7152 Federal Register / Vol. 65, No. 29 / Friday, February 11, 2000 / Rules and Regulations

1Parallel HIPAA, MHPA, and Newborns’ Act

provisions are also contained in Chapter 100 of

Subtitle K of the Internal Revenue Code (Code) and

Title XXVII of the Public Health Service Act (PHS

Act). In addition, parallel WHCRA provisions are

also contained in the PHS Act. Accordingly, all

references to ‘‘Part 7’’ in this document include the

relevant parallel provisions of the Code and the

PHS Act, unless otherwise specified.

2Section 1421(d)(1) of the Small Business Job

Protection Act of 1996 (Pub. L. 104–188) created a

new section 101(g) of ERISA relating to Simple

Retirement Accounts. Subsequently, section

101(e)(1) of HIPAA also created a new section

101(g) of ERISA relating to MEWA reporting.

Accordingly, when referring to section 101(g) of

ERISA relating to MEWA reporting, this document

cites section 101(g){h} of ERISA.

3Section 733(a)(2) of ERISA defines medical care

to mean:

‘‘amounts paid for—

(A) The diagnosis, cure, mitigation, treatment, or

prevention of disease, or amounts paid for the

purpose of affecting any structure or function of the

body,

(B) Amounts paid for transportation primarily for

and essential to medical care referred to in

subparagraph (A), and

(C) Amounts paid for insurance covering medical

care referred to in subparagraphs (A) and (B).’’

4Section 733(a) of ERISA defines a group health

plan to mean ‘‘an employee welfare benefit plan to

the extent that the plan provides medical care

* * * to employees or their dependents * * *

directly or through insurance, reimbursement, or

otherwise.’’ (Emphasis added.)

Section 3(1) of ERISA defines an employee

welfare benefit plan to mean, in pertinent part:

Any plan, fund, or program * * * established or

maintained by an employer or by an employee

organization, or by both, to the extent that such

plan, fund, or program was established or is

maintained for the purpose of providing for its

participants or their beneficiaries, through the

purchase of insurance or otherwise, * * * medical,

surgical, or hospital care or benefits, or benefits in

the event of sickness, accident, disability, death or

unemployment, or vacation benefits, apprenticeship

or other training programs, or day care centers,

scholarship funds, or prepaid legal services. * * *’’

DEPARTMENT OF LABOR

Pension and Welfare Benefits

Administration

29 CFR Part 2520

RIN 1210–AA54

Interim Final Rule for Reporting by

Multiple Employer Welfare

Arrangements and Certain Other

Entities That Offer or Provide

Coverage for Medical Care to the

Employees of Two or More Employers

AGENCY: Pension and Welfare Benefits

Administration, Department of Labor.

ACTION: Interim final rule with request

for comments.

SUMMARY: This document contains an

interim final rule governing certain

reporting requirements under Title I of

the Employee Retirement Income

Security Act of 1974 for multiple

employer welfare arrangements

(MEWAs) and certain other entities that

offer or provide coverage for medical

care to the employees of two or more

employers. The interim final rule

requires the administrator of a MEWA,

or other entity, to file a form with the

Secretary of Labor for the purpose of

determining whether the requirements

of certain recent health care laws are

being met.

DATES: Effective Date: This interim final

rule is effective beginning April 11,

2000.

Comment Date: Written comments

concerning this interim rule are invited

and must be received by the Department

of Labor on or before March 13, 2000.

Compliance Dates: Compliance dates

are set forth in paragraph (i) of this

section. In general, this paragraph states

that reports filed pursuant to this

interim rule are first due by May 1,

2000.

ADDRESSES: Interested persons are

invited to submit written comments

(preferably with three copies) to:

Pension and Welfare Benefits

Administration, Room C–5331, U.S.

Department of Labor, 200 Constitution

Avenue, NW., Washington, DC 20210.

Attention: MEWA reporting. Written

comments may also be sent by Internet

to the following address:

MEWArpt@pwba.dol.gov.

All submissions will be open to

public inspection and copying from 8:30

a.m. to 4:30 p.m. in the Public

Documents Room, Pension and Welfare

Benefits Administration, U.S.

Department of Labor, Room N–5638,

200 Constitution Avenue, NW.,

Washington, DC 20210.

FOR FURTHER INFORMATION CONTACT:

Amy J. Turner, Pension and Welfare

Benefits Administration, U.S.

Department of Labor, Room C–5331, 200

Constitution Avenue, NW., Washington,

DC 20210 (telephone (202) 219–7006).

This is not a toll-free number.

SUPPLEMENTARY INFORMATION:

A. Background

The Health Insurance Portability and

Accountability Act of 1996 (Pub. L.

104–191) (HIPAA), was enacted on

August 21, 1996. HIPAA amended the

Employee Retirement Income Security

Act of 1974 (ERISA or the Act) to

provide for, among other things,

improved portability and continuity of

health insurance coverage. The Mental

Health Parity Act of 1996 (Pub. L. 104–

204) (MHPA), was enacted on

September 26, 1996. MHPA amended

ERISA to provide parity in the

application of annual and lifetime dollar

limits for certain mental health benefits

with such dollar limits on medical and

surgical benefits. The Newborns’ and

Mothers’ Health Protection Act of 1996

(Pub. L. 104–204) (Newborns’ Act) also

was enacted on September 26, 1996.

The Newborns’ Act amended ERISA to

provide new protections for mothers

and their newborn children with regard

to the length of hospital stays in

connection with childbirth. The

Women’s Health and Cancer Rights Act

of 1998 (WHCRA) (Pub. L. 105–277) was

enacted on October 21, 1998. WHCRA

amended ERISA to provide individuals

new rights for reconstructive surgery in

connection with a mastectomy. All of

the foregoing provisions are set forth in

Part 7 of Subtitle B of Title I of ERISA.1

Section 734 of ERISA authorizes the

Secretary to promulgate regulations as

may be necessary or appropriate to carry

out the provisions of Part 7 and to

promulgate any interim final rules as

the Secretary determines are appropriate

to carry out Part 7.

HIPAA added a new section 101(g){h}

to ERISA.2 This section provides that:

the Secretary [of Labor] may, by regulation,

require multiple employer welfare

arrangements providing benefits consisting

of medical care (within the meaning of

section 733(a)(2)) 3 which are not group

health plans 4 to report, not more frequently

than annually, in such form and such manner

as the Secretary may require for the purpose

of determining the extent to which the

requirements of part 7 are being carried out

in connection with such benefits. (Emphasis

added.)

The term multiple employer welfare

arrangement is defined in section 3(40)

of ERISA to mean, in pertinent part:

(A) * * * an employee welfare benefit

plan, or any other arrangement (other than an

employee welfare benefit plan), which is

established or maintained for the purpose of

offering or providing [welfare plan 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—

(i) Under or pursuant to one or more

agreements which the Secretary [of Labor]

finds to be collective bargaining agreements,

(ii) By a rural electric cooperative, or

(iii) By a rural telephone cooperative

association.

