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[Federal Register Volume 76, Number 234 (Tuesday, December 6, 2011)]
[Proposed Rules]
[Pages 76222-76235]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-30918]

[[Page 76221]]

Vol. 76

Tuesday,

No. 234

December 6, 2011

Part II

Department of Labor

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Employee Benefits Security Administration

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29 CFR Parts 2520, and 2977

Proposed Revision of the Form M-1; Proposed Revision of Annual 
Information Return/Reports; Filings Required of Multiple Employer 
Welfare Arrangements and Certain Other Related Entities; Ex parte Cease 
and Desist and Summary Seizure Orders--Multiple Employer Welfare 
Arrangements; Proposed Rules and Notices

Federal Register / Vol. 76, No. 234 / Tuesday, December 6, 2011 / 
Proposed Rules

[[Page 76222]]

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DEPARTMENT OF LABOR

Employee Benefits Security Administration

29 CFR Part 2520

RIN 1210-AB51

Filings Required of Multiple Employer Welfare Arrangements and 
Certain Other Related Entities

AGENCY: Employee Benefits Security Administration, Department of Labor.

ACTION: Proposed rule.

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SUMMARY: This document contains a proposed rule under title I of the 
Employee Retirement Income Security Act (ERISA) that, upon adoption, 
would implement reporting requirements for multiple employer welfare 
arrangements (MEWAs) and certain other entities that offer or provide 
health benefits for employees of two or more employers. The proposal 
amends existing reporting rules to incorporate new provisions enacted 
as part of the Patient Protection and Affordable Care Act (Affordable 
Care Act) to more clearly address the reporting obligations of MEWAs 
that are ERISA plans. This regulation is designed to impose the minimal 
amount of burden on legally compliant MEWAs and entities claiming 
exception (ECEs) while implementing the Secretary's authority to take 
enforcement action against fraudulent or abusive MEWAs included in the 
Affordable Care Act and working to protect health benefits for 
businesses and their employees. This proposed rule implements the new 
provisions while preserving the filing structure and provisions of the 
2003 regulations which direct plan MEWAs and non-plan MEWAs to report 
annually and file upon registration or origination.
    Elsewhere in this edition of the Federal Register, the Employee 
Benefits Security Administration (EBSA) is publishing a Notice of 
Proposed Rulemaking related to the Secretary's new enforcement 
authority with respect to MEWAs and Notices of proposed revisions of 
the Form M-1 and the Form 5500.

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

FOR FURTHER INFORMATION CONTACT: Suzanne Bach or Kevin Horahan, 
Employee Benefits Security Administration, Department of Labor, at 
(202) 693-8335. This is not a toll-free number.

ADDRESSES: Written comments may be submitted to the address specified 
below. All comments will be made available to the public. Warning: Do 
not include any personally identifiable information (such as name, 
address, or other contact information) or confidential business 
information that you do not want publicly disclosed. All comments may 
be posted on the Internet and can be retrieved by most Internet search 
engines. Comments may be submitted anonymously.
    Department of Labor. Comments to the Department of Labor, 
identified by RIN 1210-AB51, by one of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Email: E-HPSCAMEWARegistration.EBSA@dol.gov.
     Mail or Hand Delivery: Office of Health Plan Standards and 
Compliance Assistance, Employee Benefits Security Administration, Room 
N-5653, U.S. Department of Labor, 200 Constitution Avenue NW., 
Washington, DC 20210, Attention: RIN 1210-AB51; MEWA Registration 
Proposed Regulation.
    Comments received by the Department of Labor will be posted without 
change to http://www.regulations.gov and http://www.dol.gov/ebsa, and 
made available for public inspection at the Public Disclosure Room, N-
1513, Employee Benefits Security Administration, 200 Constitution 
Avenue NW., Washington, DC 20210.

SUPPLEMENTARY INFORMATION:

I. Background

    The Health Insurance Portability and Accountability Act of 1996 
(Pub. L. 104-191, 110 Stat. 1936) (1996)) (HIPAA) amended ERISA to 
provide for, among other things, improved portability and continuity of 
health insurance coverage. HIPAA also added section 101(g) to ERISA, 29 
U.S.C. 1021(g), providing the Secretary with the authority to require, 
by regulation, annual reporting by MEWAs that are not ERISA-covered 
plans. Section 6606 of the Patient Protection and Affordable Care Act 
(Affordable Care Act), Pub. L. 111-148, 124 Stat. 119 (2010), amended 
section 101(g) of ERISA to require that such MEWAs register with the 
Department prior to operating in a State. Specifically, this section 
now provides that multiple employer welfare arrangements providing 
benefits consisting of medical care (within the meaning of section 
733(a)(2) of ERISA, 29 U.S.C. 1191b(a)(2)) which are not ERISA-covered 
group health plans must register with the Secretary prior to operating 
in a State. The Secretary may also, by regulation, direct such multiple 
employer welfare arrangements to report, not more frequently than 
annually, in such form and such manner as the Secretary specifies for 
the purpose of determining the extent to which the requirements of part 
7 of subtitle B of title I of ERISA are being carried out in connection 
with such benefits.
    The term ``multiple employer welfare arrangement'' is defined in 
section 3(40) of ERISA, 29 U.S.C. 1002(40) in pertinent part, as an 
employee welfare benefit plan, or any other arrangement (other than an 
employee welfare benefit plan), which is established or maintained for 
the purpose of offering or providing medical benefits to the employees 
of two or more employers (including one or more self-employed 
individuals), or to their beneficiaries, except that such term does not 
include any such plan or other arrangement which is established or 
maintained under or pursuant to one or more agreements which the 
Secretary finds to be collective bargaining agreements, by a rural 
electric cooperative, or by a rural telephone cooperative association. 
For purposes of this definition, two or more trades or businesses, 
whether or not incorporated, shall be deemed a single employer if such 
trades or businesses are within the same control group. The term 
``control group'' means a group of trades or businesses under common 
control, and the determination of whether a trade or business is under 
``common control'' with another trade or business shall be determined 
under regulations of the Secretary applying principles similar to the 
principles applied in determining whether employees of two or more 
trades or businesses are treated as employed by a single employer under 
section 4001(b) of ERISA, 29 U.S.C. 1301(b), except that, for purposes 
of this paragraph, common control shall not be based on an interest of 
less than 25 percent.\1\
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    \1\ This provision was added to ERISA by section 302(b) of the 
Multiple Employer Welfare Arrangement Act of 1983, Public Law 97-
473, 96 Stat. 2611, 2612 which also amended section 514(b) of ERISA, 
29 U.S.C. 1144(a). Section 514(a) of ERISA provides that State laws 
that relate to employee benefit plans are generally preempted by 
ERISA. Section 514(b) sets forth several exceptions to the general 
rule of section 514(a) and subjects employee benefit plans that are 
MEWAs to various levels of State regulation depending on whether the 
MEWA is fully insured. Sec. 302(b), Public Law 97-473, 96 Stat. 
2611, 2613 (29 U.S.C. 1144(b)(6)).
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    The original MEWA reporting requirement created under HIPAA was 
enacted in response to a 1992 General

[[Page 76223]]

Accounting Office (GAO) report.\2\ In the report, the GAO detailed a 
history of MEWA fraud and abuse.\3\ The GAO recommended that the 
Department develop a mechanism to help States identify MEWAs. The 
Secretary exercised the authority under the HIPAA provision by creating 
the Form M-1 under a 2000 interim final rule and 2003 final rule,\4\ 
which generally require non-plan and ERISA-covered MEWAs (and certain 
other entities that offer or provide group health benefits to the 
employees of two or more employers) to file the Form M-1 annually with 
the Secretary. The final rule generally directed the administrator of a 
MEWA, whether or not an ERISA-covered group health plan, (and certain 
other entities that offer or provide health benefits to the employees 
of two or more employers) to file the Form M-1 with the Secretary. The 
purpose of this form is to allow the Department to determine whether 
the requirements of part 7 are being met. Part 7 of ERISA includes 
statutory amendments made by HIPAA and other statutes for which MEWAs 
must annually report compliance. These include, but are not limited to, 
the Patient Protection and Affordable Care Act of 2010 (Pub. L. 111-
148, 124 Stat. 119), and the Health Care and Education Reconciliation 
Act (Pub. L. 111-152, 124 Stat. 1029) (these are collectively known as 
the ``Affordable Care Act''), the Paul Wellstone and Pete Domenici 
Mental Health Parity and Addiction Equity Act of 2008 (Div. C, title V, 
Subtitle B of Pub. L. 110-343, 122 Stat. 3881), and the Genetic 
Information Nondiscrimination Act of 2008 (Pub. L. 110-233, 122 Stat. 
881).
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    \2\ See, Employee Benefits: States Need Labor's Help Regulating 
Multiple Employer Welfare Arrangements, March 1992, GAO/HRD-92-40.
    \3\ For example, the 1992 GAO report indicated that between 1988 
and 1991, MEWAs left at least 398,000 participants and beneficiaries 
with over $123 million in unpaid claims. Meanwhile more than 600 
MEWAs failed to comply with State insurance laws. See supra note 2.
    \4\ 65 FR 715 (02/11/2000) and 68 FR 17494 (04/09/2003). The 
Form M-1 has been updated and is reissued each year in December by 
the Department and modified periodically to address changes to the 
statutory provisions in part 7 of ERISA.
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    Despite the reporting rules, many of the MEWA abuses discussed in 
the GAO report persist today. MEWAs frequently are marketed by 
unlicensed entities that avoid State insurance reserve, contribution, 
and consumer protection requirements. By avoiding these requirements, 
such entities often are able to market insurance coverage at rates 
substantially lower than licensed insurers, making them particularly 
attractive to some small employers that find it difficult to obtain 
affordable health insurance for their employees. Unfortunately, due to 
insufficient funding and inadequate reserves, and in some situations, 
excessive administrative fees and fraud, some MEWAs have become 
insolvent and unable to pay medical benefit claims. Therefore, affected 
employees and their dependents have become financially responsible for 
paying medical claims they presumed were covered by insurance after 
paying health insurance premiums to MEWAs that become insolvent. The 
unfortunate reality is that currently, the Department often does not 
find out about insolvent or fraudulent MEWAs until significant harm has 
occurred to employers and participants. Furthermore, while the 
Department--often working with State insurance departments--has had 
some success with both civil and criminal cases against MEWA operators, 
the monetary judgments are often uncollectible leaving the employers 
and/or individual participants without coverage for claims that are 
sometimes very large. This proposal implements the statutory 
requirements in a way that limits the burden on legitimate MEWAs but 
gives the Secretary, employers, and the participants and beneficiaries 
of the plans those employers sponsor additional information about these 
entities and a stronger enforcement scheme. Having this information 
will aid the enforcement and prevention of fraudulent and insolvent 
MEWAs.\5\
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    \5\ See, United States v. Edwards, plea agreement, 1:05CR 265 
(M.D.N.C. 2006) (In 2005, a MEWA operator, whom the Department 
showed collected over 36 million dollars in healthcare insurance 
premiums and failed to obtain health insurance coverage for its 
employer clients which resulted in thousands of uncovered employees 
and approximately $8 million in unpaid claims) see also Solis v. 
W.I.N. Ass'n, L.L.C., et. al., slip op. 4:11-cv-00616 (S.D. Tex. 
2011) (the Department investigated a MEWA which failed to make 
payments on health care claims, charged excessive fees, engaged in 
self-dealing, and failed to disclose fees to the client employers in 
the plan. The Department obtained a Consent Judgment and Order 
against the MEWA operators for leaving hundreds of participants 
without coverage and permanently enjoining them from acting as 
fiduciaries in the future. Also, the court authorized the Secretary 
to bring a collection action for the plan losses against one of the 
MEWA operators relative to his ability to restore those plan 
losses.)
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    Pursuant to the Affordable Care Act's change to section 101(g) of 
ERISA, this proposed rule would amend the 2003 final rule, as well as 
the rules related to annual reports required of MEWAs that are group 
health plans, and solicit comments regarding the restructured reporting 
requirements. Specifically, the Affordable Care Act amended section 
101(g) of ERISA to require MEWAs that provide benefits consisting of 
medical care (within the meaning of section 733(a)(2) of ERISA) which 
are not group health plans to register with the Secretary prior to 
their operating in a State, in addition to reporting annually regarding 
their compliance with part 7 of ERISA including the Public Health 
Service Act (PHS Act) market reforms incorporated by reference in 
section 715 of ERISA. These proposed regulations implement the 101(g) 
MEWA registration provision which directs MEWAs to report compliance 
with the part 7 rules including the PHS Act sections 2701 through 2728. 
By requiring MEWAs to register with the Department before operating in 
a State by filing the Form M-1 to provide additional information, this 
proposed rule would enhance the State and Federal governments' joint 
mission to prevent and take enforcement action against fraudulent and 
abusive MEWAs and limit the losses suffered by American workers, their 
families, and businesses in instances when abusive MEWAs become 
insolvent and fail to reimburse medical claims.
    The Affordable Care Act reorganizes, amends, and adds to the 
provisions in part A of title XXVII of the PHS Act, 42 U.S.C. 300gg-1 
et seq., relating to group health plans and health insurance issuers in 
the group and individual markets. The term ``group health plan'' is 
defined in title XXVII of the PHS Act, part 7 of ERISA, and chapter 100 
of the Code and includes both insured and self-insured group health 
plans. The Affordable Care Act adds section 715(a)(1) to ERISA, 29 
U.S.C. 1185d(a)(1), and section 9815(a)(1) to the Internal Revenue Code 
(the Code), 26 U.S.C. 9815(a)(1), to incorporate the provisions of part 
A of title XXVII of the PHS Act into ERISA and the Code, and make them 
applicable to group health plans, and health insurance issuers 
providing health insurance coverage in connection with group health 
plans. The PHS Act sections incorporated by this reference are sections 
2701 through 2728. PHS Act sections 2701 through 2719A are 
substantially new, though they incorporate some provisions of prior 
law. PHS Act sections 2722 through 2728 are sections of prior law 
renumbered, with some, mostly minor, changes. Section 1251 of the 
Affordable Care Act, as modified by section 10103 of the Affordable 
Care Act and section 2301 of the Reconciliation Act, 42 U.S.C. 18011, 
specifies that certain plans or coverage existing as of the date of 
enactment (i.e., grandfathered health plans) are only subject to 
certain provisions.

