certain 

other entities that offer or provide 

benefits that consist of medical care 

(within the meaning of section 733(a)(2) 

of ERISA and 29 CFR 2590.701–2) for 

employees of two or more employers. 

These final rules amend the existing 

Form M–1 reporting rules by 

incorporating new provisions enacted as 

part of the Patient Protection and 

Affordable Care Act (the ‘‘Affordable 

Care Act’’). They also amend existing 

Form 5500 annual reporting rules for 

ERISA-covered plans subject to Form 

M–1 reporting rules. Elsewhere in this 

edition of the Federal Register, the 

Employee Benefits Security 

Administration is publishing final rules 

related to the Secretary of Labor’s new 

enforcement authority with respect to 

MEWAs, a notice adopting final 

revisions to the Form 5500 Annual 

Return/Report and its instructions to 

add new Form M–1 compliance 

questions, as well as an additional 

notice announcing the finalized 

revisions to the Form M–1 and its 

instructions. These improvements in 

reporting, together with stronger 

enforcement tools authorized by the 

Affordable Care Act, are designed to 

reduce MEWA fraud and abuse, 

protecting consumers from unpaid 

medical bills. 

DATES: Effective date. These final rules 

are effective on April 1, 2013. 

Applicability dates: These final rules 

pertaining to Form M–1 filings generally 

apply for all filing events beginning on 

or after July 1, 2013, except that in the 

case of the 2012 Form M–1 annual 

report, the deadline is now May 1, 2013 

with an extension until July 1, 2013 

available. The rules pertaining to Form 

5500 annual reporting will be applicable 

for all Form 5500 Annual Return/Report 

filings beginning with the 2013 Form 

5500. 


emcdonald on DSK67QTVN1PROD with RULES
13782 Federal Register / Vol. 78, No. 41 / Friday, March 1, 2013 / Rules and Regulations 

1See, e.g., Chao v. Graf, 2002 WL 1611122 (D. 

Nev. 2002), In re Raymond Palombo, et al., 2011 

WL 1871438 (Bankr. C.D. CA 2011) and Solis v. 

Palombo, No. 1:08–CV–2017 (N.D. Ga 2009); Chao 

v. Crouse, 346 F.Supp.2d 975 (S.D. Ind. 2004). 

2See Kofman, Mila, Bangit, Eliza, and Lucia, 

Kevin, MEWAs: The Threat of Plan Insolvency and 

Other Challenges (The Commonwealth Fund March 

2004), and Employee Benefits: States Need Labor’s 

Help Regulating Multiple Employer Welfare 

Arrangements, March 1992, GAO/HRD–92–40 

Employee Benefits: States Need Labor’s Help 

Regulating Multiple Employer Welfare 

Arrangements, March 1992, GAO/HRD–92–40. 

FOR FURTHER INFORMATION CONTACT: 

Allison Goodman or Suzanne Bach, 

Employee Benefits Security 

Administration, Department of Labor, at 

(202) 693–8335. This is not a toll-free 

number. 

SUPPLEMENTARY INFORMATION: 

Customer Service Information: 

Individuals interested in obtaining 

information from the Department of 

Labor concerning employment-based 

health coverage laws may call the EBSA 

Toll-Free Hotline at 1–866–444–EBSA 

(3272) or visit the Department of Labor’s 

Web site (http://www.dol.gov/ebsa). 

Information on health reform can be 

found at http://www.healthcare.gov. 

I. Executive Summary 

A. Purpose of the Regulatory Action 

1. Need for Regulatory Action 

ERISA section 101(g), 29 U.S.C. 

1021(g), as amended by the Affordable 

Care Act, directs the Department of 

Labor (the Department) to promulgate 

rules requiring MEWAs that are not 

group health plans (non-plan MEWAs) 

to register with the Secretary of Labor 

(the Secretary) prior to operating in a 

State. The statute also allows the 

Department to promulgate rules 

requiring non-plan MEWAs to report 

annually for the purpose of determining 

the extent to which the requirements of 

ERISA part 7 are being carried out in 

connection with such benefits. While 

the statutory authority is directed at 

non-plan MEWAs, the Department 

asserts its authority under ERISA 

sections 505, 29 U.S.C. 1135, 104, 29 

U.S.C. 1024(b), and 734, 29 U.S.C. 

1191c, consistent with the MEWA 

annual reporting rule promulgated in 

2003 (the 2003 rule or 2003 regulation), 

to apply these filing requirements to 

MEWAs which are group health plans 

(plan MEWAs) as well. 

The Form M–1 and the MEWA 

reporting requirements were originally 

developed under the 2003 rule and used 

as a mechanism to help States identify 

MEWAs in order to combat a history of 

MEWA fraud and abuse. Despite these 

reporting rules, MEWA abuses persist 

and often lead to insolvency.1 As a 

result, affected employees and their 

dependents become financially 

responsible for medical claims even 

though they previously paid premiums 

to MEWAs for their medical coverage.2

These regulations amend the 2003 rule 

and establish new registration and 

reporting requirements under the 

amended section 101(g) of ERISA. 

Specifically, these final rules establish 

filing requirements and deadlines that 

apply to MEWAs annually and upon 

specified events. 

The statute is detailed but not selfimplementing, contains ambiguities, 

and specifically requires the Department 

to develop regulations. Therefore, these 

consumer protections cannot be 

established without these regulations. 

2. Legal Authority 

The substantive authority for these 

regulations is generally ERISA section 

101(g), which explicitly requires the 

Department to issue regulations 

requiring MEWAs to register with the 

Secretary prior to operating in a State. 

It further provides the Secretary with 

authority to issue regulations requiring 

MEWAs to report annually on their 

compliance with part 7 of ERISA. 

Section 505 of ERISA also gives the 

Secretary authority to prescribe such 

regulations as necessary or appropriate 

to carry out the provisions of Title I of 

ERISA, which includes the amended 

ERISA section 101(g). Further, ERISA 

section 734 authorizes the Secretary to 

promulgate regulations necessary or 

appropriate to carry out the provisions 

of ERISA part 7. 

In addition, section 104(a)(3) 

authorizes the Secretary to exempt any 

welfare plan from all or part of the 

reporting and disclosure requirements 

of Title I or provide for simplified 

reporting and disclosure if she finds that 

such requirements are inappropriate as 

applied to welfare plans. 

B. Summary of the Major Provisions of 

This Regulatory Action 

Paragraph (a) of § 2520.101–2 in these 

final rules implements the general 

registration and reporting requirements 

and explains which entities are required 

to file. The regulations explain that 

while the language in section 101(g) of 

ERISA only applies to non-plan 

MEWAs, the regulations preserve the 

structure promulgated as part of the 

2003 rule, which required both plan 

MEWAs and non-plan MEWAs to file 

the Form M–1 based on authority found 

in sections 505 and 734 of ERISA. 

Paragraph (b) defines the terms used 

in the final regulations, with some 

additions and modifications from the 

2003 rule. Paragraph (c) sets forth the 

requirement that, with certain 

exceptions, the administrators of 

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 final 

rules by filing the Form M–1, and the 

conditions under which the Secretary 

may reject a filing. 

Paragraphs (e) and (f) set forth the 

timeframes when MEWAs and ECEs 

must file the Form M–1. Paragraph (g) 

directs that the Form M–1 be filed 

electronically. The information 

provided through Form M–1 filings will 

then be accessible by the public and 

other interested parties such as State 

regulators. 

Paragraph (h) explains the civil 

penalties that may result from a failure 

to comply with these final rules. Civil 

penalties for failure to file a report 

required by ERISA section 101(g) or 

§ 2520.101–2 have been applicable for 

non-plan MEWAs under ERISA section 

502(c)(5) since May 1, 2000. 

These final rules also amend 

regulations under ERISA sections 103 

and 104 to further enhance the 

Department’s ability to enforce 

§ 2520.101–2 by making the filing of the 

Form M–1 an integral part of 

compliance with ERISA’s annual 

reporting requirements for plans subject 

to the Form M–1 filing requirements 

under § 2520.101–2. As a result, failure 

to provide information on the Form 

5500 about compliance with the 

requirement to file a Form M–1 may 

result in the rejection of the Form 5500 

as incomplete and the assessment of 

civil penalties under ERISA section 

502(c)(2). 

Finally, 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 

connection with a MEWA’s financial 

condition, the benefits it provides, or its 

regulatory status as 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 final rules 

retain the cross-reference to sections 

501(b) and 519 for the purpose of 

implementing these new rules as these 

provisions relate to filing a Form M–1. 