(B) For purposes of this paragraph—

(i) 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,

(ii) the term ‘‘control group’’ means a group

of trades or businesses under common

control,

(iii) 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

Federal Register / Vol. 65, No. 29 / Friday, February 11, 2000 / Rules and Regulations 7153

5This provision was added to ERISA by the

Multiple Employer Welfare Arrangement Act of

1983, Sec. 302(b), Pub. L. 97–473, 96 Stat. 2611,

2612 (29 U.S.C. 1002(40)), which also amended

section 514(b) of ERISA. 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), Pub. L. 97–473, 96 Stat.

2611, 2613 (29 U.S.C. 1144(b)(6)).

6The term plan sponsor is defined under section

3(16)(B) of ERISA as:

(i) The employer in the case of an employee

benefit plan established or maintained by a single

employer, (ii) the employee organization in the case

of a plan established or maintained by an employee

organization, or (iii) in the case of a plan

established or maintained by two or more

employers or jointly by one or more employers and

one or more employee organizations, the

association, committee, joint board of trustees, or

other similar group of representatives of the parties

who establish or maintain the plan.

7 In these circumstances, the Department has

previously expressed its view that the person or

persons with such responsibility is the

administrator for purposes of section 3(16) of

ERISA. See Advisory Opinion Letter 83–43 to

Robert J. Tanguay, August 23, 1983.

determining whether employees of two or

more trades or businesses are treated as

employed by a single employer under section

4001(b), except that, for purposes of this

paragraph, common control shall not be

based on an interest of less than 25 percent.

*** 5

The purpose of this regulation is to

provide the Department with

information concerning compliance by

MEWAs with the requirements of Part 7.

In determining how best to obtain this

information, the Department considered

a number of alternatives, including

requiring reporting only by MEWAs that

are not ERISA-covered group health

plans as described in section 101(g){h}

of ERISA. For a number of reasons,

explained more fully in the Economic

Analysis section of this document, the

Department determined that it was

necessary to exercise various other

regulatory authority in Title I of ERISA

(see ‘‘Statutory Authority’’ section,

below) to require annual reports from

MEWAs that are group health plans and

from entities that claim not to be

MEWAs because they are established or

maintained pursuant to a collective

bargaining agreement. An important

reason for requiring these groups to file

is that the administrator of a MEWA

may incorrectly determine that it is a

group health plan or that it is

established or maintained pursuant to a

collective bargaining agreement. A

reporting requirement limited only to

MEWAs that are not group health plans

may not result in reporting by many

such MEWAs, thus greatly reducing the

value of the data collected.

The Department also believes that

imposition of the reporting

requirements on MEWAs that are group

health plans is appropriate to carry out

the provisions of Part 7 because such

reporting will provide more complete

data on the MEWA universe. Such

additional data will support a thorough

analysis of the market segment

represented by MEWAs. Information

regarding compliance by MEWAs with

the provisions of Part 7 is particularly

important to the Department because it

has been the Department’s experience

that compliance with ERISA by such

arrangements, whether or not they claim

to be group health plans, has been

inconsistent. At the same time, in recent

years MEWAs have become more

attractive to small employers as a means

to pool risks and obtain health benefits

at a lower cost. The Department seeks to

determine the extent of compliance with

the requirements of Part 7 by this

important sector of the employee health

benefits market.

The Department recognizes that

multiemployer plans established by an

association of employers and one or

more labor organizations are structurally

and operationally different from most

MEWAs. The Department does not seek

reporting by such plans except to the

extent appropriate to assure that all

MEWAs file a report. The Department is

aware that administrators of some

MEWAs have sought to avoid State

insurance regulation by

mischaracterizing their arrangements as

being established or maintained

pursuant to collective bargaining

agreements. In many cases, such

mischaracterized entities are not

operated in a financially responsible

manner and become unable to pay

benefits within a short time. See GAO/

HRD–92–40. Therefore, in order to

obtain information on all entities that

are MEWAs, the Department has

determined that it is appropriate to

require reporting by entities that claim

the collective bargaining exception

unless the entity has been in existence

for at least three years.

B. Overview of the Interim Rule

Basis and Scope

Paragraph (a) of the interim rule sets

forth the basis and scope for this annual

reporting requirement for MEWAs and

certain other entities (referred to as

Entities Claiming Exception or ECEs)

that offer or provide coverage for

medical care to the employees of two or

more employers (including one or more

self-employed individuals).

Definitions

Paragraph (b) of the interim rule

provides most of the definitions used in

the interim rule. This definitions section

includes both statutory definitions

provided in ERISA, as amended by

HIPAA, as well as certain other

definitions used in the regulations. In

particular, the terms ‘‘group health

plan,’’ ‘‘health insurance issuer,’’

‘‘medical care,’’ and ‘‘MEWA’’ are

defined by reference to existing

statutory and regulatory provisions. In

addition, the term ‘‘administrator’’ is

defined as the person specifically

designated as the administrator by the

terms of the instrument under which the

MEWA or ECE is operated. However, if

an administrator is not designated and

the MEWA or ECE is a group health

plan, the plan sponsor 6 is the

administrator. Moreover, if an

administrator is not designated and a

plan sponsor cannot be identified, the

administrator is 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 or trustee designated

by such person or persons.7

The term ‘‘entity claiming exception’’

or ‘‘ECE’’ is defined as an entity that

claims it is not a MEWA due to the

exception in section 3(40)(A)(i) of the

Act. In general, this exception is for

entities that are established or

maintained under or pursuant to one or

more agreements that the Secretary

finds to be collective bargaining

agreements. In connection with this

exception, on August 1, 1995, the

Department published a proposed rule

for plans established or maintained

pursuant to collective bargaining

agreements under section 3(40)(A)(i) of

ERISA. 60 FR 39208. Subsequently, in

September of 1998, the Secretary

established the ERISA Section 3(40)

Negotiated Rulemaking Advisory

Committee. See 63 FR 50542. This

Committee has negotiated a proposed

rule establishing a process and criteria

for a finding by the Secretary of Labor

that an agreement is a collective

bargaining agreement for purposes of

section 3(40)(A)(i) of ERISA. Upon

issuance of a final regulation relating to

ERISA section 3(40)(A)(i), this

regulation may be modified to reflect

the scope of this exception.

Finally, the term ‘‘origination’’ is

defined to mean the occurrence of any

7154 Federal Register / Vol. 65, No. 29 / Friday, February 11, 2000 / Rules and Regulations

8Section 505 of ERISA authorizes the Secretary

to ‘‘prescribe such regulations as he finds necessary

or appropriate to carry out the provisions of [Title

I of ERISA]. Among other things, such regulations

may * * * prescribe forms * * * ’’

of the following events (and a MEWA or

ECE will be considered to have been

‘‘originated’’ when any of these events

occur):

(1) The MEWA or ECE first begins

offering or providing coverage for

medical care to the employees of two or

more employers (including one or more

self-employed individuals);

(2) The MEWA or ECE begins offering

or providing coverage for medical care

to the employees of two or more

employers (including one or more selfemployed individuals) after a merger

with another MEWA or ECE (unless all

MEWAs or ECEs participating in the

merger were last originated at least 3

years before the merger); or

(3) The number of employees

receiving coverage for medical care

under the MEWA or ECE is at least 50

percent greater than the number of such

employees on the last day of the

previous calendar year (unless such

increase is due to a merger with another

MEWA or ECE and all MEWAs and

ECEs that participated in the merger

were last originated at least three years

before the merger).