[[Page 76224]]

II. Overview of Proposal

 A. Proposed Amendment to 29 CFR Sec.  2520.101-2 Under ERISA Section 
101(g)

    These proposed rules would amend existing filing rules for MEWAs 
and ECEs in order to implement changes made to ERISA section 101(g) in 
the Affordable Care Act. Like the 2003 regulations, ECEs and MEWAs are 
treated largely the same for filing purposes. The main distinction in 
filing requirements is that ECEs are only subject to annual M-1 filings 
for the first three years following an origination event. We preserved 
this special rule included in the 2003 regulations for ECEs as well as 
e the special filing events applicable to MEWAs. In keeping with this 
structure, we propose to extend the new filing events prescribed by the 
Affordable Care Act provision to MEWAs and ECEs alike.
    Paragraph (a) of the proposal sets forth section 101(g) of ERISA 
that directs MEWAs that provide benefits consisting of medical care 
(within the meaning of section 733(a)(2) of ERISA) to register with the 
Secretary prior to operating in a State, and to report annually 
regarding compliance with part 7 of ERISA. While the language in 
section 101(g) of ERISA only applies to MEWAs that are not group health 
plans (``non-plan MEWAs''), the proposal preserves the structure 
promulgated as part of the final 2003 regulations, which required both 
MEWAs that are group health plans (``plan MEWAs'') and non-plan MEWAs 
to file the Form M-1, based on authority found in sections 505 and 734 
of ERISA. 29 U.S.C. 1135 and 1191c. Section 505 of ERISA states that 
the Secretary may prescribe such regulations as she finds necessary or 
appropriate to carry out the provisions of Title I of ERISA. Section 
734 of ERISA allows the Secretary to promulgate such regulations as may 
be necessary or appropriate to carry out the provisions of part 7 of 
ERISA.
    Paragraph (b) defines the terms used in the proposal, with some 
additions and modifications from the 2003 final rule. Amended paragraph 
(c) sets forth the requirement that, with certain exceptions, all MEWAs 
and certain entities that claim not to be a MEWA solely due to the 
exception in section 3(40)(A)(i) of ERISA (referred to as Entities 
Claiming Exception or ECEs) file reports with the Department.
    Paragraph (d) describes how MEWAs and ECEs will comply with the 
proposed rule by filing the Form M-1, and the conditions under which 
the Secretary may reject a filing.
    Paragraph (e) sets forth the times when MEWAs and ECEs will file 
the Form M-1. Paragraph (f) directs that the Form M-1 be filed 
electronically. In addition to minimizing errors and providing faster 
access to reported data, electronic filing will also be less burdensome 
on the filer. Once information about the MEWA or ECE is entered into 
the system, filers will have the option of allowing the system to copy 
information provided on a past filing into a new filing. This transfer 
of past information provides filers an easy way to update or verify 
information. The information provided through Form M-1 filings will 
then be accessible by the public and other interested parties such as 
State regulators.
    Paragraph (g) explains the civil penalties that may result from a 
failure to comply with the proposed rule. Civil penalties for failure 
to file a report required by ERISA section 101(g) or Sec.  2520.101-2 
have been applicable for non-plan MEWAs under ERISA section 502(c)(5) 
since May 1, 2000. Under these proposed regulations, the Department has 
extended similar civil penalties for a failure to file an annual report 
by plan MEWAs under ERISA section 502(c)(2).
    Also, new criminal penalties were added by the Affordable Care Act 
under ERISA section 519 for any person who knowingly submits false 
statements or false representations of fact in filing reports required 
under the proposal. See paragraph 2 below for these changes that are 
being proposed to Sec. Sec.  2520.103-1, 104-20, and 104-41 to further 
enhance the Department's ability to enforce these provisions with 
regard to MEWAs that are group health plans.
1. Basis and Scope
    These proposed regulations set forth rules implementing section 
101(g) of ERISA, as amended by section 6606 of the Affordable Care Act, 
which directs MEWAs that are not group health plans to register with 
the Secretary prior to operating in a State. These proposed regulations 
also update the existing requirement in section 101(g) of ERISA that 
MEWAs, which are group health plans, and certain other entities 
claiming an exception, file the Form M-1 upon the occurrence of 
specified events as well as annually.
2. Definitions
    a. Operating. Paragraph (b)(8) of the proposed rule adds a 
definition of ``operating,'' and defines it as any activity including 
but not limited to marketing, soliciting, providing, or offering to 
provide benefits consisting of medical care. This definition, which 
includes marketing and administrative activities, governs registration 
and origination filing events for the Form M-1 filing for MEWAs and 
ECEs.
    b. Origination. In order to implement the Affordable Care Act 
amendment to ERISA section 101(g), the Department amended the 2003 
filing rules. The rule is meant to apply equally to MEWAs and ECEs. The 
2003 rules treated MEWAs and ECEs equally for purposes of special 
filings by having a combined rule for both of these entities to 
determine if special filings were necessary which relied on the 
origination definition. The Department concluded it to be more 
responsive to the change in the section 101(g) statutory language to 
now refer to special filings by MEWAs as a registration. The effect of 
this is that MEWAs and ECEs are no longer collectively referencing the 
term origination, but now have separate origination and registration 
terms--albeit subject to the same special filing events.
    The proposed rule first indicates events which require a special 
filing in the definition of origination. A special filing is required 
when (in the case of an ECE):
    ``(i) The ECE first begins operating (within the meaning of (b)(8) 
of this section) with regard to the employees of two or more employers 
(including one or more self-employed individuals); (ii) The ECE, while 
required to report pursuant to paragraph (c)(1)(ii) of this section, 
begins operating in any additional State; (iii) The ECE begins 
operating following a merger with another ECE (unless all of the ECEs 
that participate in the merger previously were last originated at least 
three years prior to the merger); (iv) The number of employees 
receiving coverage for medical care under the ECE is at least 50 
percent greater than the number of such employees on the last day of 
the previous calendar year (unless the increase is due to a merger with 
another ECE under which all ECEs that participate in the merger were 
last originated at least three years prior to the merger); or (v) The 
ECE experiences a material change in the information reported on the 
most recently filed Form M-1 as defined by the Form M-1 instructions. 
Event (i) Was modified to comply with the new statutory requirement 
that filings be made prior to operating in a State. Events (ii) and (v) 
are new special filing events which were added to instruct entities to 
re-file with the Department so that it has the most up-to-date 
information.
    c. Reporting. The proposed rule adds a definition of ``reporting.'' 
``Reporting''