Final rules published elsewhere in 

today’s Federal Register provide further 

guidance with respect to ex parte cease 


emcdonald on DSK67QTVN1PROD with RULES
Federal Register / Vol. 78, No. 41 / Friday, March 1, 2013 / Rules and Regulations 13783 

3This 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)). 

4 65 FR 7152 (02/11/2000) and 68 FR 17494 (04/ 

09/2003). The Form M–1 is reissued each year in 

December by the Department and has been 

modified to address changes to the statutory 

provisions in part 7 of ERISA. 

5See, Employee Benefits: States Need Labor’s 

Help Regulating Multiple Employer Welfare 

Arrangements, March 1992, GAO/HRD–92–40. 6For 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 3. 

7See United States v. Gerald Rising, Jr., plea 

agreement, 11–cr–00117–WYD–01 (U.S.D.Ct.CO) (In 

2012, the owner of a MEWA that sold stop-loss 

insurance pled guilty for understating the claim 

amounts that would trigger stop-loss payments in 

order to charge excessive fees; the owner also 

commingled clients’ premiums, overcharged fees, 

and issued fraudulent invoices, to a cost of over 

$3.6 million to his victims, which included over 

250 individuals, businesses and government 

agencies.) See also 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 

Continued 

and desist and summary seizure orders 

for MEWAs. 

C. Costs and Benefits 

These final regulations are designed 

to impose a minimal amount of burden 

on legally compliant MEWAs and ECEs 

while implementing the Secretary’s 

authority under the Affordable Care Act 

to take enforcement action against 

fraudulent or abusive MEWAs and 

working to protect health benefits for 

businesses and their employees. This 

rule implements the new provisions 

while preserving the filing structure and 

provisions of the 2003 rule, which 

directed plan MEWAs and non-plan 

MEWAs to file the Form M–1. 

The additional filing requirements 

will enhance the State and Federal 

governments’ joint mission to take 

enforcement action against fraudulent 

and abusive MEWAs, thus limiting the 

losses suffered by American workers, 

their families, and businesses when 

abusive MEWAs become insolvent and 

fail to reimburse medical claims. 

Under the final regulations, MEWAs 

and ECEs will incur costs to fill out and 

electronically file the Form M–1 and 

Form 5500. The Department estimates 

that the annualized cost may be 

approximately $0.1 million. As is 

common with regulations implementing 

new policies, there is considerable 

uncertainty arising from general data 

limitations and the degree to which 

economies of scale exist for disclosing 

this information. Nonetheless, the 

Department believes that these final 

regulations lower overall administrative 

costs from the 2003 rule because of the 

move to an electronic only filing system. 

In accordance with Executive Orders 

12866 and 13563, the Department 

believes that the benefits of this 

regulatory action justify the costs. 

II. Background 

The term ‘‘multiple employer welfare 

arrangement’’ (MEWA) 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 welfare 

benefits to the employees of two or more 

employers (including one or more selfemployed 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. 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.3

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, providing the 

Secretary with the authority to require, 

by regulation, annual reporting by nonplan MEWAs. The Secretary exercised 

the authority under the HIPAA 

provision by creating the Form M–1 

under a 2000 interim final rule and 2003 

rule.4 Those rules generally required the 

administrator of both non-plan and plan 

MEWAs and ECEs to file the Form M– 

1 annually with the Secretary. The 

purpose of this form was to allow the 

Department to determine whether the 

requirements of part 7 were being met. 

Part 7 of ERISA includes statutory 

amendments made by HIPAA and other 

statutes for which MEWAs must 

annually report compliance. 

The original MEWA reporting 

requirement created under HIPAA was 

also enacted in response to a 1992 

General Accounting Office (GAO) 

report 5 that detailed a history of MEWA 

fraud and abuse.6 To combat fraudulent 

MEWAs, the GAO recommended that 

the Department develop a mechanism to 

help States identify MEWAs. Although 

the annual MEWA reporting rules 

enabled the Department to develop a 

registry of MEWAs that filed the Form 

M–1, the requirement alone has not 

stopped the abuses discussed in the 

GAO report. MEWAs are frequently 

marketed by unlicensed entities that do 

not comply with State insurance 

reserve, contribution, and consumer 

protection requirements. As a result, 

such entities often offer health 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. This results in affected 

employees and their dependents 

becoming financially responsible for 

paying medical claims even after they 

paid premiums for their medical 

coverage. 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 can be considerable.7


emcdonald on DSK67QTVN1PROD with RULES
13784 Federal Register / Vol. 78, No. 41 / Friday, March 1, 2013 / Rules and Regulations 

approximately $8 million in unpaid claims), and 

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.) 

For additional information about MEWAs, see 

http://www.dol.gov/ebsa/newsroom/ 

fsMEWAenforcement.html. 

8Under these final regulations, similar civil 

penalties under ERISA section 502(c)(2) may apply 

to plan MEWAs and ECEs required to file the Form 

M–1 that fail to answer questions on the Form 5500 

about compliance with the requirement to file a 

Form M–1. See section B of this preamble for the 

changes that are being made to §§ 2520.103–1, 104– 

20, and 104–41 to further enhance the Department’s 

ability to enforce these provisions with regard to 

MEWAs and ECEs that are group health plans. 

The Patient Protection and Affordable 

Care Act (Pub. L. 111–148, 124 Stat. 

119) and the Health Care and Education 

Reconciliation Act of 2010 (Pub. L.111– 

152, 124 Stat. 1029) (these are 

collectively known as the ‘‘Affordable 

Care Act’’), have established a 

multipronged approach to MEWA 

abuses. The principal provisions 

include sections 6601, 6605, and 6606 

of the Affordable Care Act. Section 6601 

prohibits false statements and 

representations in connection with the 

marketing or sale of a MEWA. Section 

6605 enables the Secretary to issue 

administrative cease and desist orders 

when MEWAs engage in certain conduct 

and summary seizure orders against 

MEWAs in a financially hazardous 

condition. In addition, section 6606 

amended section 101(g) of ERISA. 

Under this last amendment, MEWAs 

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 group health 

plans must now register with the 

Secretary prior to operating in a State. 

Congress left untouched the Secretary’s 

authority to issue regulations directing 

such MEWAs 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 ERISA are being met. These 

final regulations implement the ERISA 

section 101(g) MEWA annual reporting 

provision by directing all MEWAs, 

including those that are plan MEWAs, 

to report compliance with the part 7 

rules, including the Public Health 

Service Act (PHS Act) market reforms 

(PHS Act sections 2701 through 2728) 

incorporated by reference in ERISA 

section 715 by the Affordable Care Act. 

These final regulations also require 

MEWAs to register with the Department 

before operating in a State. The 

additional information provided on the 

Form M–1 as a result of these final rules 

will enhance the State and Federal 

governments’ joint mission to prevent 

harm and take enforcement action 

against fraudulent and abusive MEWAs, 

thus limiting the losses suffered by 

American workers, their families, and 

businesses when abusive MEWAs 

become insolvent and fail to reimburse 

medical claims. These final rules 

implement the statutory requirements in 

a way that limits the burden on 

legitimate MEWAs but gives the 

Secretary, States, employers, and the 

participants and beneficiaries of the 

plans additional information about 

these entities and a stronger 

enforcement scheme. 

On December 6, 2011, the Department 

published in the Federal Register 

proposed regulations (76 FR 76222) 

implementing the new reporting 

requirements for MEWAs and ECEs. The 

Department received six comments on 

the proposed rules. After consideration 

of the comments received, the 

Department is publishing these final 

regulations. While these final rules 

reflect a few changes and add some 

clarifications in response to questions 

posed by commenters, they do not 

significantly modify the requirements 

set forth in the proposed rules. 

III. Overview of the Final Regulations 

A. Amendment of 29 CFR 2520.101–2 

Under ERISA Section 101(g). 

To implement the changes made to 

ERISA section 101(g) by the Affordable 

Care Act, these final rules amend the 

2003 rule. In the 2003 rule, ECEs and 

MEWAs were largely subject to the same 

filing requirements. ECEs, however, 

were only required to submit an annual 

M–1 filing for the first three years 

following an origination event. In 

keeping with this structure, these final 

rules extend the new filing events 

prescribed by the Affordable Care Act to 

MEWAs and ECEs alike. They also 

preserve the three-year limitation 

included in the 2003 regulation for 

ECEs. Based on comments on the 

proposed rules from the multiemployer 

plan community, the final rules limit 

the events that will constitute an 

origination to those defined as such in 

the 2003 rule. 

Paragraph (a) of § 2520.101–2 in these 

final regulations describes the 

provisions of section 101(g) of ERISA 

that direct 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. 