Whether a merger triggering a filing

occurs is determined based on all the

relevant facts and circumstances.

However, in general, the addition of a

new contributing employer to a MEWA

or ECE would not constitute a merger

that would trigger a filing. In addition,

generally no merger triggering a filing

occurs when participants represented by

a local union that joins an existing

MEWA or ECE begin receiving coverage

under the MEWA or ECE.

Persons Required To Report

Paragraph (c) of the interim rule sets

forth the persons required to report

under the interim rule. First, the

administrator of a MEWA that provides

benefits consisting of medical care is

required to report, whether or not the

MEWA is a group health plan. For the

reasons discussed above, the

Department determined that it was

necessary and appropriate to exercise

various other regulatory authority in

Title I of ERISA (see Statutory

Authority, below) to require all MEWAs

to report, regardless of whether they are

group health plans. In addition, the

administrator of an ECE is required to

file if the ECE was originated at any

time within 3 years before the annual

filing due date. (This due date is

described in paragraph (e)(2)(i) of the

interim rule).

However, because a health insurance

issuer, such as an insurance company,

fits within the statutory definition of a

MEWA, paragraph (c)(2) of the interim

rule clarifies that nothing in the interim

rule is to be construed to require

reporting by the administrator of a

MEWA or ECE if the MEWA or ECE is

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.

Accordingly, subject to the exception

described above for health insurance

issuers, the administrator of a MEWA is

required to file annually. By contrast,

the administrator of an ECE is only

required to file annually for the first

three years following an origination.

Under the interim rule, whether or not

an entity is a MEWA or ECE is

determined by the administrator acting

in good faith. Therefore, if an

administrator makes a good faith

determination at the time that a filing

would otherwise be due that the entity

is maintained pursuant to one or more

collective bargaining agreements, the

entity is an ECE, and the ECE would not

be required to file because its most

recent origination was more than three

years ago, then a filing is not required.

Even if the entity is later determined to

be a MEWA (for example, pursuant to

regulations developed by the ERISA

Section 3(40) Negotiated Rulemaking

Advisory Committee), filings would not

be required prior to the determination

that the entity is a MEWA if at the time

the filings were due, the administrator

made a good faith determination that

the entity was an ECE. However, filings

would be required for years after the

determination that the entity is a

MEWA.

This interim rule further provides

that, while an administrator’s good faith

determination that an entity is an ECE

may eliminate the requirement that the

administrator of the entity file under

this section for more than three years

after the entity’s origination date, the

administrator’s determination,

nonetheless, does not affect the

applicability of State law to the entity.

Accordingly, incorrectly claiming the

exception may eliminate the need to file

under this section, if the exception is

claimed in good faith. However, the

claiming of the exception for ECEs

under this filing requirement does not

preclude States from applying State law

to an entity that is later determined to

be a MEWA. This is because the filing,

or the failure to file, under this section

does not in any way affect the

application of State law to a MEWA.

Information To Be Reported.

Paragraph (d) of the interim rule

describes the information required to be

filed under this interim rule.

Specifically, the administrator is

required to file a completed copy of the

Form M–1.8 The substance of this form

is published at the end of this

document.

Also under paragraph (d), the

Secretary may reject any filing that the

Secretary determines to be incomplete,

in accordance with § 2560.502c–5

(published separately in this issue of the

Federal Register). If the Secretary rejects

a filing as incomplete and if the

administrator fails to submit a revised

filing within 45 days of the rejection,

paragraph (c) provides that the

administrator may be subject to a civil

action for legal and equitable relief,

including civil penalties of up to $1,000

per day under section 502(c)(5) of

ERISA as amended by HIPAA. (See

§ 2560.502c–5, published separately in

this issue of the Federal Register for

interim rules governing the assessment

of civil penalties under section 502(c)(5)

of ERISA.)

Timing

Paragraph (e) of the interim rule

describes the timing rules applicable to

a filing. Generally, a ‘‘year to be

reported’’ is any calendar year in which

the entity offered coverage. For an

annual filing, the Form M–1 is generally

required to be filed by the March 1

following any ‘‘year to be reported’’

(unless March 1 is a Saturday, Sunday,

or federal holiday, in which case the

form must be filed no later than the next

business day). For the year 1999 ‘‘year

to be reported,’’ however, a transition

rule makes clear that a completed copy

of the Form M–1 is required to be filed

no later than May 1, 2000.

There is, under paragraph (e)(2)(iii),

an additional, special filing requirement

when a MEWA or ECE is originated.

Under this special rule, in general, the

administrator of a newly originated

MEWA or ECE is required to file a

completed copy of a Form M–1 within

90 days of the origination date (unless

90 days after the origination date is a

Saturday, Sunday, or federal holiday, in

which case the form must be filed no

later than the next business day). (This

report is referred to as a 90-Day

Origination Report.) However, this

special rule does not apply if the

origination occurred between October 1

and December 31. Thus, for example, if

a MEWA is originated on November 1,

2000, the administrator of the MEWA is

not required to file an origination report

in February of 2001. Instead, in the year

2001, the administrator is required to

Federal Register / Vol. 65, No. 29 / Friday, February 11, 2000 / Rules and Regulations 7155

9Moreover, other relevant criminal penalties may

apply. See, e.g., 18 U.S.C. 1021 and 1035.

file only the annual report due March 1,

2001.

In addition, the interim rule provides

that no 90-day origination reports are

required before May 1, 2000. Therefore,

for an entity that is originated, for

example, on January 1, 2000, no 90-day

origination report is required.

Nonetheless, for an entity originated, for

example, on April 1, 2000, a 90-day

origination report is required to be

completed and filed no later than June

30, 2000.

In any event, under paragraph

(e)(2)(iv), an extension may be granted

for filing reports if the administrator

complies with the extension procedure

prescribed in the Instructions to the

Form M–1.

Filing Address

Paragraph (f) provides that the

address to be used for filings is set forth

in the Instructions to the Form M–1.