[[Page 76225]]

or ``to report'' means to file the Form M-1 as required pursuant to 
section 101(g) of ERISA; Sec.  2520.101-2; or the instructions to the 
Form M-1. The term ``reporting'' is used in order to correspond to the 
terminology of Sec.  2560.502c-5 which uses the generic term ``report'' 
to describe the Form M-1 filing process, including the annual report, 
registration, and origination filings.
    d. State. The proposed rule adds a definition of ``State'' and 
defines the term by reference to Sec.  2590.701-2. This definition was 
added because MEWAs must register, and ECEs must make an origination 
filing, prior to operating in a State.
3. Persons Required To Report
    Paragraph (c) of the proposed rule sets forth the persons required 
to report under the proposed rule. As under the 2003 final rule, the 
proposed rule directs the administrator of a MEWA that provides 
benefits consisting of medical care, whether or not the MEWA is a group 
health plan, to file the Form M-1. It also requires filing by the 
administrator of an ECE that offers or provides coverage consisting of 
medical care during the first three years after the ECE is originated.
4. Information To Be Reported
    Paragraph (d) of the proposed rule clarifies that the reporting 
requirements of Sec.  2520.101-2 will only be satisfied by filing a 
completed copy of the Form M-1, including any additional statements 
pursuant to the Form M-1 Instructions.
5. Reporting Requirements and Timing
    Paragraph (e) of the proposed rule retains from the 2003 final 
rule's standards that both MEWAs and ECEs must file the Form M-1 
annually, with ECEs only having to file annually for the first 3 years 
following an origination.
    As mentioned previously, MEWAs and ECEs are also subject to special 
filings in certain circumstances. Special filing events were included 
in the 2003 regulation, but have been relabeled and expanded to 
implement statutory language under the proposed rules. To clarify the 
new section 101(g) registration standard for MEWAs and make parallel 
changes to the origination events for ECEs, the proposed rule contains 
five registration and origination events for MEWAs and ECEs, only one 
of which is new (a second filing event existed in the 2003 rules but 
has been modified).
    The 2003 regulation generally requires a special filing when a MEWA 
or ECE (1) Begins operating or providing coverage for medical care to 
employees of two or more employers; (2) begins offering or providing 
coverage for medical care to employees of two or more employers after a 
merger with another MEWA or ECE; or (3) increases the number of 
employees receiving medical care under the MEWA or ECE by at least 50 
percent over the number of employees on the last day of the previous 
calendar year. These filing events are generally preserved in the 
proposed rules. However, the first event was modified to conform to the 
statutory language under ERISA section 101(g) directing MEWAs to 
register with the Secretary by filing a Form M-1 prior to operating in 
any State. Additionally, the proposed rule directs that a filing be 
made in the event a MEWA or ECE expands its operations into additional 
States or experiences a material change as defined in the Form M-1 
instructions. This filing event was added to direct an entity to update 
its Form M-1 filing in the event that it experiences changes in its 
financial or custodial information. In the event an entity experiences 
a material change, the online filing system will allow them to log on 
to the online filing system, give them the option of importing data 
from its most recent completed filing, and make the necessary changes. 
The Department is particularly interested in receiving comments on this 
requirement. Consistent with the 2003 regulations, while this rule 
directs MEWAs to submit filings for the duration of their existence, 
ECEs are only required to file during the three year period following 
an origination event that is not a material change. ECEs that 
experience a material change must file during this period but are not 
required to file beyond that three year period.
    The proposed rule also applies new timing standards on MEWAs and 
ECEs for these special filings. Under the 2003 regulations, MEWAs and 
ECEs file the Form M-1 within 90 days of the occurrence of a special 
filing event. The proposed rule directs entities to file 30 days prior 
to or within 30 days of the event, depending on the type. The timing 
requirements implement section 6606 of the Affordable Care Act which 
says that the filling must happen ``prior to operating in a State'' and 
will also facilitate the Department's timely receipt of information 
related to the other special filing events described above.
    A provision is included in the proposed rule to discourage 
``blanket filings,'' i.e., registration or origination filings that 
cover multiple States, unless the filer expects to begin operating in 
all the named States in the near future. Blanket filings that list 
States where the filer has no immediate intent to operate could 
frustrate the law's goal of gathering and maintaining timely and 
accurate information on MEWAs. Under this provision, a filing is 
considered lapsed with respect to a State if benefits consisting of 
medical care are not offered or provided in the State (or States) 
during the calendar year immediately following the filing. A new filing 
would be submitted if the filer intends to continue to operate in that 
State.
    To minimize the burden of compliance, we propose to permit MEWAs 
and ECEs to make a single filing to satisfy multiple filing events so 
long as the filing is timely for each filing.
    As in the 2003 rule, filing extensions are available in this 
proposal. Any filing deadline that is a Saturday, Sunday, or federal 
holiday is automatically extended to the next business day. A more 
substantial extension is available for MEWAs and ECEs that request such 
an extension following the procedure outlined in the Instructions to 
the Form M-1.
6. Electronic Filing
    Paragraph (f) of the proposed rule eliminates the option to file a 
paper copy of the completed Form M-1. As is now the case for all Form 
5500 Annual Report filings, and consistent with the goals of E-
government, as recognized by the Government Paperwork Elimination Act 
\6\ and the E-Government Act of 2002,\7\ we propose that the Form M-1 
be filed electronically. Electronic filing of benefit plan information, 
among other program strategies, would facilitate EBSA's achievement of 
its Strategic Goal to ``assure the security of the retirement, health 
and other workplace related benefits of American workers and their 
families.'' EBSA's strategic goal directly supports the Secretary of 
Labor's Strategic Goal to ``secure health benefits.'' \8\ A cornerstone 
of our enforcement program is the collection, analysis, and disclosure 
of benefit plan information. Electronic filing will minimize errors and 
provide faster access to reported data, assisting EBSA in its 
enforcement, oversight, and disclosure roles and ultimately enhancing 
the security of plan benefits. Electronic filing of the M-1 would also 
reduce the paperwork burden and costs

[[Page 76226]]

related to printing and mailing forms and, with the use of secure 
account access, allow updating of previously reported information to 
facilitate simplified future reporting. Finally, consistent with 
current practice, the information would be available for reference by 
participants, beneficiaries, participating employers, and other 
interested parties such as State regulators.
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    \6\ Title XVII, Public Law 105-277, 112 Stat. 2681 (Oct. 21, 
1998).
    \7\ Public Law 107-347, 116 Stat. 2899 (Dec. 17, 2002).
    \8\ For further information on the Department of Labor's 
Strategic Plan and EBSA's relationship to it, see http://www.dol.gov/_sec/stratplan/.
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7. Penalties
    a. Civil penalties and procedures. The proposed rule retains the 
references to section 502(c)(5) of ERISA, 29 U.S.C. 1132(c)(5) and 
Sec.  2560.502c-5 regarding civil penalties and procedures.
    b. Criminal penalties and procedures. The Affordable Care Act 
section 6601 added ERISA section 519 which prohibits a person from 
making false statements or representations of fact in connection with a 
MEWAs financial condition, the benefits it provides, or its regulatory 
status as it relates to marketing or sale of a MEWA. The Affordable 
Care Act also amended ERISA section 501(b) to impose criminal penalties 
on any person who is convicted of violating the prohibition in ERISA 
section 519. The proposed rule adds a cross-reference to section 501(b) 
and 519 of ERISA, 29 U.S.C. 1131 and 1149 for the purpose of 
implementing these new rules as they relate to filing a Form M-1 prior 
to operating in a State or other registration and origination filings.
    c. Cease and desist and summary seizure and procedures. Section 
6605 of the Affordable Care Act adds section 521 to ERISA, which 
authorizes the Secretary to issue cease and desist orders, without 
prior notice or a hearing, when it appears to the Secretary that the 
alleged conduct of a MEWA is ``fraudulent, or creates an immediate 
danger to the public safety or welfare, or is causing or can be 
reasonably expected to cause significant, imminent, and irreparable 
public injury.'' This section also allows the Secretary to issue an 
order to seize the assets of a MEWA that the Secretary determines to be 
in a financially hazardous condition. The regulation providing guidance 
on the cease and desist orders and summary seizure rules published 
elsewhere in this Federal Register also include regulatory guidance on 
the procedural rules for this process. A cease and desist order 
containing a prohibition against transacting business with any MEWA or 
plan would prevent the MEWA or a person from avoiding the cease and 
desist order by shutting the MEWA down and re-establishing it in a new 
location or under a new identity.
    As such, the proposed rule adds a cross-reference to section 521 of 
ERISA and Sec.  2560.521 regarding the Secretary's authority to issue 
cease and desist and summary seizure orders.

B. Proposed Amendment to Regulations Under ERISA Section 104(a)(1), 29 
U.S.C. 1024(a)(1)

    Additional changes are being proposed to further enhance the 
Department's ability to enforce Sec.  2520.101-2. The primary change is 
the addition of a new paragraph (f) to Sec.  2520.103-1 regarding the 
content of the annual report. As part of this proposal, existing 
paragraph (f) of Sec.  2520.103-1 would be redesignated paragraph (g), 
but would be otherwise unchanged. New Sec.  2520.103-1(f) would apply 
to all MEWAs that are ERISA-covered plans and that are subject to the 
requirements of Sec.  2520.101-2. This change provides that all such 
MEWAs must prove compliance with Sec.  2520.101-2 (filing the Form M-1) 
in order to satisfy the annual reporting requirements of Sec.  
2520.103-1. Pursuant to ERISA section 502(c)(2), 29 U.S.C. 1132(c)(2), 
a plan administrator who fails to file a Form 5500 Annual Return/Report 
with a proof of compliance with Sec.  2520.101-2 may be subject to a 
civil penalty of up to $1,100 a day (or higher amount if adjusted 
pursuant to the Federal Civil Penalties Inflation Adjustment Act of 
1990, as amended) for each day a plan administrator fails or refuses to 
file a complete report. Although ERISA sections 505 and 734 give the 
Secretary the authority to require MEWAs that are group health plans to 
comply with the requirements of Sec.  2520.101-2, there is, however, no 
corresponding ERISA civil penalty for a failure to comply with those 
requirements. These proposed changes to the Form 5500 annual reporting 
requirements for MEWAs that are group health plans will enhance the 
Department's ability to enforce the Form M-1 requirements and ensure 
that MEWAs are subject to the same rules under the law.
    Conforming changes adding references to new Sec.  2520.103-1(f) are 
proposed for Sec. Sec.  2520.103-1(a)(2), (b), (c) and Sec.  2520.104-
41. A corresponding change is also proposed for Sec.  2520.104-20 to 
eliminate the limited filing exemption for insured or unfunded, fully 
insured, or combination unfunded/fully insured plan MEWAs with fewer 
than 100 participants. It is important to note that while the addition 
of Sec.  2520.103-1(f) and the change to Sec.  2520.104-20 would 
eliminate the annual reporting exemption for such plan MEWAs with fewer 
than 100 participants, these plan MEWAs are subject to the existing 
(and proposed) standards of Sec.  2520.101-2. Moreover, the impact of 
satisfying the annual reporting would be substantially less burdensome 
because in addition to being eligible for the simplified annual 
reporting for small welfare plans, these plan MEWAs would be exempt 
under Sec.  2520.104-44 from completing Schedule I (Financial 
Information).\9\ Thus, these changes give the Secretary an important 
enforcement tool while imposing minimal burden on plan MEWAs. Because 
it is not clear that there are any unfunded/fully insured plan MEWAs 
with fewer than 100 participants, the Department does not believe this 
is overly burdensome but rather ensures that all MEWAs are treated the 
same. Nonetheless, the Department is particularly interested in 
receiving comments regarding any undue burden this elimination may 
create.
---------------------------------------------------------------------------