Paragraph (b) defines the terms used 

in the final regulations, with some 

additions and modifications from the 

2003 rule. Paragraph (c) sets forth the 

requirement that, with certain 

exceptions, the administrators of 

MEWAs or ECEs file reports with the 

Department. 

Paragraph (d) describes how MEWAs 

and ECEs will comply with the final 

rules by filing the Form M–1, and the 

conditions under which the Secretary 

may reject a filing. 

Paragraphs (e) and (f) set forth the 

timeframes when MEWAs and ECEs 

must file the Form M–1. Paragraph (g) 

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 (h) explains the civil 

penalties that may result from a failure 

to comply with the rule. Civil penalties 

for failure to file a report required by 

ERISA section 101(g) or § 2520.101–2 

have been applicable for non-plan 

MEWAs under ERISA section 502(c)(5) 

since May 1, 2000.8

Finally, 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 rule. 

1. Basis and Scope 

These final 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 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 annually 

and upon the occurrence of specified 

events. While the language in section 


emcdonald on DSK67QTVN1PROD with RULES
Federal Register / Vol. 78, No. 41 / Friday, March 1, 2013 / Rules and Regulations 13785 

101(g) of ERISA only applies to nonplan MEWAs, these final rules preserve 

the structure promulgated as part of the 

2003 regulation, which required both 

plan and non-plan MEWAs to file the 

Form M–1, based on authority found in 

sections 505 and 734 of ERISA. 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. 

One commenter questioned the 

Department’s authority to require ECEs 

to file a Form M–1 prior to operating in 

a State. As explained in the preamble to 

the 2003 rule, the Department has set 

forth procedures for administrative 

hearings to obtain a determination by 

the Secretary that a collectively 

bargained plan is exempted from 

ERISA’s definition of a MEWA. 29 CFR 

2510.3–40. An entity that has a 

determination from an Administrative 

Law Judge (ALJ) that it is such a 

collectively-bargained plan is not 

required to file a Form M–1 while the 

opinion remains in effect unless the 

circumstances underlying the 

determination change. Entities may, 

however, claim the exemption on their 

own accord and sometimes do so 

incorrectly, including as part of an 

insurance fraud scheme using sham 

unions and collective bargaining 

agreements to market health coverage to 

small employers. The Secretary remains 

concerned about MEWA operators who 

avoid State insurance regulation by 

making false assertions that the 

arrangement is pursuant to a collective 

bargaining agreement. The requirement 

that ECEs file the Form M–1 for only 

three years after an origination event 

continues to provide an important 

enforcement tool while imposing little 

burden on bona fide collectively 

bargained plans. Bona fide collectively 

bargained plans also benefit from the 

early identification of MEWA operators 

using sham unions and collective 

bargaining agreements. Consequently, 

based on the Department’s authority 

under ERISA sections 505 and 734, the 

final rules preserve the three-year 

limitation included in the 2003 

regulation for ECEs. 

2. Definitions 

a. Operating. Paragraph (b)(8) of 

§ 2520.101–2 of the proposed and these 

final rules 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 when Form M–1 

filings must be made. Some commenters 

raised concerns that the definition in 

the proposed rules could be interpreted 

broadly to include participants 

receiving medical care in a State in 

which the MEWA or ECE has not been 

providing medical benefits and for 

which it is not otherwise required to 

make any filings. These commenters 

noted that MEWAs or ECEs would be 

unable to comply with the requirement 

to file the Form M–1 30 days before 

operating in an additional State because 

they would not know when a 

participant planned, for instance, to 

move or travel to a new State. The 

Department never intended for the 

definition of operating to apply to the 

receipt of medical care without any 

action by, or on behalf of, the MEWA or 

ECE to market, solicit, provide, or offer 

to provide medical benefits to a 

participating employer in that State. 

Commenters also noted that, in 

general, they would not be aware in 

advance if an employer or union, on its 

own accord, distributes information 

about medical care in a State in which 

the MEWA or ECE has not been 

operating and is not registered. ECEs, in 

particular, may not be aware of a 

contract awarded for work in a new 

State to a company that is part of a 

collective bargaining agreement. The 

Department agrees that there are 

circumstances in which it would be 

difficult, if not impossible, for a MEWA 

or ECE to file the Form M–1 30 days 

before operating in an additional State. 

Consequently, while the Department has 

not revised the definition of operating, 

as discussed later in this preamble, 

provisions in paragraph (e) in these final 

rules on when a MEWA or ECE must file 

when it begins operating in an 

additional State have been revised to 

address this concern. 

b. Origination and Special Filing 

Events. The 2003 rule used the term 

‘‘origination’’ to determine if additional 

filings were necessary for both MEWAs 

and ECEs. As in the proposed rules, the 

Department only uses the term 

‘‘origination’’ when it refers to events 

that trigger an additional filing by ECEs 

in the final rules. The term 

‘‘registration’’ also continues to be used 

to refer to filings by MEWAs. 

The definition of origination, 

however, has been modified in the final 

rules. This change responds to a 

commenter who found the provisions in 

the proposed rules relating to the 

application of the three-year limitation 

to ECEs that begin operating in 

additional States to be confusing. These 

final rules have been adjusted to clarify 

that an ECE is not required to file a 

Form M–1 solely because it begins 

operating in an additional State or 

experiences a material change after the 

three-year period following any of the 

three origination events: (i) The ECE 

first begins operating with regard to the 

employees of two or more employers 

(including one or more self-employed 

individuals); (ii) 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); or (iii) 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). 

In paragraph (b)(9)(ii) and (v) of 

§ 2520.101–2 of the proposed rules, the 

definition of origination also included 

an ECE that begins operating in an 

additional State or experiences a 

material change. To clarify that the 

three-year rule does not restart or extend 

when those two events occur, they were 

moved to a new paragraph (b)(11) in the 

final rules on special filing events. 

Additionally, the reference to the threeyear period during which filings are 

required was removed from the 

definition of origination. In the final 

rules, the paragraph (b)(9) origination 

events and the corresponding filing 

rules in paragraph (c)(1)(ii) now clarify 

that only the events in paragraph (b)(9) 

restart or extend the three-year period 

for ECEs. 

c. Reporting. As in the proposed rules, 

the final rules add a definition of 

‘‘reporting.’’ ‘‘Reporting’’ or ‘‘to report’’ 

means to file the Form M–1 as required 

pursuant to section 101(g) of ERISA; 

§ 2520.101–2; or the instructions to the 

Form M–1. The term ‘‘reporting’’ is used 

in order to correspond to the 

terminology of § 2560.502c–5, which 

uses the generic term ‘‘report’’ to 

describe the Form M–1 filing process, 

including the annual report as well as 

registration, origination, and all other 

required M–1 filings. 

d. State. The final rules also, like the 

proposed rules, add a definition of 

‘‘State’’ and define the term by reference 

to § 2590.701–2. This definition was 

added because MEWAs must register, 

and ECEs must make an origination 

filing, prior to operating in a State. 


emcdonald on DSK67QTVN1PROD with RULES
13786 Federal Register / Vol. 78, No. 41 / Friday, March 1, 2013 / Rules and Regulations 

3. Persons Required to Report 

Paragraph (c) of § 2520.101–2 of the 

final rules set forth the persons required 

to report. As under the 2003 rule and 

the proposed rules, the final rules direct 

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. Several commenters suggested 

changes to this section. One commenter 

sought to have third party 

administrators carved out of the 

definition of administrator. Another 

sought to have affiliated service groups 

exempted from the filing requirements. 

The Department considered these 

comments but declines to modify these 

longstanding provisions promulgated as 

part of the 2003 rule. However, as noted 

above, to clarify the timing requirements 

for filings required of ECEs, this 

paragraph references the requirement 

that such filings be made only during 

the three years after the ECE is 

originated. 

4. Information To Be Reported 

Paragraph (d) of the final rules is 

unchanged from the proposed rules. It 

clarifies that the reporting requirements 

of § 2520.101–2 will only be satisfied by 

filing a completed copy of the Form M– 

1, including any additional statements 

required pursuant to the Form M–1 

instructions. One commenter wanted 

even more detailed financial 

information collected on the Form M–1. 

As noted earlier, after consideration of 

the comments made, the Department 

has reviewed the Form M–1 but made 

only minor changes to the content of the 

Form M–1 that was proposed to 

correspond to these final rules. A notice 

announcing the availability of the 

finalized revisions to the Form M–1 and 

its instructions are published elsewhere 

in this edition of the Federal Register. 