Civil Penalties and Procedures;

Transition Rule Creating Good Faith

Safe Harbor Period

Paragraph (g) contains a crossreference for civil penalties and

procedures. The penalty and procedure

regulations are being published

separately in this issue of the Federal

Register.9 These regulations, and the

instructions to the Form M–1 (also being

published at the end of this document,

make clear that the Department does not

intend to assess penalties in cases where

there has been a good faith effort to

comply with a filing due in the year

2000. During this first year in particular,

the Department is focused on educating

administrators about this filing

requirement and is committed to

working with them to help them

comply. In this regard, the Department

has developed filers’ guides which may

be helpful in filing the Form M–1. These

filers’ guides will be made available on

the Pension and Welfare Benefits

Administration’s website at

www.dol.gov/dol/pwba and through

their toll-free publication hotline at 1–

800–998–7542. Also, the Pension and

Welfare Benefits Administration’s help

desk (202–219–8818) is available in case

administrators have questions or if they

need any assistance in completing the

Form M–1.

Compliance Dates

Paragraph (i) provides that reports

filed pursuant to this reporting

requirement are first due by May 1,

2000. (Therefore, on May 1, 2000, filings

are due with respect to MEWAs or ECEs

that provided coverage in calendar year

1999.) However, no 90-Day Origination

Reports (described in paragraph (e)(2)(ii)

of this section) are due before May 1,

2000. Therefore, for an entity that is

originated, for example, on January 1,

2000, no 90-day origination report is

required. Nonetheless, for an entity

originated, for example, on April 1,

2000, a 90-day origination report is

required to be completed and filed no

later than June 30, 2000.

C. Interim Rule with Request for

Comments

The principal purpose of these

regulations is to determine the extent of

compliance by MEWAs with part 7 of

ERISA. ERISA Section 734 authorizes

the Secretary to issue ‘‘any interim final

rules as the Secretary deems are

appropriate to carry out the provisions

of [Part 7].’’ Thus, the authority in

ERISA section 734 to issue interim

regulations applies to this rule. As

explained below, the Secretary has

determined that this regulation should

be issued as an interim final rule with

requests for comments.

Part 7 was enacted as part of the

Health Insurance Portability and

Accountability Act of 1996. To

implement certain requirements of part

7, the Secretary promulgated interim

final regulations in April, 1997. During

the period following promulgation of

the April, 1997 regulations, the

Department carried out an extensive

educational campaign to assist all

sectors of the regulated community to

learn to apply the new requirements and

received numerous comments on these

regulations.

The Department decided not to

promulgate the instant regulations

during this period of adapting to the

new requirements. Now that the

regulated community has had more than

two years to become familiar with the

part 7 requirements, it is now

appropriate, in the Secretary’s view, that

the instant regulations become effective,

on an interim basis, as quickly as

possible.

The Secretary believes that a period of

interim effectiveness will provide a

sound basis for developing a final rule.

The Department is seeking comments

from all those affected by these

regulations and the Department will

consider such comments, and will

reevaluate these regulations following

the comment period in the same way

that it would if the regulation had been

published as a non-final proposal. Based

on such comments and other

information obtained through the

operation of this interim reporting

requirement, the Department will make

any necessary modifications to the

reporting requirement when the

regulation is issued in final.

The Secretary believes that the

purpose of the MEWA reporting

requirement will be best served if these

rules are made effective as quickly as

possible, now that the regulated

community has had time to familiarize

itself with part 7 and the substantive

interim regulations. Registration of

MEWAs was first recommended in a

1992 Government Accounting Office

Report (GAO/HRD–92–40). The

problems pointed out in that report

continue to this day. To date, the

Department has initiated approximately

358 civil and 70 criminal investigations

(with 45 criminal convictions) affecting

over 1.2 million participants and

beneficiaries and involving over $83.6

million in unpaid claims. During each

of the past 3 years, the Department has

had an average of about 100 MEWA

cases under active investigation. Thus,

the identification of problem MEWAs

and correction of violations remains an

important investigative priority and

consumes substantial resources.

Obtaining reimbursement for such

losses is the greatest challenge the

Department faces in pursuing these

cases. Too often, when the Department

discovers an unsound MEWA, it has

already failed and there is no money to

cover the participants’ unpaid medical

claims. In such cases discovered by the

Department, where there has been a

failure to pay claims, over 90% of the

claims are likely to remain unpaid,

unless the Department is able to

intervene at an early stage of the

problem. When the MEWA becomes

unable to pay the health benefits it has

promised, employees, employers and

health care providers may suffer serious

financial losses. The reporting

requirements of these interim

regulations are designed to allow earlier

detection of unsound MEWAs and will

reduce the risk of financial harm to

these parties.

Economic Analysis Under 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,

7156 Federal Register / Vol. 65, No. 29 / Friday, February 11, 2000 / Rules and Regulations

jobs, the environment, public health or

safety, or State, local or tribal

governments or communities (also

referred to as ‘‘economically

significant’’); (2) creating serious

inconsistency or otherwise interfering

with an action taken or planned by

another agency; (3) materially altering

the budgetary impacts of entitlement

grants, user fees, or loan programs or the

rights and obligations of recipients

thereof; or (4) raising novel legal or

policy issues arising out of legal

mandates, the President’s priorities, or

the principles set forth in the Executive

Order. OMB has determined that this

action is significant under section 3(f)(4)

because it raises novel legal or policy

issues arising from the President’s

priorities.

The total cost of this interim final rule

is estimated at $437,000 per year, or an

average of approximately $163 for each

of the 2,678 entities expected to be

required to file the annual reporting

form for MEWAs. HIPAA amended

ERISA to add section 101(g){h}, which

authorizes the Secretary of Labor to

require reporting by MEWAs which are

not group health plans for the purpose

of determining the extent of their

compliance with Part 7 of ERISA. The

principal intent of Congress in enacting

this provision was to ensure that all

participants and beneficiaries of such

arrangements receive the new health

care protections incorporated into

ERISA by HIPAA, MHPA, the

Newborns’ Act, and WHCRA.

The reporting requirement

implemented by this interim final rule

provides the most cost effective means

of facilitating compliance with Part 7, as

well as with the full range of other

federal and State requirements that may

apply to MEWAs under ERISA, the

Internal Revenue Code, the Public

Health Service Act, and State insurance

statutes. The data collected as a result

of the filing requirement will serve as

the only source of uniform and

complete information identifying these

arrangements that will allow federal and

State regulators to evaluate their

compliance with all applicable

requirements. Evaluations of

compliance based on the information

reported will be significantly more cost

effective for both governmental entities

and MEWAs than the alternative of

active intervention by compliance

examiners.

Increased compliance by these

arrangements will be beneficial to

participants and beneficiaries who are

able to fully realize their rights under

these new laws. A greater assurance of

compliance by these arrangements will

also be beneficial because, due at least

in part to the interaction of federal and

State requirements, their compliance

with the various requirements which

apply to them has been shown to be

inconsistent. Although the provisions of

Title I and IV of ERISA generally

supercede State laws that relate to

employee benefit plans, the regulation

of MEWAs is a joint federal and State

responsibility pursuant to ERISA

section 514(b)(6). Section 514(b)(6) of

ERISA provides, among other things,

that State laws that regulate insurance

may apply to fully insured MEWAs to

the extent that these laws establish

rating, solvency, and similar standards,

and to other MEWAs to the extent that

State insurance laws are not

inconsistent with Sections 1 through

513 of ERISA. Knowledge of both

federal and State requirements is

therefore needed for an arrangement to

make an appropriate determination

concerning the requirements that apply

to it.