    \9\ These plan MEWAs would only need to file Form 5500 annual 
return/report and, if applicable, Schedule A (Insurance Information) 
and Schedule G, Part III (nonexempt transactions). They would not be 
eligible to file the Form 5500-SF (Short Form 5500 Annual Return/
Report of Small Employee Benefit Plan) under Sec.  2520.104-41 and 
Sec.  2520.103-1(c)(2)(ii). The Form 5500-SF does not include 
Schedule A insurance information and the Department believes that 
plan MEWAs subject to this proposal that claim to provide insured 
benefits should be required to complete the Schedule A so that 
enforcement officials and the public have information about the 
insurance policy and insurance company through which the MEWA is 
providing insurance coverage. In addition, an unrelated technical 
correction to Sec.  2520.104-41 is being included in this rulemaking 
to add an express reference to the Form 5500-SF.
---------------------------------------------------------------------------

III. Regulatory Impact Analysis

A. Executive Order 12866

    Under Executive Order 12866, the Department must determine whether 
a regulatory action is ``significant'' and therefore subject to the 
requirements of the Executive Order and subject to review by the Office 
of Management and Budget (OMB). Under section 3(f) of the Executive 
Order, a ``significant regulatory action'' is an action that is likely 
to result in a rule (1) Having an annual effect on the economy of $100 
million or more, or adversely and materially affecting a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local or tribal governments or communities 
(also referred to as ``economically significant''); (2) creating 
serious inconsistency or otherwise interfering with an action taken or 
planned by another agency; (3) materially altering

[[Page 76227]]

the budgetary impacts of entitlement grants, user fees, or loan 
programs or the rights and obligations of recipients thereof; or (4) 
raising novel legal or policy issues arising out of legal mandates, the 
President's priorities, or the principles set forth in the Executive 
Order. OMB has determined that this action is not economically 
significant within the meaning of section 3(f)(1) of the Executive 
Order but is significant under section 3(f)(4) of the Executive Order, 
because it raises novel legal or policy issues arising from the 
President's priorities.
    The Department estimates that the total cost of this proposed rule 
would be approximately $124,300 in the first year, or an average of 
approximately $272 for each of the 457 entities expected to file the 
Form M-1. These costs are all associated with the information 
collection request contained in this proposal and, therefore, are 
discussed in the Paperwork Reduction Act Section, below.
1. Summary and Need for Regulatory Action
    As discussed earlier in this preamble, section 6606 of the 
Affordable Care Act amended section 101(g) of ERISA to require the 
Secretary of Labor to promulgate regulations requiring MEWAs providing 
medical care benefits (within the meaning of section 733(a)(2) of 
ERISA) that are not ERISA-covered group health plans (non-plan MEWAs) 
to register with the Secretary before operating in a State.
    Before this proposed amendment, ERISA section 101(g) permitted the 
Secretary to establish an annual reporting requirement on non-plan 
MEWAs that provide medical care benefits to determine whether such 
MEWAs comply with the requirements of Part 7 of ERISA. The Secretary 
exercised this authority by creating the Form M-1 under a 2000 interim 
final rule and 2003 final rule.\10\
---------------------------------------------------------------------------

    \10\ 65 FR 715 (02/11/2000) and 68 Fed. Reg. 17494 (04/09/2003). 
The Form M-1 has been updated and is reissued each year in December 
by the Department and modified periodically to address changes to 
the statutory provisions in part 7 of ERISA.
---------------------------------------------------------------------------

    The original MEWA reporting requirement was enacted by Congress as 
part of the Health Insurance Portability and Accountability Act of 1996 
in response to a 1992 General Accounting Office (GAO) recommendation 
contained in a GAO report.\11\ As discussed above, the GAO recommended 
that the Department develop a mechanism to help States identify 
fraudulent and abusive MEWAs. The HIPAA provision led to the 
Department's creation of the Form M-1, which generally requires non-
plan and ERISA-covered MEWAs (and certain other entities that offer or 
provide group health benefits to the employees of two or more 
employers) to file Form M-1 annually with the Secretary.
---------------------------------------------------------------------------

    \11\ See, Employee Benefits: States Need Labor's Help Regulating 
Multiple Employer Welfare Arrangements, March 1992, GAO/HRD-92-40.
---------------------------------------------------------------------------

    In addition to amending the Department's MEWA reporting regulation 
to require MEWAs to register with the Secretary before operating in a 
State, these proposed rules also direct Form M-1 filers to provide 
additional information regarding the MEWA or ECE and apply new timing 
standards for the special filings that are made when a MEWA's or ECE's 
status changes. These amendments will aid the Department in its 
oversight of MEWAs consistent with its expanded authority provided by 
the Affordable Care Act \12\ and allow it to provide critical 
information to State insurance departments that coordinate their 
investigations and enforcement actions against fraudulent and abusive 
MEWAs with the Department.
---------------------------------------------------------------------------

    \12\ As part of the Affordable Care Act, Congress also enacted 
ERISA section 521, which authorized the Secretary to issue cease and 
desist orders, without prior notice or a hearing, when it appears to 
the Secretary that a MEWA's alleged conduct is fraudulent, creates 
an immediate danger to the public safety or welfare, or causes or 
can reasonably be expected to cause significant, imminent, and 
irreparable public injury. Section 521 also authorizes the Secretary 
to issue a summary order to seize the assets of a MEWA that the 
Secretary determines to be in financially hazardous condition. The 
Department also is proposing rules for these provisions, which are 
published elsewhere in today's Federal Register.
---------------------------------------------------------------------------

    Over the last several years, the Department has observed a downward 
trend in the number of MEWAs that file the Form M-1, raising concerns 
that some existing MEWAs are not filing the form. Under the 2003 
regulations, the Department has the ability to impose penalties on 
ERISA-covered MEWAs that fail to file the M-1 only in limited 
circumstances and if a determination regarding plan status were made by 
the Secretary. To address this issue and encourage compliance with the 
M-1 filing requirement, the Department also is proposing as part of 
this regulatory action to amend the Form 5500 annual reporting 
standards by requiring all ERISA-covered MEWAs, including MEWAs with 
less than 100 participants,\13\ to file Form 5500 and provide on the 
form proof of a timely filed Form M-1 in order for the plan 
administrator to avoid the Department's imposition of ERISA section 
502(c)(2) penalties.\14\
---------------------------------------------------------------------------

    \13\ The proposal would remove the small welfare plan filing 
exemption under Sec.  2520.104-20. Currently, under Sec.  2520.104-
20, small insured or unfunded welfare benefit plans, including small 
plan MEWAs, are exempt from certain reporting and disclosure 
provisions, including the requirement to file an annual Form 5500. 
By removing this exemption, all plan MEWAs will now be required to 
file a Form 5500 with a proof of filing a timely Form M-1 filing in 
order to satisfy the annual reporting requirements under ERISA 
Sections 103 and 104. However, small insured and unfunded plan MEWAs 
would be exempt under Sec.  2520.104-44 from completing Schedule I 
(Financial Information). As with other small welfare benefit plans 
subject to the annual reporting requirements, small plan MEWAs would 
be required to complete Schedule A (Insurance Information), if 
applicable.
    \14\ If a MEWA fails to prove that it filed the M-1 on its Form 
5500, it could be subject to a civil penalty of up to $1,000 a day 
for each day the plan administrator fails or refuses to file a 
complete report.
---------------------------------------------------------------------------

    These proposed amendments to the Department's MEWA reporting 
standards would provide a cost effective means to implement the 
expanded MEWA reporting as enacted in the Affordable Care Act. As 
stated above, the Department estimates that the average cost for each 
entity that the Department expects to file the revised form would 
average approximately $272.
2. Benefits of Proposed Rule
    As discussed earlier in this preamble, section 6606 of the 
Affordable Care Act amended section 101(g) of ERISA directing the 
Secretary of Labor to promulgate regulations requiring MEWAs providing 
medical care benefits (within the meaning of section 733(a)(2) of 
ERISA) that are not ERISA-covered group health plans (non-plan MEWAs) 
to register with the Secretary before operating in a State. By 
implementing this statutory amendment, the Department would receive 
prior notice of a MEWA's intention to commence operations in a State. 
Such notification would help the Department and State insurance 
commissioners to ensure that MEWAs are being lawfully operated and that 
sufficient insurance has been purchased or adequate reserves 
established to pay benefit claims before the MEWAs begin operating \15\ 
in a State. The proposed rule would improve MEWA compliance and deter 
fraudulent and abusive MEWA practices, thereby protecting and securing 
the benefits of participants and beneficiaries by ensuring that MEWA 
assets are preserved and benefits timely paid. These potential benefits 
have not been

[[Page 76228]]

quantified, but the Department expects that they will more than justify 
their costs.
---------------------------------------------------------------------------

    \15\ Section 2520.101-2(b)(8) of the proposed rule provides that 
the term ``operating'' means any activity including but not limited 
to marketing, soliciting, providing, or offering to provide medical 
care benefits.
---------------------------------------------------------------------------

3. Costs of Proposed Rule
    The costs of the proposed rule are associated with the amendments 
to the Form M-1 and Form 5500 reporting requirements and are therefore 
discussed in the Paperwork Reduction Act section, below.

B. Paperwork Reduction Act

    As part of its continuing effort to reduce paperwork and respondent 
burden, the Department of Labor conducts a preclearance consultation 
program to provide the general public and Federal agencies with an 
opportunity to comment on proposed and continuing collections of 
information in accordance with the Paperwork Reduction Act of 1995 (PRA 
95) (44 U.S.C. 3506(c)(2)(A)). This helps to ensure that requested data 
can be provided in the desired format, reporting burden (time and 
financial resources) is minimized, collection instruments are clearly 
understood, and the impact of collection requirements on respondents 
can be properly assessed. Currently, the Department is soliciting 
comments concerning the proposed information collection request (ICR) 
included in this proposed rule. A copy of the ICR may be obtained by 
contacting the individual identified below in this notice. The 
Department has submitted a copy of the proposed information collection 
to OMB in accordance with 44 U.S.C. 3507(d) for review of its 
information collections. The Department and OMB are particularly 
interested in comments that:
     Evaluate whether the proposed collection of information is 
necessary for the proper performance of the functions of the agency, 
including whether the information will have practical utility;
     Evaluate the accuracy of the agency's estimate of the 
burden of the collection of information, including the validity of the 
methodology and assumptions used;
     Enhance the quality, utility, and clarity of the 
information to be collected; and
     Minimize the burden of the collection of information on 
those who are to respond, including through the use of appropriated 
automated, electronic, mechanical, or other technological collection 
techniques or other forms of information technology, e.g., permitting 
electronic submission of responses.
    Comments should be sent to the Office of Information and Regulatory 
Affairs, Office of Management and Budget, Room 10235, New Executive 
Office Building, Washington, DC 20503; Attention: Desk Officer for the 
Employee Benefits Security Administration. Although comments may be 
submitted through February 6, 2012. Address requests for copies of the 
ICR to G. Christopher Cosby, Office of Policy and Research, U.S. 
Department of Labor, Employee Benefits Security Administration, 200 
Constitution Avenue NW., Room N 5647, Washington, DC 20210. Telephone 
(202) 219-8410; Fax: (202) 219-4745. These are not toll free numbers.
    Between 2006 and 2009, an average of 457 entities filed Form M-1 
with the Department (a high of 508 in 2006 and a low of 397 in 2009). 
Of the total filings, on average, 197 were submitted via mail and 260 
were submitted electronically through the Form M-1 electronic filing 
system provided by the Department via the Internet. The fraction filing 
electronic returns has been increasing and reached nearly 65 percent in 
2009. This proposed rule will require all filings to be submitted 
electronically.
    As discussed above and pursuant to section 6606, the proposed rule 
would amend the information required to be disclosed on the Form M-1 by 
adding new data elements. Therefore, the Department assumes that all 
MEWA plan administrators that file the Form M-1 in-house (an estimated 
10 percent of filers) would spend two hours familiarizing themselves 
with the changes to the form that would be made by the proposed 
regulation. This would result in a total hour burden of 92 hours (46 
MEWAs * 2 hours). The Department estimates that Part I of the Form (the 
identifying information) would require five minutes to complete. The 
time required to complete Part II would vary based on the number of 
States in which the entity provides coverage, and the Department 
estimates that this would require 60 minutes for single-State filers 
and 120 minutes for multi-State filers. The Department expects the time 
required to complete Part III would be 15 minutes for fully-insured 
filers and 30 minutes for self-insured filers. Table 1 below summarizes 
the estimates of time required to complete each part of the form. Based 
on the foregoing, the Department estimates that the total hour burden 
for MEWAs to file the Form M-1 using in-house resources would be 178 
hours in the first year with an equivalent cost of $16,200 assuming all 
work will be performed by an employee benefits professional at $91.21 
per hour.\16\ The cost to submit electronic filings would be 
negligible.
---------------------------------------------------------------------------