5. Reporting Requirements and Timing 

The final rules retain from the 2003 

rule and the proposed rules that both 

MEWAs and ECEs must file the Form 

M–1 annually, with ECEs only having to 

file annually for the first three years 

following an origination. However, to 

clarify the application of the new 

registration requirements, the annual 

filing requirements were moved from 

paragraph (e) to paragraph (f) (and 

paragraphs (f) and (g) were redesignated 

paragraphs (g) and (h)). 

As mentioned previously, MEWAs 

and ECEs are also subject to additional 

(non-annual) filings in certain 

circumstances. Several non-annual 

filing events were included in the 2003 

regulation, but, as previously explained, 

these filings were relabeled and 

expanded in the proposed rules and 

these final rules to implement changes 

to the statutory language. The 2003 

regulation and the proposed rules 

generally required an additional filing 

when a MEWA or ECE: (1) First began 

offering or providing coverage for 

medical care to employees of two or 

more employers; (2) began offering or 

providing coverage for medical care to 

employees of two or more employers 

after a merger with another MEWA or 

ECE; or (3) increased 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. 

In the proposed rules, 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 rules directed that a filing 

be made in the event a MEWA (and in 

some cases an ECE) expands its 

operations into additional States or 

experiences a material change as 

defined in the Form M–1 instructions. 

These filing events are preserved in 

these final rules. 

Several commenters sought to limit 

filings due to a material change. This 

filing event was added to direct an 

entity to update its Form M–1 filing in 

the event that it experienced changes in 

certain financial or custodial 

information. The Department intends to 

follow the same basic structure for these 

filings as it has indicated it will for 

filings related to operating in a State. So, 

for example, if a MEWA or ECE takes 

action to add or remove an individual 

who is a marketer or promoter, the 

MEWA or ECE would have experienced 

a material change and would need to 

report. However, if the MEWA or ECE 

employs a third party (and 

appropriately identifies that entity in its 

filings) and the third party takes action 

to add or remove an individual who is 

a marketer or promoter, the MEWA or 

ECE will not have experienced a 

material change and no additional filing 

will be required. In the event an entity 

experiences a material change, the 

online filing system will allow them to 

log on, import data from the most 

recently completed filing, and make the 

necessary changes. The regulatory 

provision is retained as proposed, but in 

response to these comments, the 

Department will continue to ensure the 

electronic filing system minimizes the 

additional burden on entities that 

experience a material change. 

Consistent with the 2003 rule and the 

proposed rules, these final rules direct 

MEWAs to submit filings for the 

duration of their existence and ECEs to 

file only during the three-year period 

following an origination. As noted 

above, ECEs that begin operating in a 

new State or experience a material 

change during their three-year filing 

period report those events. ECEs that are 

not required to file because they are 

outside their three-year period do not 

need to report those events. 

The final rules also apply new timing 

standards on MEWAs and ECEs for 

these additional filings. Under the 2003 

regulation, MEWAs and ECEs filed the 

Form M–1 within 90 days of the 

occurrence of certain events. The 

proposed and these final rules direct 

entities to file 30 days prior to or within 

30 days of the event, depending on the 

type of event which prompts the filing. 

The timing requirements in paragraph 

(e) implement section 6606 of the 

Affordable Care Act, which provides 

that the filing must happen ‘‘prior to 

operating in a State’’ and will also 

facilitate the Department’s timely 

receipt of information related to the 

other filing events described above. One 

commenter suggested that ECEs not be 

required to file 30 days prior to 

operating in an additional State because 

it might be difficult for the entity to 

determine when the event occurs. The 

Department considered this comment 

and, as previously stated, has revised 

the provision to address this concern. In 

these final rules, a MEWA or ECE will 

need to make a registration or special 

filing within 30 days of knowingly 

operating in any additional State or 

States. The Department does, however, 

expect MEWAs and ECEs to periodically 

monitor the activities of participating 

employers so that they become aware of 

any unilateral actions by participating 

employers that have caused them to 

begin operating in an additional State. 

Knowledge by a MEWA or ECE includes 

knowledge by an employee or agent of 

the MEWA or ECE. 

The provision included in the 

proposed rules to discourage ‘‘blanket 

filings,’’ (i.e., registration, origination, or 

special filings that cover multiple 

States, unless the filer expects to begin 

operating in all the named States in the 

near future), was retained in these final 

rules. 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 


emcdonald on DSK67QTVN1PROD with RULES
Federal Register / Vol. 78, No. 41 / Friday, March 1, 2013 / Rules and Regulations 13787 

9Title XVII, Public Law 105–277, 112 Stat. 2681 

(Oct. 21, 1998). 

10Public Law 107–347, 116 Stat. 2899 (Dec. 17, 

2002). 

11For further information on the Department of 

Labor’s Strategic Plan and EBSA’s relationship to it, 

see http://www.dol.gov/_sec/stratplan/. 

12Unlike plan MEWAs that are under a 

permanent requirement to file the Form M–1, 29 

CFR 2520.101–2 requires an ECE to file the Form 

M–1 only during the three years following each 

origination event (an ECE may experience more 

than one origination event). Therefore, the final 

Form 5500 rules for plans required to file the Form 

M–1 apply to ECEs only during the periods in 

which ECEs are required to file the Form M–1. 

consisting of medical care are not 

offered or provided in the State during 

the calendar year immediately following 

the filing. A new filing would be 

required if the filer intends to resume 

operating in that State. 

To minimize the burden of 

compliance, the final rules continue to 

permit MEWAs and ECEs to make a 

single filing to satisfy multiple filing 

events so long as the filing is timely for 

each event. 

As in the 2003 rule and the proposed 

rules, filing extensions are available. 

Any filing deadline that is a Saturday, 

Sunday, or federal holiday is 

automatically extended to the next 

business day. The proposed rules 

provided a more substantial extension 

for annual filings if MEWAs and ECEs 

requested such an extension following 

the procedure outlined in the 

instructions to the Form M–1. A 

question was raised regarding whether 

extensions were limited to annual 

filings. The Department considered this 

option and believes that any filing 

should be eligible for an extension so 

long as the request is made in a timely 

manner and in accordance with the 

Form M–1 instructions. A modification 

to this effect was made to the operative 

language in paragraph (e) of § 2520.101– 

2 of the final rules. 

6. Electronic Filing 

As in the proposed rules, paragraph 

(g) of § 2520.101–2 of the final rules 

eliminates the option to file a paper 

copy of the completed Form M–1. As is 

now the case for Form 5500 Annual 

Return/Report filings required under 

Title I of ERISA and consistent with the 

goals of E-government, as recognized by 

the Government Paperwork Elimination 

Act 9 and the E-Government Act of 

2002,10 these final rules require that the 

Form M–1 be filed electronically. 

Electronic filing of benefit plan 

information, among other program 

strategies, facilitates 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.’’ 11 A cornerstone of the 

Department’s enforcement program is 

the collection, analysis, and disclosure 

of benefit plan information. Electronic 

filing minimizes errors and provides 

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 Form M–1 also 

reduces the paperwork burden and costs 

related to printing and mailing forms 

and, with the use of secure account 

access, allows updating of previously 

reported information to facilitate 

simplified future reporting. Finally, 

consistent with current practice, the 

information will be available for 

reference by participants, beneficiaries, 

participating employers, and other 

interested parties such as State 

regulators. A notice announcing the 

availability of the updated Form M–1 

filing system will be published 

elsewhere in this edition of the Federal 

Register. 

7. Penalties 

a. Civil penalties and procedures. The 

final rules retain the references to 

section 502(c)(5) of ERISA, 29 U.S.C. 

1132(c)(5) and § 2560.502c–5 regarding 

civil penalties and procedures. 

b. Criminal penalties and procedures. 

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 MEWA’s financial condition, the 

benefits it provides, or its regulatory 

status as 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 

final rules retain the cross-reference to 

sections 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, 

origination, and special filings. 

c. Cease and desist and summary 

seizure and procedures. Section 6605 of 

the Affordable Care Act added 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 includes 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 final rules retain the 

cross-reference to section 521 of ERISA 

and § 2560.521 regarding the Secretary’s 

authority to issue cease and desist and 

summary seizure orders. 