Because State insurance statutes are

not uniform, an arrangement doing

business in more than one State may be

required to comply with a range of

States’ varying requirements. Other legal

and factual issues, such as whether an

entity is established pursuant to a

collective bargaining agreement or

whether an arrangement for a staff

leasing organization is maintained by

more than one employer, may

contribute to uncertainty about

applicability of regulatory requirements.

Identification of these entities and

determination of the applicability of

State insurance law through this

reporting requirement will help ensure

that administrators of these

arrangements are aware of the

requirements that apply, and that the

protections intended to be provided

under federal and State laws are

actually implemented for the benefit of

employers and participants who obtain

their group health coverage through

these arrangements.

Substantial ancillary benefits are

expected to result from the public

disclosure of this data. Participants with

greater access to information about the

arrangements through which they obtain

group health coverage may better

exercise their rights in the event of a

dispute with the arrangement. The data

collected will also enhance the

capability to conduct analysis of the

market segment represented by MEWAs,

which will be useful to policy makers in

evaluating the role of these entities in

providing employment-based health

benefits. The potential benefits of this

interim final rule are, therefore,

expected to outweigh its costs.

Paperwork Reduction Act

The Department of Labor, as part of its

continuing effort to reduce paperwork

and respondent burden, 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 Pension and Welfare

Benefits Administration is soliciting

comments concerning the information

collection request (ICR) included in this

interim final rule, which would require

reporting by MEWAs and certain other

entities on a prescribed form.

Respondents are not required to comply

with the ICR incorporated in the form

unless it displays a currently valid OMB

control number. A copy of the ICR may

be obtained by contacting the office of

the Pension and Welfare Benefits

Administration listed below.

The Department has submitted the

ICR included in this interim final rule,

using emergency review procedures, to

OMB for review and clearance in

accordance with PRA 95. OMB approval

has been requested by February 28,

2000. 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

proposed 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 appropriate automated,

electronic, mechanical, or other

technological collection techniques or

other forms of information technology,

e.g., permitting electronic submission of

responses.

Comments regarding the ICR should

be sent to the Office of Information and

Regulatory Affairs, Office of

Management and Budget, Room 10235,

Federal Register / Vol. 65, No. 29 / Friday, February 11, 2000 / Rules and Regulations 7157

10See note 5. 11See note 6.

New Executive Office Building,

Washington, DC 20503; Attention: Desk

Officer for the Pension and Welfare

Benefits Administration. Although

comments may be submitted through

April 11, 2000, OMB requests that

comments be received within 30 days of

publication of this interim final rule to

ensure their consideration.

Address requests for copies of the ICR

to Gerald B. Lindrew, Office of Policy

and Research, U.S. Department of Labor,

Pension and Welfare Benefits

Administration, 200 Constitution

Avenue, NW, Room N–5647,

Washington, D.C. 20210. Telephone:

(202) 219–4782; Fax: (202) 219–4745.

These are not toll-free numbers.

The ICR implemented with this

interim final rule will require

administrators of MEWAs, as defined in

section 3(40) of ERISA, and certain

other multiple employer arrangements

that seek to utilize the exception

described in section 3(40)(A)(i) of

ERISA (referred to in the interim final

rule as ‘‘Entities Claiming Exception’’

(ECEs)), to file certain information with

the Secretary of Labor. This filing is

generally required to be made annually

by March 1 for the calendar year just

ended. In addition, expedited filing is

required following origination of an

entity required to file. However, an ECE

is required to file for only the first three

years following its origination. A form

has been prescribed for this filing, the

substance of which is published at the

end of this document.

The information to be filed includes

basic identifying information (names

and addresses, telephone numbers,

employer identification numbers), and

the date of origination of the

arrangement. The filer will also be

required to identify the States in which

the arrangement provides coverage,

whether it is licensed as an insurer or

otherwise authorized to operate in those

States (with the corresponding license

or registration numbers), and whether

the arrangement, if not licensed, is fully

insured by a health insurance issuer in

each State. The filer must also state the

number of participants in the

arrangement and the number of States in

which at least 20 percent of the

arrangement’s business (based on

number of participants) is conducted.

The form poses specific questions

concerning compliance with Part 7 of

ERISA, including yes/no questions

about litigation involving Part 7 of

ERISA or corresponding provisions of

the Internal Revenue Code or Public

Health Service Act (with specific

additional information to be provided, if

there was litigation), and about

compliance with provisions of Part 7

and implementing regulations with

respect to HIPAA, MHPA, Newborns’

Act, and WHCRA. The form must also

be signed and dated.

Detailed instructions are supplied

with the form, as are compliance

worksheets, which are intended to

provide filers with convenient

summaries of the requirements of the

HIPAA, MHPA, Newborns’ Act, and

WHCRA provisions of Part 7 of ERISA,

and references to the statutory

requirements. These worksheets are not

required to be filed.

The information collected in

connection with this filing requirement

will be useful to the Department, other

federal agencies, and the States, in

determining the extent of compliance by

MEWAs and ECEs with Part 7 of ERISA

and parallel provisions of the Internal

Revenue Code and the Public Health

Service Act.

The information will be useful to

federal and State authorities with

oversight responsibilities for these

arrangements, and to the public for a

variety of reasons. The enforcement

activities of the Department and the

States have shown that, due at least in

part to the complex interaction of State

and federal regulatory requirements for

multiple employer arrangements

providing group health coverage,

compliance with all the applicable State

and federal rules has been inconsistent.

For example, the March, 1992 General

Accounting Office (GAO) Report

entitled, ‘‘EMPLOYEE BENEFITS—

States Need Labor’s Help Regulating

Multiple Employer Welfare

Arrangements’’ (GAO/HRD–92–40)

states that ‘‘MEWAs have proven to be

a source of regulatory confusion,

enforcement problems, and in some

instances, fraud.’’ This is supported by

results of GAO’s 1991 survey in which

46 States reported non-compliance by

MEWAs with applicable reporting,

disclosure, funding, licensing and

registration requirements.

MEWAs doing business in several

States may be required to comply with

licensing and solvency requirements of

each State, which often differ

significantly. Although ERISA was

amended in 1983 to clarify the role of

the States in the regulation of MEWAs 10

these arrangements must still make

judgments with respect to a number of

relatively complex legal and factual

issues in order to determine which

requirements are applicable. The

absence of uniform information as to the

identity and location of these entities

often prevents both federal and State

regulators from taking a proactive

approach to ensuring compliance by

these arrangements with the full range

of requirements imposed upon them.

Although MEWAs which are group

health plans under ERISA, and

multiemployer group health plans

established pursuant to a collective

bargaining agreement are generally

required to file Form 5500 in

accordance with ERISA sections 101(b)

and 104(a), these entities will also be

required to file the annual report for

MEWAs under this interim final rule.