    \16\ EBSA estimates of labor rates include wages, other 
benefits, and overhead based on the National Occupational Employment 
Survey (May 2009, Bureau of Labor Statistics) and the Employment 
Cost Index (October 2010, Bureau of Labor Statistics).
---------------------------------------------------------------------------

    The Department estimates that the annual hour burden for Form M-1 
filings prepared in-house in subsequent years would be approximately 94 
hours as summarized in Table 2.\17\ The Department estimate is based on 
the assumption that approximately 41 new MEWAs \18\ will file the Form 
M-1 each year, and thus, approximately four new MEWAs will prepare Form 
M-1 in-house. The Department estimates that it would take two hours for 
these administrators, resulting in an hour burden of eight hours. The 
Department estimates that MEWAs preparing the form in-house would spend 
four hours completing part I, 68 hours completing Part II, and 15 hours 
completing part III. The equivalent cost of this annual hour burden is 
estimated to be $8,600, assuming a $91.21 hourly labor rate for an 
employee benefits professional.
---------------------------------------------------------------------------

    \17\ These are rounded values. The totals may differ slightly as 
a result.
    \18\ There were 46 MEWA originations in 2006, 52 originations in 
2007 and 26 originations in 2008. This averages to 41 originations 
per year.

                                         Table 1--Time To Fill Out Form
                                                    [Minutes]
----------------------------------------------------------------------------------------------------------------
                                                                   Fully-insured              Self-insured
----------------------------------------------------------------------------------------------------------------
                                                                                                        Multi
                                                              One State   Multi States   One State      States
----------------------------------------------------------------------------------------------------------------
New Filing.................................................          120          120           120          120
Part I.....................................................            5            5             5            5
Part II....................................................           60          120            60          120

[[Page 76229]]

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

                         Table 2--Hour Burden To Prepare Form M-1, In-House Preparation
----------------------------------------------------------------------------------------------------------------
                                                      Fully-insured              Self-insured
                                               -----------------------------------------------------
                                                                                           Multi        Total
                                                 One State   Multi States   One State      States
----------------------------------------------------------------------------------------------------------------
Number of MEWAs...............................           16           17             8            5           46
Review: Year 1................................           32           34            16           10           92
New Filing: Subsequent Years..................            3            3             1            1            8
Part I........................................            1            1             1          0.5            4
Part II.......................................           16           33             8           11           68
Part III......................................            4            4             4            3           15
                                               -----------------------------------------------------------------
    Total Time: Year 1........................           53          73a            29           24          178
    Total Time: Subsequent Years..............           24           41            14           15           94
----------------------------------------------------------------------------------------------------------------

1. Cost Burden
    The Department assumes that 90 percent of the 457 MEWAs (411 MEWAs) 
that will file the Form M-1 will use third-party service providers to 
complete and submit the Form M-1.\19\ Because the Department is 
proposing to add additional data elements to the form, the Department 
assumes that in the year of implementation, all service providers would 
spend additional time familiarizing themselves with the changes. The 
Department estimates that MEWAs that use third party service providers 
would incur the cost of one hour for service providers to review the 
new rule as service providers likely will provide this service for 
multiple MEWAs and therefore spread this burden across multiple MEWAs. 
This results in a one-time cost burden of $37,500 (411 MEWAs * 1 hour * 
$91.21).
---------------------------------------------------------------------------

    \19\ This assumption is made in connection with EBSA's principal 
reporting form, the Form 5500, and was validated through a filer 
survey.
---------------------------------------------------------------------------

    The total estimated cost burden for preparing the form is arrived 
at by multiplying the number of filers (found in Table 3) by the amount 
of time required to prepare the documents (Table 1) and multiplying 
this result by the hourly cost of an employee benefits professional 
($91.21 dollars an hour). Based on the foregoing, the total cost burden 
for MEWAs that use purchased third-party resources to file the M-1 form 
is $108,100 hours in the first year and $70,700 in later years. Table 3 
summarizes the estimates of the cost burden.

                        Table 3--Cost Burden To Prepare Form M-1, Third-Party Preparation
----------------------------------------------------------------------------------------------------------------
                                                      Fully-insured              Self-insured
                                               -----------------------------------------------------
                                                                                           Multi        Total
                                                 One State   Multi States   One State      States
----------------------------------------------------------------------------------------------------------------
Number of MEWAs...............................          140          149            73           49          411
Review: Year 1................................      $12,800      $13,600        $6,700       $4,500      $37,500
New Filing: Subsequent Years..................           $0           $0            $0           $0           $0
Part I........................................       $1,100       $1,100          $600         $400       $3,100
Part II.......................................      $12,800      $27,100        $6,600       $8,900      $55,400
Part III......................................       $3,200       $3,400        $3,300       $2,200      $12,100
                                               -----------------------------------------------------------------
    Total Time: Year 1........................      $29,800      $45,200       $17,200      $15,900     $108,100
    Total Time: Subsequent Years..............      $17,100      $31,600       $10,500      $11,500      $70,700
----------------------------------------------------------------------------------------------------------------
Note: The displayed numbers are rounded to the nearest hundred and therefore may not add up to the totals.

    The proposed regulations direct an ERISA-covered plan MEWA that is 
subject to Form M-1 requirements to include proof of filing the Form M-
1 as part of the Form 5500. Accordingly, the Department is proposing to 
add a new Part III to the Form 5500, which would ask for information 
regarding whether the employee welfare benefit plan is a MEWA subject 
to the Form M-1 requirements, and if so, whether the plan is currently 
in compliance with the Form M-1 requirements under Sec.  2520.101-2. 
Plan administrators that indicate the plan is a MEWA subject to the 
Form M-1 requirements also would be required to enter the receipt 
confirmation code for the most recent Form M-1 filed with the 
Department. Failure to answer the Form M-1 compliance questions will 
result in rejection of the Form 5500 Annual Return/Report as incomplete 
and civil penalties may be assessed pursuant to ERISA section 
502(c)(2). The Department believes that the burden associated with this 
revision would be

[[Page 76230]]

de minimis, because plan administrators would know whether the plan 
MEWA is subject to and in compliance with the Form M-1 requirements and 
they would have the receipt confirmation code for the most recent Form 
M-1 filing readily available.
    The proposed regulations also would remove the exemption from 
filing the Form 5500 for ERISA-covered MEWAs that are unfunded or 
insured and have fewer than 100 participants. Following the methodology 
used to calculate the burden in the Form 5500 regulations, the 
Department estimates that small ERISA-covered MEWAs filing a Form 5500 
and completing Schedule A and Part III of Schedule G would incur an 
annual cost of $450 to engage a third-party service provider to prepare 
the form and schedules for submission. The Department does not have 
sufficient data to determine the number of small, ERISA-covered MEWAs 
that would be required to file the Form 5500 under the proposed rule, 
but believes that the number of such MEWAs would be small, because 90 
percent of MEWAs that file Form M-1 with the Department cover more than 
100 participants.
2. Cost to the Government
    The Department estimates that the cost to the Federal government to 
process Form M-1s is approximately $7,200. This includes the cost to 
process online submissions and maintain the processing system, and was 
estimated by the offices within EBSA that are responsible for 
overseeing these activities.

             Table 4--Cost of Federal Government of Form M-1
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Processing of M1 Forms:
  Online......................................................    $2,200
  Maintenance of System.......................................     5,000
                                                               ---------
    Total.....................................................     7,200
------------------------------------------------------------------------

    These paperwork burden estimates are summarized as follows:
    Type of Review: Revised collection.
    Agency: Employee Benefits Security Administration, Department of 
Labor.
    Title: MEWA Form M-1.
    OMB Control Number: 1210-0116.
    Affected Public: Business or other for-profit; not-for-profit 
institutions.
    Estimated Number of Respondents: 457 (first year); 457 (three-year 
average).
    Estimated Number of Responses: 457 (first year); 457 (three-year 
average).
    Frequency of Response: Annually.
    Estimated Annual Burden Hours: 178 (first year); 122 (three-year 
average).
    Estimated Annual Burden Cost: $108,100 (first year); $83,200 
(three-year average).

C. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) imposes 
certain requirements with respect to Federal rules that are subject to 
the notice and comment requirements of section 553(b) of the 
Administrative Procedure Act (5 U.S.C. 551 et seq.) and are likely to 
have a significant economic impact on a substantial number of small 
entities. Unless an agency certifies that a rule will not have a 
significant economic impact on a substantial number of small entities, 
section 603 of the RFA requires the agency to present an initial 
regulatory flexibility analysis at the time of the publication of the 
notice of proposed rulemaking describing the impact of the rule on 
small entities. Small entities include small businesses, organizations 
and governmental jurisdictions.
    The Department does not have data regarding the total number of 
MEWAs that currently exist. The best information the Department has to 
estimate the number of MEWAs is based on filing of the Form M-1, which 
is an annual report that MEWAs and certain collectively bargained 
arrangements file with the Department. Nearly 400 MEWAs filed the Form 
M-1 with the Department in 2009, the latest year for which data is 
available.
    The Small Business Administration uses a size standard of less than 
$7 million in average annual receipts as the cut off for small business 
in the finance and insurance sector.\20\ While the Department does not 
collect revenue information on the Form M-1, it does collect data 
regarding the number of participants covered by MEWAs that file Form M-
1 and can use participant data and average premium data to determine 
the number of MEWAs that are small entities, because their revenues do 
not exceed the $7 million threshold. For 2009, the average single 
coverage annual premium was $4,717 and the average annual family 
coverage premium was $12,696.\21\ Combining these premium estimates 
with estimates of the ratio of policies to the covered population from 
the Current Population Survey at employers with less than 500 workers 
(0.309 for single coverage and 0.217 for family coverage), the 
Department estimates that 60 percent of MEWAs (243 MEWAs) are small 
entities.
---------------------------------------------------------------------------

    \20\ U.S. Small Business Administration, ``Table of Small 
Business Size Standards Matched to North American Industry 
Classification System Codes,'' http://www.sba.gov/sites/default/files/Size_Standards_Table.pdf.
    \21\ Kaiser Family Foundation and Health Research Educational 
Trust ``Employer Health Benefits, 2009 Annual Survey.'' The reported 
numbers are from Exhibit 1.2 and are for the category Annual, all 
Small Firms (3-199 workers).
---------------------------------------------------------------------------

    While this number is a relatively large fraction of all MEWAs, it 
is about 7 percent when expressed as a fraction of all participants 
covered by MEWAs. In addition, the Department notes that the reporting 
burden that would be imposed on all MEWAs by the proposed rule is 
estimated as an average cost of $272 for each MEWA filing Form M-1. For 
all but the smallest MEWAs (less than 15 participants), this represents 
less than one-half of one percent of revenues.
    The proposed regulations also would remove the exemption from 
filing the Form 5500 for ERISA-covered MEWAs that are unfunded or 
insured, fully insured, or combination unfunded/fully insured covering 
fewer than 100 participants. As discussed in the PRA section above, the 
Department estimates that these small ERISA-covered MEWAs would incur 
an annual cost of $450 to engage a third-party service provider to 
prepare the form and schedules for submission. The Department does not 
have sufficient data to determine the number of small plan MEWAs that 
would be required to file the Form 5500 under the proposed rule. About 
10 percent (48) of MEWAs filing Form M-1 in 2009 had less than 100 
participants. However, the 2009 Form M-1 lacks information on the 
source of funding to determine which of these small MEWAs would be 
subject to the proposed rule.
    Accordingly, the Department hereby certifies that this proposed 
regulation would not have a significant economic impact on a 
substantial number of small entities. The Department invites public 
comments regarding this finding.

D. Unfunded Mandates Reform Act

    For purposes of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1501 et seq.), as well as Executive Order 12875, this proposed rule 
does not include any federal mandate that may result in expenditures by 
State, local, or tribal governments, or the private sector, which may 
impose an annual burden of $100 million.

E. Executive Order 13132

    When an agency promulgates a regulation that has federalism 
implications, Executive Order 13132 (64 FR 43255, August 10, 1999), 
requires the Agency to provide a federalism summary impact statement. 
Pursuant to section 6(c) of the Order, such a statement must include a 
description of the extent of the agency's consultation with State and 
local officials, a summary of the nature of their concerns and the 
agency's position supporting the

[[Page 76231]]

need to issue the regulation, and a statement of the extent to which 
the concerns of the State have been met.
    This regulation has federalism implications, because the States and 
the Federal government share dual jurisdiction over MEWAs that are 
employee benefit plans or hold plan assets. Generally, States are 
primarily responsible for overseeing the financial soundness and 
licensing of MEWAs under State insurance laws. The Department enforces 
ERISA's fiduciary responsibility provisions against MEWAs that are 
ERISA plans or hold plan assets.
    Over the years, the Department and State insurance departments have 
worked closely and coordinated their investigations and other actions 
against fraudulent and abusive MEWAs. For example, EBSA regional 
offices have met with State officials in their regions and supported 
their enforcement efforts to shut down fraudulent and abusive MEWAs. By 
requiring MEWAs to register with Department before operating in a State 
by filing Form M-1 and to provide additional information, this proposed 
rule would enhance the State and Federal governments' joint mission to 
take enforcement action against fraudulent and abusive MEWAs and limit 
the losses suffered by American workers, their families, and businesses 
when abusive MEWAs become insolvent and fail to reimburse medical 
claims.

List of Subjects in 29 CFR Part 2520

    Accounting, Employee benefit plans, Pensions, Reporting and 
recordkeeping requirements.

DEPARTMENT OF LABOR

Employee Benefits Security Administration

29 CFR Chapter XXV

    For the reasons set out in the preamble, part 2520 of Chapter XXV 
of Title 29 of the Code of Federal Regulations is amended as follows:

PART 2520--[AMENDED]

    1. The authority for part 2520 is revised to read:

    Authority:  29 U.S.C. 1021-1024, 1027, 1029-31, 1059, 1134 and 
1135; Secretary of Labor's Order 3-2010, 75 FR 55354 (September 10, 
2010). Sec. 2520.101-2 also issued under 29 U.S.C. 1181-1183, 1181 
note, 1185, 1185a-d, and 1191-1191c. Sec. 2520.103-1 also issued 
under 26 U.S.C. 6058 note. Sec. 2520.101-6 also issued under Sec.  
502(a)(3), 120 Stat. 780, 940 (2006); Secs. 2520.102-3, 2520.104b-1 
and 2520.104b-3 also issued under 29 U.S.C. 1003, 1181-1183, 1181 
note, 1185, 1185a-d, 1191, and 1191a-c. Secs. 2520.104b-1 and 
2520.107 also issued under 26 U.S.C. 401 note, 111 Stat. 788;

    2. Section 2520.101-2 is revised to read as follows:

Sec.  2520.101-2  Filing by Multiple Employer Welfare Arrangements and 
Certain Other Related Entities.

    (a) Basis and scope. Section 101(g) of the Employee Retirement 
Income Security Act (ERISA), as amended by the Patient Protection and 
Affordable Care Act, requires the Secretary of Labor (the Secretary) to 
establish, by regulation, a requirement that multiple employer welfare 
arrangements (MEWAs) providing benefits that consist of medical care 
(as described in paragraph (b)(6), below), which are not group health 
plans, register with the Secretary prior to operating in a State. 
Section 101(g) also permits the Secretary to require, by regulation, 
such MEWAs to report, not more frequently than annually, in such form 
and manner as the Secretary may require, for the purpose of determining 
the extent to which the requirements of part 7 of subtitle B of title I 
of ERISA (part 7) are being carried out in connection with such 
benefits. Section 734 of ERISA provides that the Secretary may 
promulgate such regulations as may be necessary or appropriate to carry 
out the provisions of part 7. This section sets out requirements for 
reporting by MEWAs that provide benefits that consist of medical care 
and by certain entities that claim not to be a MEWA solely due to the 
exception in section 3(40)(A)(i) of ERISA (referred to in this section 
as Entities Claiming Exception or ECEs). The reporting requirements 
apply regardless of whether the MEWA or ECE is a group health plan.
    (b) Definitions. As used in this section, the following definitions 
apply:
    (1) Administrator means--(i) The person specifically so designated 
by the terms of the instrument under which the MEWA or ECE is operated;
    (ii) If the MEWA or ECE is a group health plan and the 
administrator is not so designated, the plan sponsor (as defined in 
section 3(16)(B) of ERISA); or
    (iii) In the case of a MEWA or ECE for which an administrator is 
not designated and a plan sponsor cannot be identified, jointly and 
severally, the person or persons actually responsible (whether or not 
so designated under the terms of the instrument under which the MEWA or 
ECE is operated) for the control, disposition, or management of the 
cash or property received by or contributed to the MEWA or ECE, 
irrespective of whether such control, disposition, or management is 
exercised directly by such person or persons or indirectly through an 
agent, custodian, or trustee designated by such person or persons.
    (2) Entity Claiming Exception (ECE) means an entity that claims it 
is not a MEWA on the basis that the entity is established or maintained 
pursuant to one or more agreements that the Secretary finds to be 
collective bargaining agreements within the meaning of section 
3(40)(A)(i) of ERISA and Sec.  2510.3-40.
    (3) Excepted benefits means excepted benefits within the meaning of 
section 733(c) of ERISA and Sec.  2590.701-2.
    (4) Group health plan means a group health plan within the meaning 
of section 733(a) of ERISA and Sec.  2590.701-2.
    (5) Health insurance issuer means a health insurance issuer within 
the meaning of section 733(b)(2) of ERISA and Sec.  2590.701-2.
    (6) Medical care means medical care within the meaning of section 
733(a)(2) of ERISA and Sec.  2590.701-2.
    (7) Multiple employer welfare arrangement (MEWA) means a multiple 
employer welfare arrangement within the meaning of section 3(40) of 
ERISA.
    (8) Operating means any activity including but not limited to 
marketing, soliciting, providing, or offering to provide benefits 
consisting of medical care.
    (9) Origination means the occurrence of any of the following events 
(and an ECE is considered to have been originated when any of the 
following events occurs)--
    (i) The ECE begins operating with regard to the employees of two or 
more employers (including one or more self-employed individuals);
    (ii) The ECE, while required to report pursuant to paragraph 
(c)(1)(ii) of this section, begins operating in any additional State;
    (iii) The ECE begins operating following a merger with another ECE 
(unless all of the ECEs that participate in the merger previously were 
last originated at least three years prior to the merger);
    (iv) The number of employees receiving coverage for medical care 
under the ECE is at least 50 percent greater than the number of such 
employees on the last day of the previous calendar year (unless the 
increase is due to a merger with another ECE under which all ECEs that 
participate in the merger were last originated at least three years 
prior to the merger); or
    (v) The ECE, during the three-year period following an event 
described in (b)(9)(i)-(iv) above, experiences a