B. Amendment to Regulations Under 

ERISA Sections 103 and 104 

Pursuant to authority in ERISA 

section 104(a)(3) to establish reporting 

exemptions and simplified reporting for 

welfare benefit plans, this rulemaking 

also makes filing the Form M–1 an 

integral part of compliance with 

ERISA’s simplified reporting 

requirements by requiring all plans 

subject to the Form M–1 filing 

requirements under § 2520.101–2 to file 

a Form 5500 Annual Return/Report, and 

include specific Form M–1 compliance 

information. The revisions to the Form 

5500 and instructions reflecting these 

final rules are being published 

simultaneously as a Notice of Adoption 

of Revisions to the Form 5500 Annual 

Return/Report in today’s Federal 

Register. That document includes a 

discussion of the changes to the Form 

5500 and instructions as well as the 

Department’s findings required under 

sections 104(a)(3) and 110 of ERISA 

with regard to the use of the revised 

Form 5500 as a simplified report, 

alternative method of compliance, and/ 

or limited exemption pursuant to 

§ 2520.103–1(b). 

We requested but received no 

comments on these changes to the 

annual reporting requirements; 

therefore, these final rules retain the 

changes proposed to further enhance the 

Department’s ability to enforce the Form 

M–1 filing requirements under 

§ 2520.101–2, except for technical 

changes and a clarification that all plans 

required to file the Form M–1 (plan 

MEWAs and ECEs) are required to file 

a Form 5500 and to answer the Form M– 

1 compliance questions on the Form 

5500.12


emcdonald on DSK67QTVN1PROD with RULES
13788 Federal Register / Vol. 78, No. 41 / Friday, March 1, 2013 / Rules and Regulations 

13 In addition, an unrelated technical correction 

to 29 CFR 2520.104–41 is being included in this 

rulemaking to add an express reference to the Form 

5500–SF. 

14Neither these final regulations nor the 

companion revisions to the Form 5500 change the 

eligibility requirements for the limited exemption 

under 29 CFR 2520.104–44. The Department 

expects that many plan MEWAs and ECEs will not 

satisfy the unfunded and insured eligibility 

requirements in the limited exemption and will 

continue to be ineligible for the reporting relief 

under 29 CFR 2520.104–44. 

15See, Employee Benefits: States Need Labor’s 

Help Regulating Multiple Employer Welfare 

Arrangements, March 1992, GAO/HRD–92–40. 

16 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. 

The primary change to § 2520.103–1 

being adopted in this rule is the 

addition of a new paragraph (f) 

regarding the content of the annual 

report. Existing paragraph (f) of 

§ 2520.103–1 is redesignated paragraph 

(g), but is otherwise unchanged. New 

§ 2520.103–1(f) applies to all plans that 

are subject to the Form M–1 filing 

requirements of § 2520.101–2 during the 

plan year. This change provides that all 

such plans must demonstrate 

compliance with § 2520.101–2 (filing 

the Form M–1) in order to satisfy the 

annual reporting requirements of 

§ 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 § 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 and 

ECEs that are employee benefit plans to 

comply with the requirements of 

§ 2520.101–2, unlike MEWAs that are 

not employee benefit plans, there is no 

specific ERISA civil penalty applicable 

to plan MEWAs and ECEs for a failure 

to comply with those requirements. 

These changes to the Form 5500 annual 

reporting requirements for plan MEWAs 

and ECEs will enhance the Department’s 

ability to enforce the Form M–1 filing 

requirements. 

The final rules include conforming 

changes adding references to the new 

§ 2520.103–1(f) and other conforming 

changes in §§ 2520.103–1(a), (b), (c) and 

§ 2520.104–41. A corresponding change 

is also made to § 2520.104–20 to 

expressly provide that the limited filing 

exemption under § 2520.104–20 is no 

longer available to plan MEWAs and 

ECEs with fewer than 100 participants 

required to file the Form M–1 (small 

plans). In addition, a new paragraph (E) 

has been added to § 2520.103–1(c)(2)(ii) 

to provide that small plans subject to 

the Form M–1 filing requirements are 

not eligible to file the Form 5500–SF 

(Short Form 5500 Annual Return/Report 

of Small Employee Benefit Plan) under 

§ 2520.103–1(c)(2)(ii) and § 2520.104– 

41.13

Although small plans subject to the 

Form M–1 filing requirements are not 

eligible to file the Form 5500–SF, these 

plans are still eligible for the simplified 

Form 5500 annual reporting for small 

welfare plans, and these plans that meet 

all of the requirements for the relief 

under § 2520.104–44 are exempt from 

certain financial reporting and audit 

requirements. Small plan MEWAs and 

ECEs that qualify for the relief provided 

by 29 CFR 2520.104–44 would only 

need to file the Form 5500 Annual 

Return/Report and, if applicable, 

Schedule A (Insurance Information) and 

Schedule G, Part III (nonexempt 

transactions).14 Such plans are no 

longer eligible to use the Form 5500–SF 

because that form does not include 

Schedule A insurance information. The 

Department believes that plans subject 

to these final rules 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 plan is providing insurance 

coverage. Thus, these changes give the 

Secretary an important enforcement tool 

while imposing minimal burden on 

small plan MEWAs and ECEs. 

IV. Regulatory Impact Analysis 

A. Executive Order 12866 and 13563 

Under Executive Order 12866, a 

‘‘significant’’ regulatory action is 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 

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. Executive Order 

13563 emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and of promoting flexibility. 

The Department estimates that the 

total cost of this rule would be 

approximately $137,400 in the first year, 

or an average of approximately $284 for 

each of the 484 entities expected to file 

the Form M–1. These costs are all 

associated with the information 

collection request contained in these 

rules 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. 

The original MEWA reporting 

requirement in ERISA section 101(g) 

was enacted by Congress as part of the 

Health Insurance Portability and 

Accountability Act (HIPAA) of 1996 in 

response to a 1992 General Accounting 

Office (GAO) recommendation.15 The 

GAO recommended that the Department 

develop a mechanism to help States 

identify fraudulent and abusive 

MEWAs. The HIPAA provision led to 

the Department creating the Form M–1 

under a 2000 interim final rule and 2003 

final rule.16

ERISA section 101(g), as amended by 

the Affordable Care Act, directs the 

Department of Labor (the Department) to 

promulgate rules requiring MEWAs that 

are not group health plans (non-plan 

MEWAs) to register with the Secretary 

of Labor (the Secretary) prior to 

operating in a State. ERISA sections 505 

and 734 provide the Secretary with the 

authority to require plan MEWAs and 


emcdonald on DSK67QTVN1PROD with RULES
Federal Register / Vol. 78, No. 41 / Friday, March 1, 2013 / Rules and Regulations 13789 

17 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). 

18Pursuant 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. 

19Pursuant to ERISA section 502(c)(2), a plan 

administrator who fails to file a Form 5500 Annual 

Return/Report with a proof of compliance with the 

M–1 filing requirements 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. 

20As 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 finalizing rules 

for these provisions, which are published elsewhere 

in today’s Federal Register. 

21The final rules expressly provide that the 

limited exemption for certain unfunded and 

insured small welfare plans under § 2520.104–20 is 

not available for any plans subject to the Form M– 

1 filing requirements. In addition, these plans also 

are not eligible to use the Form 5500–SF. 

22A plan administrator who fails to file a Form 

5500 with a proof of Form M–1 compliance could 

be subject to a civil penalty of up to $1,100 a day 

for each day the plan administrator fails or refuses 

to file a complete report. 

23Section 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. 

ECEs to comply with the Form M–1 

reporting requirements,17 but because 

ERISA section 101(g) only applies to 

non-plan MEWAs, 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.18 In order to 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, this final rule will 

require all plan MEWAs to prove 

compliance with the Form M–1 filing 

requirements in order to satisfy the 

ERISA annual reporting requirements.19

In amending the Department’s MEWA 

reporting regulation to require MEWAs 

to register with the Secretary before 

operating in a State, these final rules 

direct Form M–1 filers to provide 

additional information regarding the 

MEWA or ECE and apply new timing 

standards for the 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 20

and allow the Department to provide 

critical information to State insurance 

departments that coordinate their 

investigations and enforcement actions 

against fraudulent and abusive MEWAs 

with the Department. 

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 regulation, the 

Department has the ability to assess 

penalties against MEWAs that fail to file 

the Form M–1 only in limited 

circumstances and if a determination 

regarding plan status was made by the 

Secretary. To address this issue and 

encourage compliance with the Form 

M–1 filing requirement, the Department 

also is amending, as part of this 

regulatory action, the Form 5500 annual 

reporting requirements. The amendment 

will require all plans subject to the 

Form M–1 filing requirements, 

regardless of plan size or type of 

funding,21 to file the Form 5500 Annual 

Return/Report and demonstrate on the 

form compliance with Form M–1 filing 

requirements. Failure to do so may 

result in an assessment of penalties 

under ERISA section 502(c)(2).22

These 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 M–1 would average approximately 

$284 during the first year and $181 

during each subsequent year. 