This is in part because Form 5500 does

not require duplicate reporting with

respect to compliance with Part 7. An

important reason for requiring these

groups to file is to collect uniform

information on MEWAs that does not

rely on the arrangements’ assessments of

their status as group health plans or

their entitlement to claim an exception

based on the existence of a collective

bargaining agreement. Arrangements

which might mischaracterize

themselves as group health plans under

ERISA or as multiemployer collectively

bargained plans (and thus not MEWAs),

or in any number of other ways, would

otherwise be omitted from the data that

would be available to the Department

and the States to assess compliance by

these arrangements. At the same time,

the Department did not wish to require

reporting by well established

multiemployer plans that have been in

operation for several years. As noted

earlier, this interim final rule may be

modified in the future if changes are

needed as a result of the issuance of

further guidance with respect to

establishing criteria and a process for a

finding by the Secretary that an

agreement is a collective bargaining

agreement for purposes of section

3(40)(A)(i) of ERISA. 11 At present,

however, the Department considers it

important to obtain complete data on all

entities which may be considered

MEWAs, including newly originated

multiemployer collectively bargained

group health plans in their first years of

operation.

An ancillary benefit of the availability

of complete data on the multiple

employer health plan universe will be a

significantly enhanced capability to

conduct more thorough analysis of the

market segment represented by MEWAs.

Risk pooling by groups of employers has

been considered to offer potential

advantages in the purchase of health

care coverage by small employers.

Timely and complete information on

these entities will be of significant

utility in evaluating the effectiveness of

existing arrangements in providing

7158 Federal Register / Vol. 65, No. 29 / Friday, February 11, 2000 / Rules and Regulations

employment-based health benefits.

Greater access to information for

participants may assist them in

exercising their rights under these

arrangements in the event of a dispute.

Estimates of the burdens associated

with this filing requirement are based

on the number of annual filers and the

time assumed to be required to complete

the form.

The Filer Universe

The entities that will be required to

file the annual reporting form will

include multiemployer collectively

bargained group health plans (entities

claiming exception, or ECEs) originated

within three years of the filing date,

MEWAs which are group health plans

under ERISA, and MEWAs which are

not group health plans under ERISA. A

description of the Department’s

methods of estimating the number and

characteristics of filers in each group

follows.

Multiemployer Collectively Bargained

Plans

These plans are generally required to

file Form 5500, and as such, information

is available concerning the number of

such plans originated from year to year.

For the purpose of estimating the

number of potential filers, the

Department reviewed the data collected

from Form 5500 filings for the 1991

through 1995 plan years for collectively

bargained multiemployer welfare plans

which provided medical benefits. A

period of longer than three years was

examined in order to determine whether

the numbers were reasonably consistent

from year to year, and whether the data

indicated a trend over this period.

Individual records in this group were

examined and adjusted for the purpose

of this count for possible errors in filers’

characterization of their filing entity

(which is selected from a number of

codes in the Form 5500 instructions).

The resulting number of such plans

originated since 1991 was 41, which

amounts to an average of about 8 plans

per year. The number of participants in

those 41 plans was 78,702. This

represents about 2% of the total of all

multiemployer collectively bargained

group health plan filers in 1995 (2,180

plans with 5,957,946 participants).

Examination of origination in each

individual year shows that the number

of plans established was reasonably

similar from year to year. The

Department considers a reasonable

estimate of the number of new plans

that are originated each year is 12,

which is the greatest number originated

in any single year during the period

examined. This would result in

approximately 36 filers in this category

for each annual filing cycle, assuming

that 12 plans are originated each year,

and 12 plans will no longer be required

to file the form. The average number of

participants per plan in the 41 plans

originated since 1990 was 1,900, while

the greatest average number per plan in

a single year was 3,200. Based on these

averages, it could be assumed that

participation would total between

23,000 and 38,000 for the 12 plans

assumed to originate in any year. For

purposes of estimating the number of

participants in the affected plans in this

category, a midpoint of 30,600 per year

(2,550 participants per plan) for the 12

new plans, and 91,800 for all 36 filers

has been used.

Certain characteristics of this group

may also be estimated, based on the

characteristics of both the 1995 filers

originated since 1990 and all 1995

multiemployer health plan filers. In

both groups, no more than 11 percent of

plans had fewer than 100 participants,

while less than 1 percent of total

participants were covered by plans with

fewer than 100 participants.

The methods of funding indicated by

the filers on Form 5500 differ somewhat

between the groups. The funding

method categories are defined in the

Form 5500 instructions. ‘‘Trust only’’ is

generally used interchangeably with the

more commonly understood terms ‘‘selffunded’’ or ‘‘self-insured.’’ ‘‘Insured’’ is

considered to mean fully insured.

Where ‘‘Trust and Insurance’’ is

indicated, it is generally not possible to

determine without examination of

individual records whether the plan is

essentially self-funded with stop-loss

insurance, or whether the plan is

entirely self-funded except to the extent

that it includes specific insured benefits

such as life or long term disability

insurance. Consequently, this category

will include a range of funding

methods. For purposes of estimates of

the burden of the filing requirement, a

distinction is made between fully

insured arrangements and all other

arrangements. While estimates of the

number of fully self-funded

arrangements may also be of interest,

only fully insured arrangements are

segregated for purposes of estimates

ultimately developed, due to a

difference in form completion time for

these entities.

The plan funding methods reported

on Form 5500 for the 2,180

multiemployer collectively bargained

group health plans (with 5,957,946

participants) filing in 1995 were

compared with those for the 41

multiemployer collectively bargained

group health plans (with 78,702

participants) established since 1990.

The comparison showed that about 63

percent of the 41 plans, and 51 percent

of the 2,180 plans reported being fully

self-funded. Between 2 and 4 percent of

both groups of plans reported being

fully insured. The remainder (24

percent of the 41 plans, and 41 percent

of the 2,180 plans reported funding

through a combination of insurance and

self-funding. It is assumed that the

newly originated multiemployer

collectively bargained group health

plans will more closely resemble the

group of 41 plans originated since 1990.

Multiple Employer Welfare

Arrangements Which Are Group Health

Plans Under ERISA

The number of filers in this category

may be estimated in a manner similar to

that used for estimating the ECE count.

In general, most ERISA-covered welfare

plans which provide medical benefits

are required under the statute and

regulations to file a Form 5500 annually

unless the plan covers fewer than 100

participants and is either unfunded or

fully insured. While data from Form

5500 filings will not include

information on small plans due to this

exemption from filing requirements,

multiple employer plans are considered

less likely to be excluded on this basis

because the affiliation of at least two

employers for the formation of a plan

increases the likelihood that

participation will exceed 100. However,

because plans with fewer than 100

participants will be required to file the

annual report for MEWAs, an

adjustment would need to be made to

account for the excluded plans.