[[Page 76232]]

material change as defined in the Form M-1 instructions.
    (10) Reporting or to report means to file the Form M-1 as required 
pursuant to sections 101(g); Sec.  2520.101-2; or the instructions to 
the Form M-1.
    (11) State means State within the meaning of Sec.  2590.701-2.
    (c) Persons required to report--(1) General rule. Except as 
provided in paragraph (c)(2) of this section, the following persons are 
required to report under this section:
    (i) The administrator of a MEWA regardless of whether the entity is 
a group health plan; and
    (ii) The administrator of an ECE during the three year period 
following an event described in (b)(9)(i)-(iv).
    (2) Exceptions--(i) Nothing in this paragraph (c) shall be 
construed to require reporting under this section by the administrator 
of a MEWA or ECE described under this paragraph (c)(2)(i).
    (A) A MEWA or ECE licensed or authorized to operate as a health 
insurance issuer in every State in which it offers or provides coverage 
for medical care to employees;
    (B) A MEWA or ECE that provides coverage that consists solely of 
excepted benefits, which are not subject to part 7. If the MEWA or ECE 
provides coverage that consists of both excepted benefits and other 
benefits for medical care that are not excepted benefits, the 
administrator of the MEWA or ECE is required to report under this 
section;
    (C) A MEWA or ECE that is a group health plan not subject to ERISA, 
including a governmental plan, church plan, or a plan maintained solely 
for the purpose of complying with workmen's compensation laws, within 
the meaning of sections (4)(b)(1), 4(b)(2), or 4(b)(3) of ERISA, 
respectively; or
    (D) A MEWA or ECE that provides coverage only through group health 
plans that are not covered by ERISA, including governmental plans, 
church plans, or plans maintained solely for the purpose of complying 
with workmen's compensation laws within the meaning of sections 
4(b)(1), 4(b)(2), or 4(b)(3) of ERISA, respectively (or other 
arrangements not covered by ERISA, such as health insurance coverage 
offered to individuals other than in connection with a group health 
plan, known as individual market coverage);
    (ii) Nothing in this paragraph (c) shall be construed to require 
reporting under this section by the administrator of an entity that 
would not constitute a MEWA or ECE but for the following circumstances 
under this paragraph (c)(2)(ii).
    (A) The entity provides coverage to the employees of two or more 
trades or businesses that share a common control interest of at least 
25 percent at any time during the plan year, applying the principles 
similar to the principles of section 414(c) of the Internal Revenue 
Code;
    (B) The entity provides coverage to the employees of two or more 
employers due to a change in control of businesses (such as a merger or 
acquisition) that occurs for a purpose other than avoiding Form M-1 
filing and is temporary in nature. For purposes of this paragraph, 
``temporary'' means the MEWA or ECE does not extend beyond the end of 
the plan year following the plan year in which the change in control 
occurs; or
    (C) The entity provides coverage to persons (excluding spouses and 
dependents) who are not employees or former employees of the plan 
sponsor, such as non-employee members of the board of directors or 
independent contractors, and the number of such persons who are not 
employees or former employees does not exceed one percent of the total 
number of employees or former employees covered under the arrangement, 
determined as of the last day of the year to be reported or, determined 
as of the 60th day following the date the MEWA or ECE began operating 
in a manner such that a filing is required pursuant to paragraph 
(e)(2)(ii), (iii), or (iv) of this section.
    (3) Examples. The rules of this paragraph (c) are illustrated by 
the following examples:

    Example 1. (i) Facts. MEWA A begins operating by offering 
coverage to the employees of two or more employers on January 1, 
2012. MEWA A is licensed or authorized to operate as a health 
insurance issuer in every State in which it offers coverage for 
medical care to employees.
    (ii) Conclusion. In this Example 1, the administrator of MEWA A 
is not required to report via Form M-1. MEWA A meets the exception 
to the filing requirement in paragraph (c)(2)(i)(A) of this section 
because it is licensed or authorized to operate as a health 
insurance issuer in every State in which it offers coverage for 
medical care to employees.
    Example 2. (i) Facts. Company B maintains a group health plan 
that provides benefits for medical care for its employees (and their 
dependents). Company B establishes a joint venture in which it has a 
25 percent stock ownership interest, determined by applying the 
principles under section 414(c) of the Internal Revenue Code, and 
transfers some of its employees to the joint venture. Company B 
continues to cover these transferred employees under its group 
health plan.
    (ii) Conclusion. In this Example 2, the administrator is not 
required to file the Form M-1 because Company B's group health plan 
meets the exception to the filing requirement in paragraph 
(c)(2)(ii)(A) of this section. This is because Company B's group 
health plan would not constitute a MEWA but for the fact that it 
provides coverage to two or more trades or businesses that share a 
common control interest of at least 25 percent.
    Example 3. (i) Facts. Company C maintains a group health plan 
that provides benefits for medical care for its employees. The plan 
year of Company C's group health plan is the fiscal year for Company 
C, which is October 1st-September 30th. Therefore, October 1, 2012-
September 30, 2013 is the 2013 plan year. Company C decides to sell 
a portion of its business, Division Z, to Company D. Company C signs 
an agreement with Company D under which Division Z will be 
transferred to Company D, effective September 30, 2013. The change 
in control of Division Z therefore occurs on September 30, 2013. 
Under the terms of the agreement, Company C agrees to continue 
covering all of the employees that formerly worked for Division Z 
under its group health plan until Company D has established a new 
group health plan to cover these employees. Under the terms of the 
agreement, it is anticipated that Company C will not be required to 
cover the employees of Division Z under its group health plan beyond 
the end of the 2014 plan year, which is the plan year following the 
plan year in which the change in control of Division Z occurred.
    (ii) Conclusion. In this Example 3, the administrator of Company 
C's group health plan is not required to report via Form M-1 on 
March 1, 2014 for fiscal year 2013 because it is subject to the 
exception to the filing requirement in paragraph (c)(2)(ii)(B) of 
this section for an entity that would not constitute a MEWA but for 
the fact that it is created by a change in control of businesses 
that occurs for a purpose other than to avoid filing the Form M-1 
and is temporary in nature. Under the exception, ``temporary'' means 
the MEWA does not extend beyond the end of the plan year following 
the plan year in which the change in control occurs. The 
administrator is not required to file the 2013 Form M-1 because it 
is anticipated that Company C will not be required to cover the 
employees of Division Z under its group health plan beyond the end 
of the 2014 plan year, which is the plan year following the plan 
year in which the change in control of businesses occurred.
    Example 4. (i) Facts. Company E maintains a group health plan 
that provides benefits for medical care for its employees (and their 
dependents) as well as certain independent contractors who are self-
employed individuals. The plan is therefore a MEWA. The 
administrator of Company E's group health plan uses calendar year 
data to report for purposes of the Form M-1. The administrator of 
Company E's group health plan determines that the number of 
independent contractors covered under the group health plan as of 
the last day of calendar year 2012 is less than one percent of the 
total number of employees and former employees covered under the 
plan determined as of the last day of calendar year 2012.
    (ii) Conclusion. In this Example 4, the administrator of Company 
E's group health plan is not required to report via Form M-

[[Page 76233]]

1 for calendar year 2012 (a filing that is otherwise due by March 1, 
2013) because it is subject to the exception to the filing 
requirement provided in paragraph (c)(2)(ii)(C) of this section for 
entities that cover a very small number of persons who are not 
employees or former employees of the plan sponsor.

    (d) Information to be reported-- (1) Any reporting required by this 
section shall consist of a completed copy of the Form for Multiple 
Employer Welfare Arrangements (MEWAs) and Certain Entities Claiming 
Exception (ECEs) (Form M-1) and any additional statements required 
pursuant to the Instructions to the Form M-1.
    (2) Rejected filings.--The Secretary may reject any filing under 
this section if the Secretary determines that the filing is incomplete, 
in accordance with Sec.  2560.502c-5.
    (3) If the Secretary rejects a filing under paragraph (d)(2) of 
this section, and if a revised filing satisfactory to the Secretary is 
not submitted within 45 days after the notice of rejection, the 
Secretary may bring a civil action for such relief as may be 
appropriate (including penalties under section 502(c)(5) of ERISA and 
Sec.  2560.502c-5).
    (e) Reporting requirements and timing--(1) Period for which 
reporting is required. A completed copy of the Form M-1 is required to 
be filed for each calendar year during all or part of which the MEWA or 
ECE is operating.
    (2) Filing deadline--(i)(A) General March 1 filing due date for 
annual filings. Except as provided in paragraph (e)(2)(i)(B) of this 
section, a completed copy of the Form M-1 is required to be filed on or 
before each March 1 that follows a period for which reporting is 
required (as described in paragraph (e)(1) of this section).
    (B) Exception. Paragraph (e)(2)(i) of this section does not apply 
to ECEs and MEWAs if, between October 1 and December 31, they 
experience an origination or registration event and make the 
subsequent, timely filing. Thus, no annual report is due in March if a 
MEWA has a registration event or an ECE has an origination event 
between October 1 and December 31. However the exception applies only 
if the MEWA or ECE makes a timely filing pursuant to paragraph 
(e)(2)(ii), (iii), or (iv) of this section.
    (ii) Special rule requiring an Origination Filing when an ECE is 
originated--(A) In general. Except as provided in paragraph 
(e)(2)(ii)(B) of this section, when an ECE is originated, the 
administrator of the ECE is also required to file a completed copy of 
the Form M-1 30 days prior to the origination date.
    (B) Exception. Paragraph (e)(2)(ii)(A) of this section does not 
apply to ECEs that experience an origination as described in paragraphs 
(b)(9)(iii), (iv), or (v) of this section. Such entities are required 
to file a completed copy of the Form M-1 by the 30th day following the 
origination date.
    (iii) Special rule requiring that a MEWA register with the 
Secretary prior to operating in a State--(A) In general. Except as 
provided in paragraph (e)(2)(iii)(B) of this section, the administrator 
of the MEWA is required to register with the Secretary by filing a 
completed Form M-1 30 days prior to operating in any State.
    (B) Exception. Paragraph (e)(2)(iii)(A) of this section does not 
apply to MEWAs that, prior to the effective date of this section, were 
already in operation in a State (or States). Such entities are required 
to submit an annual filing pursuant to annual reporting rules described 
in paragraph (e)(2)(i) of this section for that State (or those 
States).
    (iv) Special rule requiring MEWAs to make additional registration 
filings. Subsequent to registering with the Secretary pursuant to 
paragraph (e)(2)(iii)(A), the administrator of a MEWA shall make an 
additional registration filing:
    (A) 30 days prior to operating in any additional State or States 
that were not indicated on a previous report filed pursuant to 
paragraph (e)(2)(i) or (e)(2)(iii)(A);
    (B) Within 30 days of the MEWA operating with regard to the 
employees of an additional employer (or employers, including one or 
more self-employed individuals) after a merger with another MEWA;
    (C) Within 30 days of the date the number of employees receiving 
coverage for medical care under the MEWA is at least 50 percent greater 
than the number of such employees on the last day of the previous 
calendar year; or
    (D) Within 30 days of experiencing a material change as defined in 
the Form M-1 instructions.
    (v) Anti-abuse rule. If a MEWA or ECE neither offers nor provides 
benefits consisting of medical care within a State during the calendar 
year immediately following the year in which an origination filing is 
made by the ECE pursuant to paragraph (e)(2)(ii) (due to an event 
described in paragraph (b)(9)(ii)) or a registration filing is made by 
the MEWA pursuant to (e)(2)(iii)(A) or (e)(2)(iv)(A), with respect to 
operating in such State, such filing will be considered to have lapsed.
    (vi) Multiple filings not required in certain circumstances. If 
multiple filings are required under this paragraph (e)(2), a single 
filing will satisfy this section so long as the filing is timely for 
each required filing.
    (vii) Extensions. (A) An extension may be granted for filing a 
report required by paragraph (e)(2)(i)(A) of this section, if the 
administrator complies with the extension procedure prescribed in the 
Instructions to the Form M-1.
    (B) If the filing deadline set forth in this paragraph (e)(2) is a 
Saturday, Sunday, or federal holiday, the form must be filed no later 
than the next business day.
    (3) Examples. The rules of this paragraph (e) are illustrated by 
the following examples:

    Example 1. (i) Facts. MEWA A began offering coverage for medical 
care to the employees of two or more employers on July 1, 2003 (and 
continues to offer such coverage). MEWA A has satisfied all filing 
requirements to date.
    (ii) Conclusion. In this Example 1, the administrator of MEWA A 
must continue to file a completed Form M-1 each year by March 1 but 
the administrator is not required to register with the Secretary 
because MEWA A meets the exception to the registration requirement 
in paragraph (e)(2)(iii)(B) of this section and has not experienced 
any event described in paragraph (e)(2)(iv) that would require 
registering with the Secretary.
    Example 2. (i) Facts. As of February 22, 2012, MEWA B is 
preparing to operate in States Y and Z. MEWA B is not licensed or 
authorized to operate as a health insurance issuer in any State and 
does not meet any of the other exceptions set forth in paragraph 
(c)(2) of this section.
    (ii) Conclusion. In this Example 2, the administrator of MEWA B 
is required to register with the Secretary by filing a completed 
Form M-1 30 days prior to operating in States Y or Z. The 
administrator of MEWA B must also report by filing the Form M-1 
annually by every March 1 thereafter.
    Example 3. (i) Facts. As of March 28, 2012, MEWA C is operating 
in States V and W. MEWA C has satisfied the requirements of 
(e)(2)(iii) with respect to those States. MEWA C is not licensed or 
authorized to operate as a health insurance issuer in any State and 
does not meet any of the other exceptions set forth in (c)(2) of 
this section. On April 1, 2012 MEWA C begins operating in State X.
    (ii) Conclusion. In this Example 3, the administrator of MEWA C 
is required to make an additional registration filing with the 
Secretary 30 days prior to operating in State X. Additionally, the 
administrator of MEWA C must continue to file the Form M-1 annually 
by every March 1 thereafter.
    Example 4. (i) Facts. ECE A began offering coverage for medical 
care to the employees of two or more employers on January 1, 2007 
and ECE A has not been involved in any mergers or experienced any 
other origination as described in paragraph (b)(9) of this section.
    (ii) Conclusion. In this Example 4, ECE A was originated on 
January 1, 2007 and has not been originated since then. Therefore, 
the

[[Page 76234]]

administrator of ECE A is not required to file a Form M-1 on March 
1, 2012 because the last time the ECE A was originated was January 
1, 2007 which is more than 3 years prior to March 1, 2012. Further, 
the ECE has satisfied its reporting requirements by making 3 timely 
annual filings after its origination.
    Example 5. (i) Facts. ECE B wants to begin offering coverage for 
medical care to the employees of two or more employers on July 1, 
2012.
    (ii) Conclusion. In this Example 5, the administrator of ECE B 
must file a completed Form M-1 on or before June 1, 2012 (which is 
30 days prior to the origination date). In addition, the 
administrator of ECE B must file an updated copy of the Form M-1 by 
March 1, 2013 because the last date ECE B was originated was June 1, 
2012 (which is less than 3 years prior to the March 1, 2013 due 
date). Furthermore, the administrator of ECE B must file the Form M-
1 by March 1, 2014 and again by March 1, 2015 (because July 1, 2012 
is less than three years prior to March 1, 2014 and March 1, 2015, 
respectively). However, if ECE B is not involved in any mergers and 
does not experience any other origination as described in paragraph 
(b)(9) of this section, there would not be a new origination date 
and no Form M-1 is required to be filed after March 1, 2015.
    Example 6.  (i) Facts. ECE D, which currently operates in State 
A, is making preparations to operate in State B on November 1, 2012 
and thus must make an origination filing by October 2, 2012 (30 days 
prior to the origination date). ECE D makes this filing timely.
    (ii) Conclusion. In this Example 6, ECE D experiences an 
origination and makes a timely filing on October 2, 2012. Thus ECE D 
is exempt from the next annual filing due March 1, 2013 pursuant to 
the filing deadline exception under (e)(2)(i)(B) of this section. 
However, the ECE must continue to file annual reports for the 
subsequent years on March 1, 2014 and March 1, 2015.
    Example 7. (i) Facts. MEWA E begins distributing marketing 
materials on August 31, 2012.
    (ii) Conclusion. In this Example 7, because MEWA E began 
operating on August 31, 2012, the administrator of MEWA E must 
register with the Secretary by filing a completed Form M-1 on or 
before August 1, 2012 (30 days prior to operating in any State). In 
addition, the administrator of MEWA E must file the Form M-1 
annually by every March 1 thereafter.
    Example 8. (i) Facts. Same facts as Example 7, but MEWA E 
registers on or before August 1, 2012 by filing a Form M-1 
indicating it will begin operating in every State. However, in the 
calendar year immediately following the filing, MEWA E only offered 
or provided benefits consisting of medical care to participants in 
State Z.
    (ii) Conclusion. In this Example 8, the registration for all 
States (other than State Z) have lapsed under (e)(2)(v) because MEWA 
E only offered or provided benefits consisting of medical care to 
participants in State Z in the calendar year immediately following 
the filing. If subsequently, MEWA E begins offering or providing 
benefits consisting of medical care to participants in any 
additional State (or States), it must make a new registration filing 
pursuant to (e)(2)(iv)(A) of this section.

    (f) Electronic Filing. A completed Form M-1 is filed with the 
Secretary by submitting it electronically as prescribed in the 
Instructions to the Form M-1.
    (g) Penalties--(1) Civil penalties and procedures. For information 
on civil penalties under section 502(c)(5) of ERISA for persons who 
fail to file the information required under this section, see Sec.  
2560.502c-5. For information relating to administrative hearings and 
appeals in connection with the assessment of civil penalties under 
section 502(c)(5) of ERISA, see Sec. Sec.  2570.90 through 2570.101.
    (2) Criminal penalties and procedures. For information on criminal 
penalties under section 519 of ERISA for persons who knowingly make 
false statements or false representation of fact with regards to the 
information required under this section, see section 501(b) of ERISA.
    (3) Cease and desist and summary seizure orders. For information on 
the Secretary's authority to issue a cease and desist or summary 
seizure order under section 521 of ERISA, see Sec.  2560.521.
    3. Section 2520.103-1 is amended by:
    a. Revising paragraphs (a) introductory text, (a)(2), (b) 
introductory text and (c)(1),
    b. Amending paragraph (c)(2)(ii)(C) by removing the reference 
``and'' at the end of the paragraph,
    c. Removing the period at the end of paragraph (c)(2)(ii)(D) and 
adding the reference ``and'' at the end of paragraph,
    d. Adding a new paragraph (c)(2)(ii)(E),
    e. Redesignating paragraph (f) as paragraph (g) and add a new 
paragraph (f).
    The revisions and additions read as follows:

Sec.  2520.103-1  Contents of the annual report.

    (a) In general. The administrator of a plan required to file an 
annual report in accordance with section 104(a)(1) of the Act shall 
include with the annual report the information prescribed in paragraph 
(a)(1) of this section or in the simplified report, limited exemption 
or alternative method of compliance described in paragraph (a)(2) of 
this section.
* * * * *
    (2) Under the authority of subsections 104(a)(2), 104(a)(3) and 110 
of the Act, and section 1103(b) of the Pension Protection Act of 2006, 
a simplified report, limited exemption or alternative method of 
compliance is prescribed for employee welfare and pension benefit 
plans, as applicable. A plan filing a simplified report or electing the 
limited exemption or alternative method of compliance shall file an 
annual report containing the information prescribed in paragraph (b), 
paragraph (c), or paragraph (f) of this section, as applicable, and 
shall furnish a summary annual report as prescribed in Sec.  2520.104b-
10.
    (b) Contents of the annual report for plans with 100 or more 
participants electing the limited exemption or alternative method of 
compliance. Except as provided in paragraphs (d) and (f) of this 
section and in Sec. Sec.  2520.103-2 and 2520.104-44 the annual report 
of an employee benefit plan covering 100 or more participants at the 
beginning of the plan year which elects the limited exemption or 
alternative method of compliance described in paragraph (a)(2) of this 
section shall include:
* * * * *
    (c) * * *
    (1) Except as provided in paragraph (c)(2), (d) and (f) of this 
section, and in Sec. Sec.  2520.104-43 and 2520.104a-6, the annual 
report of an employee benefit plan that covers fewer than 100 
participants at the beginning of the plan year shall include a Form 
5500 ``Annual Return/Report of Employee Benefit Plan'' and any 
statements or schedules required to be attached to the form, completed 
in accordance with the instructions for the form, including Schedule A 
(Insurance Information), Schedule SB (Single Employer Defined Benefit 
Plan Actuarial Information), Schedule MB (Multiemployer Defined Benefit 
Plan and Certain Money Purchase Plan Actuarial Information), Schedule D 
(DFE/Participating Plan Information), Schedule I (Financial 
Information--Small Plan), and Schedule R (Retirement Plan Information). 
See the instructions for this form.
    (2) * * *
    (ii) * * *
    (E) Is not a multiple employer welfare arrangement subject to the 
filing requirements under Sec.  2520.101-2.
* * * * *
    (f) Plans which are multiple employer welfare arrangements. The 
annual report of an employee welfare benefit plan that is a multiple 
employer welfare arrangement subject to the filing requirements under 
Sec.  2520.101-2 shall include:
    (1)(i) For a plan with 100 or more participants, the information 
prescribed in paragraph (b) of this section; or
    (ii) For a plan with fewer than 100 participants, except as 
provided in

[[Page 76235]]

Sec.  2520.104-44, the information prescribed in paragraph (c) of this 
section; and
    (2) Any statements or information required by the instructions to 
the Form 5500 relating to multiple employer welfare arrangements, 
including information regarding compliance with the filing requirements 
under Sec.  2520.101-2.
* * * * *
    4. Section 2520.104-20 is amended by removing the reference ``and'' 
in paragraph (b)(2)(iii), removing the period at the end of the 
sentence and adding the reference ``and'' to the end of the sentence in 
paragraph (b)(3)(ii), and adding a new paragraph (b)(4) to read as 
follows:

Sec.  2520.104-20  Limited exemption for certain small welfare plans.

* * * * *
    (b)(4) Which are not multiple employer welfare arrangements subject 
to the filing requirements under Sec.  2520.101-2.
* * * * *
    5. In Sec.  2520.104-41, revise paragraph (c) to read as follows:

Sec.  2520.104-41  Simplified annual reporting requirements for plans 
with fewer than 100 participants.

* * * * *
    (c) Contents. The administrator of an employee pension or welfare 
benefit plan described in paragraph (b) of this section shall file, in 
the manner described in Sec.  2520.104a-5, a completed Form 5500 
``Annual Return/Report of Employee Benefit Plan'' or, to the extent 
eligible, a completed Form 5500-SF ``Short Form Annual Return/Report of 
Small Employee Benefit Plan,'' and any required schedules or statements 
prescribed by the instructions to the applicable form, including, if 
applicable, the information described in Sec.  2520.103-1(f)(2), and, 
unless waived by Sec.  2520.104-44 or Sec.  2520.104-46, a report of an 
independent qualified public accountant meeting the requirements of 
Sec.  2520.103-1(b).

    Signed this 28th day of November 2011.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits Security Administration, 
Department of Labor.
[FR Doc. 2011-30918 Filed 12-5-11; 8:45 am]
BILLING CODE 4510-29-P
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