2. Benefits of Rule 

As discussed earlier in this preamble, 

section 6606 of the Affordable Care Act 

amended section 101(g) of ERISA 

directing the Secretary to promulgate 

regulations requiring non-plan MEWAs 

providing medical care benefits (within 

the meaning of section 733(a)(2) of 

ERISA) 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 23 in a State. These final rules 

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 quantified, but the Department 

expects that they will justify the costs. 

3. Costs of Rule 

The costs of the 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 

In accordance with the requirements 

of the Paperwork Reduction Act of 1995 

(PRA) (44 U.S.C. 3506(c)(2)), the 

Department submitted an information 

collection request (ICR) to OMB in 

accordance with 44 U.S.C. 3507(d), 

contemporaneously with the 

publication of the proposed regulation, 

for OMB’s review. 

Although no additional public 

comments were received that 

specifically addressed the paperwork 

burden analysis of the information 

collections at the proposed rules stage, 

the comments that were submitted and 

described earlier in this preamble, 

contained information relevant to the 

costs and administrative burdens 

attendant to the proposals. The 

Department took into account such 

public comments in connection with 

making changes to the final rules and in 

developing the revised paperwork 

burden analysis summarized below. 

In connection with publication of 

these final rules, the Department 

submitted a revision to the ICR under 

OMB Control Number 1210–0116. OMB 

approved the revised ICR, which is 

scheduled to expire on February 29, 

2016. A copy of the revised ICR may be 

obtained by contacting the PRA 

addressee shown below or at http:// 

www.RegInfo.gov. 

PRA ADDRESSEE: G. Christopher 

Cosby, Office of Policy and Research, 

U.S. Department of Labor, Employee 

Benefits Security Administration, 200 

Constitution Avenue NW., Room N– 

5718, Washington, DC 20210. 

Telephone: (202) 693–8410; Fax: (202) 


emcdonald on DSK67QTVN1PROD with RULES
13790 Federal Register / Vol. 78, No. 41 / Friday, March 1, 2013 / Rules and Regulations 

24The Department estimates 2012 hourly labor 

rates include wages, other benefits, and overhead 

based on data from the National Occupational 

Employment Survey (June 2011, Bureau of Labor 

Statistics) and the Employment Cost Index 

(September 2011, Bureau of Labor Statistics); the 

2010 estimated labor rates are then inflated to 2012 

labor rates. 

25These are rounded values. The totals may differ 

slightly as a result. 

26An average of 9 percent of entities originate 

each year according to Form M–1 data. 

27This assumption is made in connection with 

EBSA’s principal reporting form, the Form 5500, 

and was validated through a filer survey. 

219–4745. These are not toll-free 

numbers. 

Between 2006 and 2010, an average of 

484 entities (MEWAs and ECEs) filed 

the Form M–1 with the Department (a 

high of 533 in 2006 and a low of 436 

in 2010). Of the total filings, on average, 

217 were submitted via mail and 267 

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 63 percent in 2010. This rule will 

require all filings to be submitted 

electronically. 

As discussed above and pursuant to 

section 6606 of the Affordable Care Act, 

these rules amend the information 

required to be disclosed on the Form M– 

1 by adding new data elements. 

Therefore, the Department assumes that 

all administrators of MEWAs and ECEs 

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 final 

regulations. This would result in a total 

hour burden of 97 hours (48 entities * 

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 not fully-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 entities to file the Form M– 

1 using in-house resources would be 

188 hours in the first year with an 

equivalent cost of $17,900 assuming all 

work will be performed by an employee 

benefits professional at $94.91 per 

hour.24 The cost to submit electronic 

filings would be negligible. 

The Department estimates that the 

annual hour burden for Form M–1 

filings prepared in-house in subsequent 

years would be approximately 100 

hours as summarized in Table 2.25 The 

Department’s estimate is based on the 

assumption that approximately 44 new 

entities 26 will file the Form M–1 each 

year, and thus, approximately four new 

entities will prepare the Form M–1 inhouse. The Department estimates that it 

would take two hours for these 

administrators, resulting in an hour 

burden of eight hours. The Department 

estimates that entities 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 $94.91 hourly labor rate for 

an employee benefits professional. 

TABLE 1—TIME TO FILL OUT FORM

[Minutes] 

Fully-insured Not fully-insured 

One State Multi States One State Multi States 

New Filing ........................................................................................................ 120 120 120 120 

Part I ................................................................................................................ 5 5 5 5 

Part II ............................................................................................................... 60 120 60 120 

Part III .............................................................................................................. 15 15 30 30 

TABLE 2—HOUR BURDEN TO PREPARE FORM M–1, IN-HOUSE PREPARATION

Fully-insured Not fully-insured 

Total 

One State Multi States One State Multi States 

# of MEWAs and ECEs ....................................................... 16 18 9 5 48 

Review: Year 1 .................................................................... 32 36 18 11 97 

New Filing: Subsequent Years ............................................ 3 3 2 1 9 

Part I .................................................................................... 1 2 1 0 4 

Part II ................................................................................... 16 36 9 11 72 

Part III .................................................................................. 4 5 4 3 16 

Total Time: Year 1 ............................................................... 54 78 31 25 188 

Total Time: Subsequent Years ............................................ 24 45 15 15 100 

1. Cost Burden 

The Department assumes that 90 

percent of the 484 entities (435 entities) 

that will file the Form M–1 will use 

third-party service providers to 

complete and submit the Form M–1.27

Because the Department is adding 

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 

entities 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 entities 

and therefore spread this burden across 

multiple entities. This results in a onetime cost burden of $41,300 (435 

entities * 1 hour * $94.91). 

The total estimated cost burden for 

preparing the form is arrived at by 


emcdonald on DSK67QTVN1PROD with RULES
Federal Register / Vol. 78, No. 41 / Friday, March 1, 2013 / Rules and Regulations 13791 

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 ($94.91 dollars an hour). 

Based on the foregoing, the total cost 

burden for entities that use purchased 

third-party resources to file the Form 

M–1 is $119,500 in the first year and 

$78,200 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 Not fully-insured 

Total 

One State Multi States One State Multi States 

# of MEWAs and ECEs ....................................................... 145 163 79 49 435 

Review: Year 1 .................................................................... $13,700 $15,400 $7,500 $4,700 $41,300 

New Filing: Subsequent Years ............................................ $0 $0 $0 $0 $0 

Part I .................................................................................... $1,100 $1,300 $600 $400 $3,400 

Part II ................................................................................... $13,700 $30,900 $7,500 $9,400 $61,400

Part III .................................................................................. $3,400 $3,900 $3,700 $2,300 $13,400 

Total: Year 1 ................................................................. $32,000 $51,400 $19,300 $16,800 $119,500 

Total: Subsequent Years .............................................. $18,300 $36,000 $11,800 $12,100 $78,200 

Note: The displayed numbers are rounded to the nearest hundred and therefore may not add up to the totals. 

These regulations direct a plan that is 

subject to Form M–1 filing requirements 

to include proof of Form M–1 

compliance as part of the Form 5500. 

Accordingly, the Department is adding 

a new Part III to the Form 5500, that 

asks for information regarding whether 

the employee welfare benefit plan is 

subject to the Form M–1 filing 

requirements, and if so, whether the 

plan is currently in compliance with the 

Form M–1 filing requirements under 

§ 2520.101–2. Plan administrators that 

indicate the plan is subject to the Form 

M–1 filing requirements also would be 

required to enter the Receipt 

Confirmation Code for the Form M–1 

annual report or the most recent Form 

M–1 required to be 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 

de minimis because plan administrators 

would know whether the plan is subject 

to and in compliance with the Form M– 

1 filing requirements, and they would 

have the Receipt Confirmation Code for 

the Form M–1 filing readily available. 

The regulations also amend 

§ 2520.104–20 to expressly provide that 

the exemption from filing the Form 

5500 is not available for small plans 

required to file the Form M–1. 

Following the methodology used to 

calculate the burden in the Form 5500 

regulations, the Department estimates 

that for small plans that meet the 

requirements of § 2520.104–44, filing a 

Form 5500 and completing Schedule A 

and Part III of Schedule G would cause 

them to 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 and ECEs 

that would be required to file the Form 

5500 under the final rules, but believes 

that the number of such plans would be 

small, because 90 percent of the entities 

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 forprofit; not-for-profit institutions. 

Estimated Number of Respondents: 

484 (first year); 484 (three-year average). 

Estimated Number of Responses: 484 

(first year); 484 (three-year average). 

Frequency of Response: Annually. 

Estimated Annual Burden Hours: 188 

(first year); 130 (three-year average). 