Data from Form 5500 filings for 1995

plan years were reviewed with respect

to plans indicating they provided

medical benefits that were designated as

multiemployer collectively bargained

plans, multiple employer noncollectively bargained plans, and group

insurance arrangements. Because the

Department has been made aware of

some multiple employer plan filers’

uncertainty as to the appropriate entry

for this element of the form, the source

data in these categories were also

examined. While it is not possible to

determine the nature of a filing entity

with certainty without reference to the

facts and circumstances related to its

establishment, a number of plans

appeared to have been coded in such a

way as to limit the usefulness of this

data for the purpose of estimating the

number of potential filers. For purposes

of this estimate, therefore, entity codes

were adjusted where a more appropriate

choice was apparent. The resulting data,

after exclusion of plans that appeared to

Federal Register / Vol. 65, No. 29 / Friday, February 11, 2000 / Rules and Regulations 7159

12According to GAO, comparison of these totals

may give an indication of the number of MEWAs

operating across State lines. GAO indicates that the

numbers should not be added, because MEWAs

operating in more than one State may have been

counted in each State of operation.

13 ‘‘Survey of Association Member Health Plans,’’

W.F. Morneau & Associates/ American Society of

Association Executives, 1993 and 1997.

be single employer plans or collectively

bargained plans, and inclusion of plans

originally categorized as group

insurance arrangements, were

summarized to arrive at the initial

estimate of the number and

characteristics of filers. On this basis

(and without yet adjusting for small

plans exempted from Form 5500 filing

requirements), 642 plans in this

category covering approximately

1,913,000 participants would be

expected to file the MEWA annual

reporting form. The average number of

participants per plan among this group

is approximately 3,000. About 14

percent of these plans report selffunding only, while 31 percent report

being fully insured. About 49 percent of

these plans report a combination of

insurance and self-funding.

Although the number of MEWA

report filers which are multiple

employer group health plans could be

estimated by adjusting the number of

Form 5500 filers to allow for plans

exempted from Form 5500 filing

requirements, the Department is

unaware of an appropriate basis for such

an adjustment. Instead, these exempt

filers have been estimated in

conjunction with the estimate of MEWA

report filers which are not employee

benefit plans under ERISA, as explained

below.

Multiple Employer Welfare

Arrangements Which Are Not Group

Health Plans Under ERISA

The potential number of filers in this

category is significantly more difficult to

estimate because there is no single

source of data on such arrangements.

The Department therefore relied on

three different data sources to develop

an estimate of the number of potential

filers. Data reported in the previously

cited March, 1992 GAO report (GAO/

HRD–92–40) were collected in GAO’s

survey of State insurance officials

conducted in 1991. These data showed

1,034 MEWAs which were

headquartered in the State in which the

information was collected, and 2,213

MEWAs operating in States in which

they were not headquartered.12 Of the

1,034 MEWAs, 264 (25.5 percent) were

characterized as ‘‘fully insured’’ and 770

(74.5 percent) were ‘‘not fully insured.’’

It was also reported that there were

2,581,438 participants and beneficiaries

covered by the 1,034 MEWAs in the

respondent States.

The figures may be somewhat

understated due to the lack of survey

data from a number of large States

which reported data for another aspect

of the survey indicating that

participants has sustained losses as a

result of MEWAs’ failure to pay claims

in the State. The number of these

entities may also be expected to have

changed during the period since the

survey due to small group reforms in the

States, the enactment of HIPAA, and a

period of relative stability in health care

costs that generally reduces economic

pressures on employers seeking

affordable coverage. It is generally

believed that these factors have served

to reduce the number of entities that

obtain group health coverage through

risk pooling arrangements such as

MEWAs.

Furthermore, it is unclear whether the

survey respondents would have

distinguished between MEWAs which

are group health plans and those which

are not group health plans.

Consequently, it is not possible to

determine whether the number of

MEWAs headquartered in the States

may overlap to any degree with the

estimate of the number of MEWAs

which are ERISA-covered plans. The

Department contacted the National

Association of Insurance Commissioners

and certain State representatives to

whom it was subsequently referred to

determine whether comparable and

more current data were available, and

concluded on the basis of these contacts

that while several States might maintain

certain current data elements, no

comparable data set is available to

support the updating or refinement of

the GAO estimates.

Other more recent sources may serve

to shed light on the usefulness of the

GAO data in developing a current

estimate of potential non-ERISA plan

MEWA filers. The Department

examined reports published by W.F.

Morneau & Associates and the American

Society of Association Executives 13

(ASAE) concerning membership surveys

conducted in 1992 and 1997. The

survey respondents were those

associations which reported sponsoring

health care plans for their members. The

respondents would apparently include

sponsors of plans covered by ERISA as

well as arrangements not covered by

ERISA. Respondents also included

professional/individual associations,

which would not typically be sponsors

of ERISA-covered plans due to lack of

an employment basis. Coverage

sponsored by these types of associations

may, however, be considered non-plan

MEWAs based on the facts and

circumstances surrounding the

establishment and maintenance of the

arrangement. The report also states that

because the response rate to the 1997

survey was somewhat low (974 of 7,169

surveys distributed were returned), it

would be conservative to assume that

the survey represents no more than 50

percent of the total number of

association health plans. On the basis of

the 283 plans reported, then, it could be

assumed that the number of association

sponsored plans could be estimated at

566. The 1992 data were somewhat

different, with 2,648 responses to 6,341

surveys distributed, resulting in 799

association sponsored plans being

reported. However, the report on the

1997 survey offers many reasons for a

decline in the number of plans

sponsored, which supports the

credibility of the observed decrease.

A different approach may also be

taken to estimating the number of nonrespondents which sponsor health

plans, which results in a somewhat

larger estimate of association plans. If it

is assumed that the rate of sponsorship

of plans among non-respondents is onehalf the rate of sponsorship among

respondents, it may be estimated that

there are approximately 1,200

association sponsored plans. As noted,

this estimate would likely include

arrangements that would be considered

to be plans under ERISA, as well as

those that would not. This estimate

would also include both trade/corporate

association plans and professional/

individual association plans. Other data

presented in the Morneau/ASAE report

indicate that 66 percent of association

health plans are sponsored by trade/

corporate associations. While this

would tend to support reducing the

estimate of association plans which

might file the annual reporting form, the

degree of imprecision already

introduced may not support further

refinement of this estimate.

If it is assumed, then, that there are

1,200 association plans to be considered

among the universe of potential filers,

an assumption concerning the funding

mechanisms used is also needed.

Assuming 75 percent of these plans are

fully insured, as indicated by the 1997

report, 900 plans would be fully insured

and 300 would not be fully insured.

Findings of an analysis conducted by

the RAND Corporation of data from the

1997 Robert Wood Johnson Foundation

7160 Federal Register / Vol. 65, No. 29 / Friday, February 11, 2000 / Rules and Regulations

14 ‘‘Pooled Purchasing: Who Are the Players?’’

Stephen H. Long and M. Susan Marquis, ‘‘Health

Affairs,’’ July—August 1999.