Estimated Annual Burden Cost: 

$119,500 (first year); $92,000 (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. In 

accordance with the RFA, the 

Department prepared an initial 

regulatory flexibility analysis at the 

proposed rule stage and requested 

comments on the analysis. No 

comments were received. Below is the 

Department’s final regulatory flexibility 

analysis and its certification that these 

final regulations do not have a 

significant economic impact on a 

substantial number of small entities. 

The Department does not have data 

regarding the total number of MEWAs 

and ECEs that currently exist. The best 


emcdonald on DSK67QTVN1PROD with RULES
13792 Federal Register / Vol. 78, No. 41 / Friday, March 1, 2013 / Rules and Regulations 

28U.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 

29 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). 

information the Department has to 

estimate the number of MEWAs and 

ECEs is based on filings of the Form M– 

1, which MEWAs and certain 

collectively bargained arrangements 

have filed annually with the 

Department. Just over 436 entities filed 

the Form M–1 with the Department in 

2010, 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.28 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 and 

ECEs that file Form M–1 and can use 

participant data and average premium 

data to determine the number of 

MEWAs and ECEs 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 

$12,696.29 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 62 percent of entities 

filing Form M–1 (258 entities) are small 

entities. 

While this number is a relatively large 

fraction of all entities, it is about 7 

percent when expressed as a fraction of 

all participants covered by MEWAs and 

ECEs. In addition, the Department notes 

that the reporting burden that would be 

imposed on all MEWAs and ECEs by the 

rule is estimated as an average cost of 

$284 for each entity filing Form M–1. 

For all but the smallest MEWAs or ECEs 

(less than 15 participants), this 

represents less than one-half of one 

percent of revenues. 

The regulations also amend 

§ 2520.104–20 to expressly provide that 

the limited exemption from filing the 

Form 5500 for certain unfunded and 

insured small welfare plans is not 

available for plans required to file the 

Form M–1. As discussed in the PRA 

section above, the Department estimates 

that these small plan MEWAs and ECEs 

would incur an annual cost of $450 to 

engage a third-party service provider to 

prepare the form and schedules for 

submission. Any burden for small ECEs 

is even less because these plans are 

subject to the Form M–1 filing 

requirements only for limited periods. 

The Department does not have sufficient 

data to determine the number of small 

plan MEWAs and ECEs that would be 

required to file the Form 5500 under the 

final rules. About 10 percent (48) of 

MEWAs and ECEs filing the Form M–1 

in 2010 had less than 100 participants. 

However, the 2010 Form M–1 lacks 

information on the source of funding to 

determine which of these small MEWAs 

and ECEs would be ERISA-covered 

plans affected by the Final Rules. 

Accordingly, the Department hereby 

certifies that this regulation does not 

have a significant economic impact on 

a substantial number of small entities. 

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 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 

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. States have often lobbied for 

stronger Federal enforcement tools to 

help combat fraudulent and insolvent 

MEWAs. By requiring MEWAs to 

register with the Department before 

operating in a State by filing the Form 

M–1 and to provide additional 

information, these final rules respond to 

the States’ concern and 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. 

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 citation for part 2520 

is revised to read as follows: 

Authority: 29 U.S.C. 1021–1024, 1027, 

1029–31, 1059, 1134 and 1135; Secretary of 

Labor’s Order 1–2011, 77 FR 1088 (January 

9, 2012). 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 29 U.S.C. 

1021(k); 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: 

§ 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) of this section), which 

are not group health plans, to register 

with the Secretary prior to operating in 

a State. Section 101(g) also permits the 


emcdonald on DSK67QTVN1PROD with RULES
Federal Register / Vol. 78, No. 41 / Friday, March 1, 2013 / Rules and Regulations 13793 

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 § 2510.3–40. 

(3) Excepted benefits means excepted 

benefits within the meaning of section 

733(c) of ERISA and § 2590.701–2 of 

this chapter. 

(4) Group health plan means a group 

health plan within the meaning of 

section 733(a) of ERISA and § 2590.701– 

2 of this chapter. 

(5) Health insurance issuer means a 

health insurance issuer within the 

meaning of section 733(b)(2) of ERISA 

and § 2590.701–2 of this chapter. 

(6) Medical care means medical care 

within the meaning of section 733(a)(2) 

of ERISA and § 2590.701–2 of this 

chapter. 

(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, with regard to 

an ECE, the occurrence of any of the 

following events (an ECE is considered 

to have been originated only when an 

event described below occurs)— 

(i) The ECE begins operating with 

regard to the employees of two or more 

employers (including one or more selfemployed individuals); 

(ii) 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); or 

(iii) 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). 

(10) Reporting or to report means to 

file the Form M–1 as required pursuant 

to sections 101(g) of ERISA; § 2520.101– 

2; or the instructions to the Form M–1. 

(11) Special filing event means, with 

regard to an ECE— 

(i) The ECE begins knowingly 

operating in any additional State or 

States that were not indicated on a 

previous report filed pursuant to 

paragraph (e)(1)(i) or (f)(2)(i) of this 

section; or 

(ii) The ECE experiences a material 

change as defined in the Form M–1 

instructions. 

(12) State means State within the 

meaning of § 2590.701–2 of this chapter. 

(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 paragraph (b)(9) of 

this section. 

(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 ERISA 

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 

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 


emcdonald on DSK67QTVN1PROD with RULES
13794 Federal Register / Vol. 78, No. 41 / Friday, March 1, 2013 / Rules and Regulations 

(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)(1)(i), (2), or (3) 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 

August 1, 2013. 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 similar to 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 the 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 annual report 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 2013 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 

2013. 

(ii) Conclusion. In this Example 4, the 

administrator of Company E’s group health 

plan is not required to report via the Form 

M–1 for calendar year 2013 (a filing that is 

otherwise due by March 1, 2014) 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 M–1 Report for Multiple Employer 

Welfare Arrangements (MEWAs) and 

Certain Entities Claiming Exception 

(ECEs) (Form M–1) and any additional 

statements required pursuant to the 

instructions for 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 

§ 2560.502c–5 of this chapter. 

(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 § 2560.502c–5 of 

this chapter). 

(e) Origination, registration, and other 

non-annual reporting requirements and 

timing—(1) General rule for ECEs—(i) 

Except as provided in paragraph 

(e)(1)(ii) of this section, and subject to 

the limitations established by paragraph 

(c)(1)(ii) of this section, when an ECE 

experiences an event described in 

paragraphs (b)(9) or (b)(11) of this 

section, the administrator of the ECE 

shall file Form M–1 by the 30th day 

following the date of the event. 

(ii) Exception. Paragraph (e)(1)(i) of 

this section does not apply to ECEs that 

experience an origination as described 

in paragraph (b)(9)(i) of this section. 

Such entities are required, subject to the 

limitations established by paragraph 

(c)(1)(ii) of this section, to file the Form 

M–1 30 days prior to the date of the 

event. 

(2) General rule for MEWAs—(i) In 

general. Except as provided in 

paragraph (e)(2)(ii) of this section, the 

administrator of the MEWA is required 

to register with the Secretary by filing 

the Form M–1 30 days prior to operating 

in any State. 

(ii) Exception. Paragraph (e)(2)(i) 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 (f)(2)(i) of this 

section for that State (or those States). 

(3) Special rule requiring MEWAs to 

make additional filings. Subsequent to 

registering with the Secretary pursuant 

to paragraph (e)(2)(i) of this section, the 

administrator of a MEWA shall file the 

Form M–1: 

(i) Within 30 days of knowingly 

operating in any additional State or 

States that were not indicated on a 

previous report filed pursuant to 

paragraph (e)(2)(i) or (f)(2)(i) of this 

section; 

(ii) Within 30 days of the MEWA 

operating with regard to the employees 

of an additional employer (or 

employers, including one or more selfVerDate Mar<15>2010 14:12 Feb 28, 2013 Jkt 229001 PO 00000 Frm 00024 Fmt 4700 Sfmt 4700 E:\FR\FM\01MRR1.SGM 01MRR1

emcdonald on DSK67QTVN1PROD with RULES
Federal Register / Vol. 78, No. 41 / Friday, March 1, 2013 / Rules and Regulations 13795 

employed individuals) after a merger 

with another MEWA; 

(iii) 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 

(iv) Within 30 days of experiencing a 

material change as defined in the Form 

M–1 instructions. 

(4) 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 a filing is 

made by the ECE pursuant to paragraph 

(e)(1) of this section (due to an event 

described in paragraph (b)(9)(i) or 

(b)(11)(i) of this section) or a filing is 

made by the MEWA pursuant to 

paragraph (e)(2) or (3) of this section, 

with respect to operating in such State, 

such filing will be considered to have 

lapsed. 

(5) Multiple filings not required in 

certain circumstances. If multiple filings 

are required under this paragraph (e), a 

single filing will satisfy this section so 

long as the filing is timely for each 

required filing. 

(6) Extensions. (i) An extension may 

be granted for filing a report required by 

paragraph (e)(1), (2), or (3) of this 

section if the administrator complies 

with the extension procedure prescribed 

in the instructions to the Form M–1. 

(ii) If the filing deadline set forth in 

this paragraph (e) is a Saturday, Sunday, 

or federal holiday, the form must be 

filed no later than the next business day. 

(f) Annual 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 is operating and for each of 

the three calendar years following an 

origination during all or part of which 

the ECE is operating. 

(2) Filing deadline—(i) General March 

1 filing due date for annual filings. 

Except as provided in paragraph 

(f)(2)(ii) 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 

(f)(1) of this section). 

(ii) Exception. Paragraph (f)(2)(i) of 

this section does not apply to ECEs and 

MEWAs if, between October 1 and 

December 31, the entity is required to 

make a filing pursuant to paragraph 

(e)(1), (2), or (3) of this section and 

makes that filing timely. 

(3) Extensions. (i) An extension may 

be granted for filing a report required by 

paragraph (f)(2)(i) of this section if the 

administrator complies with the 

extension procedure prescribed in the 

instructions to the Form M–1. 

(ii) If the filing deadline set forth in 

this paragraph (f) is a Saturday, Sunday, 

or federal holiday, the form must be 

filed no later than the next business day. 

(4) Examples. The rules of paragraphs 

(e) and (f) of this section 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 timely completed Form M–1 annual 

report each year, 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)(ii) of this section and has not 

experienced any event described in 

paragraph (e)(3) that would require 

registering with the Secretary. 

Example 2. (i) Facts. On August 25, 2013, 

MEWA B is operating in State P and has 

made all appropriate filings related to those 

operations. On December 22, 2013 one of the 

employers that participates in MEWA B is 

awarded a new contract in State Q. The 

employer adds an office in State Q and the 

employees there are eligible to access its 

group health plan. 

(ii) Conclusion. In this Example 2, the 

administrator of MEWA B must report the 

addition of State Q by filing the Form M–1 

within 30 days of knowing that it is operating 

in State Q. 

Example 3. (i) Facts. As of July 1, 2013, 

MEWA C is preparing to operate in States Y 

and Z. 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 paragraph (c)(2) of this 

section. 

(ii) Conclusion. In this Example 3, the 

administrator of MEWA C 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 C must also report by filing the 

Form M–1 annually by every March 1 

thereafter. 

Example 4. (i) Facts. As of July 28, 2013, 

MEWA D is operating in States V and W. 

MEWA D has satisfied the requirements of 

(e)(2) and, if applicable, (e)(3) with respect to 

those States. MEWA D 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 August 5, 2013 MEWA D 

knowingly begins operating in State X. 

(ii) Conclusion. In this Example 4, the 

administrator of MEWA D is required to 

make an additional registration filing with 

the Secretary by September 4, 2013 (within 

30 days of knowingly operating in State X). 

Additionally, the administrator of MEWA D 

must continue to file the Form M–1 annually 

by every March 1 thereafter. 

Example 5. (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 5, ECE A 

was originated on January 1, 2007 and has 

not been originated since then. Therefore, the 

administrator of ECE A is not required to file 

a 2012 Form M–1 because the last time the 

ECE A was originated was January 1, 2007 

which is more than three years prior. Further, 

the ECE has satisfied its reporting 

requirements by making three timely annual 

filings after its origination. 

Example 6. (i) Facts. ECE B wants to begin 

offering coverage for medical care to the 

employees of two or more employers on July 

1, 2013. 

(ii) Conclusion. In this Example 6, the 

administrator of ECE B must file a completed 

Form M–1 on or before June 1, 2013 (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, 2014 because the last date ECE B was 

originated was July 1, 2013 (which is less 

than three years prior to the March 1, 2014 

due date). Furthermore, the administrator of 

ECE B must file the Form M–1 by March 1, 

2015 and again by March 1, 2016 (because 

July 1, 2013 is less than three years prior to 

March 1, 2015 and March 1, 2016, 

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, 2016. 

Example 7. (i) Facts. ECE D, which 

currently operates in State A and is still 

within the three-year window following its 

origination and the timely filing related 

thereto, is making preparations to operate in 

State B beginning on November 1, 2013. 

(ii) Conclusion. In this Example 7, by 

operating in State B, ECE D experiences a 

special event within the three-year window 

following its origination and must make a 

filing by December 2, 2013. 

Example 8. (i) Facts. Same facts as 

Example 7. ECE D satisfied its special filing 

requirement but is unsure about its annual 

filing requirements. 

(ii) Conclusion. ECE D is exempt from the 

next annual filing due March 1, 2014 

pursuant to the filing deadline exception 

under (f)(2)(ii) of this section. However, ECE 

D must continue making annual filings for 

the remainder of the three years following its 

origination. 

Example 9. (i) Facts. MEWA E begins 

distributing marketing materials on August 

31, 2013. 

(ii) Conclusion. In this Example 8, because 

MEWA E began operating on August 31, 

2013, the administrator of MEWA E must 

register with the Secretary by filing a 

completed Form M–1 on or before August 1, 

2013 (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. 


emcdonald on DSK67QTVN1PROD with RULES
13796 Federal Register / Vol. 78, No. 41 / Friday, March 1, 2013 / Rules and Regulations 

Example 10. (i) Facts. Same facts as 

Example 9, but MEWA E registers on or 

before August 1, 2013 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 10, the 

registration for all States (other than State Z) 

have lapsed under (e)(4) 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)(3) of this 

section. 

(g) 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. 

(h) 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 § 2560.502c–5 of this chapter. For 

information relating to administrative 

hearings and appeals in connection with 

the assessment of civil penalties under 

section 502(c)(5) of ERISA, see 

§§ 2570.90 through 2570.101 of this 

chapter. 

(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 

§ 2560.521. 

■ 3. Section 2520.103–1 is amended by: 

■ a. Revising paragraphs (a) 

introductory text, (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 the 

paragraph, 

■ d. Adding a new paragraph 

(c)(2)(ii)(E), 

■ e. Redesignating paragraph (f) as 

paragraph (g) and adding a new 

paragraph (f). 

The revisions and additions read as 

follows: 

§ 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. 

* * * * * 

(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 paragraph (d) and 

paragraph (f) of this section and in 

§§ 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), paragraph (d) and paragraph (f) of 

this section, and in §§ 2520.104–43, 

2520.104a–6, and 2520.104–44, 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 plan subject to the Form 

M–1 requirements under § 2520.101–2 

(Filing by Multiple Employer Welfare 

Arrangements and Certain Other Related 

Entities). 

* * * * * 

(f) Plans subject to the Form M–1 

filing requirements under § 2520.101–2. 

The annual report of an employee 

welfare benefit plan that is subject to the 

Form M–1 requirements under 

§ 2520.101–2 (Filing by Multiple 

Employer Welfare Arrangements and 

Certain Other Related Entities) during 

the plan year shall also include any 

statements or information required by 

the instructions to the Form 5500 

relating to compliance with the Form 

M–1 filing requirements under 

§ 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 paragraph (b)(3)(ii) 

and adding the reference ‘‘; and’’ in its 

place, and adding a new paragraph 

(b)(4) to read as follows: 

§ 2520.104–20 Limited exemption for 

certain small welfare plans. 

* * * * * 

(b) * * * 

(4) Which are not subject to the Form 

M–1 requirements under § 2520.101–2 

(Filing by Multiple Employer Welfare 

Arrangements and Certain Other Related 

Entities). 

* * * * * 

■ 5. In § 2520.104–41, revise paragraph 

(c) to read as follows: 

§ 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 § 2520.104a–5, a completed 

Form 5500 ‘‘Annual Return/Report of 

Employee Benefit Plan’’ including, if 

applicable, the information described in 

§ 2520.103–1(f) 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, and, unless waived by 

§ 2520.104–44 or § 2520.104–46, a 

report of an independent qualified 

public accountant meeting the 

requirements of § 2520.103–1(b). 

Signed this 26th day of February, 2013. 

Phyllis C. Borzi, 

Assistant Secretary, Employee Benefits 

Security Administration, Department of 

Labor. 

[FR Doc. 2013–04863 Filed 2–28–13; 8:45 am] 

BILLING CODE 4510–29–P 


emcdonald on DSK67QTVN1PROD with RULES