Employer Health Insurance Survey 14

offer another basis for the development

of an estimate of the number of MEWAs.

The findings address the prevalence of

pooled purchasing among employer

health plans through analysis of survey

respondents’ assessments of whether

their establishment purchases insurance

through (1) a purchasing cooperative or

alliance, (2) a business coalition, (3) a

multiple employer trust (MET) or

multiple employer welfare arrangement

(MEWA), or (4) a trade or professional

association or other membership

organization. The report concludes that

about 25 percent of establishments

participate in pooled purchasing in at

least one of the forms described.

The survey data as weighted for

purposes of the analysis indicate that a

total of 394,000 establishments covering

5.7 million employees report offering

insurance through a MEWA/MET or a

trade association/membership

organization. This includes 118,000

establishments which were pooled

through a MEWA/MET and 276,000

establishments pooled through a trade

association or membership organization.

Employees reported to be covered

through a MEWA/MET total 3.3 million,

while those reported as covered through

an association or membership

organization total 2.4 million.

The MEWA/MET and trade

association/membership association

categories appear to include many of the

arrangements that would be required to

file the MEWA annual reporting form,

including collectively bargained

arrangements, without regard to

whether the arrangement constitutes a

plan for purposes of ERISA. It is also

likely that potential filers will be found

among the establishments reporting

purchase through a purchasing alliance

or business coalition. The total number

of establishments which report

purchasing through pooled purchasing

arrangements, including business

coalitions and purchasing alliances, but

excluding known purchasing alliances,

is 836,000. Employees of these

establishments number 12 million.

Known purchasing alliances are

excluded because these are not

considered likely to be MEWAs.

Because these data are collected and

presented on an establishment rather

than plan basis, other adjustments are

required in order to compare them with

data reported in other sources.

One possible approach to imputing a

estimated number of different

arrangements from the employee counts

reported in the pooled arrangements

would be to simply divide the number

of employees by the average number of

participants in the multiple employer

group health plans which file Form

5500 (between 2,500 and 3,000).

Dividing the 12 million employees in

this way results in an estimate of 4,000

to 4,800 separate arrangements. When

applied to the trade association segment

alone, the imputed number of separate

arrangements would be between 800

and 1,000. This analysis, although

imprecise, appears to support the

comparability of the Morneau/ASAE

data and the RAND analysis of the 1997

Robert Wood Johnson Foundation

Employer Health Insurance Survey data.

Because a total based on all pooling

arrangements will include collectively

bargained multiemployer group health

plans and multiple employer noncollectively bargained group health

plans, the estimate must be reduced to

avoid duplication. Reducing the

estimated total of 4,800 arrangements by

multiemployer and multiple employer

group health plans counts results in a

total of 2,200 MEWAs not previously

counted, which cover an estimated 4

million employees.

The universe of filers, therefore, can

be variously estimated as follows:

• 642 non-collectively bargained

multiple employer group health plans

which file Form 5500 plus 36 newly

originated multiemployer collectively

bargained group health plans (ECEs)

covering a total of 1,943,551

participants (excludes non-plan MEWAs

and small fully insured/unfunded plans

exempt from filing) (1995 Form 5500

data);

• 1,034 MEWAs including plans and

non-plans covering 2,581,438

participants (likely excludes some

arrangements the States would

recognize as ERISA covered plans)

(1992 GAO report);

• 1,200 association plans including

ERISA plans and non-ERISA plans

(likely excludes both arrangements

which are MEWAs not sponsored by

associations and collectively bargained

multiemployer plans) (1997 Morneau/

ASAE survey); and

• 4,000 to 4,800 multiple employer

association plans, collectively bargained

plans, and MEWAs covering 12,000,000

participants (or 2,000 non-ERISA plan

MEWAs covering 4,100,000 employees,

after adjustment for multiemployer

collectively bargained group health

plans and multiple employer noncollectively bargained group health

plans) (1997 RWJF Health Insurance

Survey).

On the basis of these estimates, the

Department believes a conservative

assumption as to the number of MEWAs

and entities claiming exception that will

be required to file the annual reporting

form in any year is 2,678. The method

of developing the estimate of filers

accounts for some arrangements which

would be considered group health plans

under ERISA but which are exempt

from Form 5500 filing requirements,

although their number is not separately

identified.

Estimating the proportion of these

arrangements which are fully insured,

funded through a trust, or a combination

of these methods is more problematic.

The RAND analysis does not provide

specific information on the funding

method of the pooled arrangements, and

the information reported in the other

sources varies significantly. For

example, 73 percent of the recently

originated multiemployer collectively

bargained plans were funded through a

trust only, while only 4 percent were

fully insured. Of the multiple employer

non-collectively bargained ERISA plans

which filed Form 5500, 14 percent were

self-funded and 31 percent were fully

insured. Of the MEWAs reported by the

States in the GAO study, 25 percent

were fully insured, while 75 percent of

the association plans in the Morneau/

ASAE survey reported being fully

insured.

The funding status of the filers that

reported their funding method on Form

5500 has been included as reported. In

the absence of additional information as

to the funding status of the 2,000 nonplan filers, the Department believes it is

reasonable to assume that 50 percent

(the midpoint between the 25 percent

reported by GAO and the 75 percent

reported by Morneau/ASAE) are fully

insured. Although this assumption is

somewhat arbitrary, it is relied on for

purposes of the estimates of annual

report filer burden only for estimating a

variation in the burden expected in

completing the form. The Department

welcomes comments on the data and

assumptions used in developing these

estimates.

The resulting breakdown of

arrangements between fully insured and

not fully insured is shown below:

Total

Fully

insured

Not

fully

insured

Total ........................ 2,678 1,202 1,476

Multiemployer ECE 36 1 35

Multiple employer

non-collectively

bargained ERISA

plans .................... 642 201 441

Other MEWA .......... 2,000 1,000 1,000

Federal Register / Vol. 65, No. 29 / Friday, February 11, 2000 / Rules and Regulations 7161

Completing the MEWA Annual

Reporting Form

Completion of this two-page form is

expected to require between 2 hours and

50 minutes to 3 hours and 35 minutes.

This estimate assumes that all filers will

require an average of two hours to

familiarize themselves with the form

and read the instructions, particularly in

the first years following implementation

of the filing requirement. The

identifying information in Parts I and II

of the form and the signature block

would be expected to require a limited

amount of time to complete.

The most variable portion of the form

is expected to be Part III, which

includes information concerning the

locations in which the arrangement does

business, and its funding arrangements

and licensing status in those locations.

The amount of information to be entered

here will vary directly with the number

of States in which an entity operates.

The degree of this variation is expected

to be great, as some of the arrangements

which will file are known to be Statespecific, while others are national in

scope.

Time required to complete this

segment of the form is also expected to

vary with the funding arrangement of

the entity in any given State, and with

the State’s licensing requirements.

Entities which are fully insured in the

States in which they operate would be

expected to require little time to

complete the section because those

entities are believed to be least likely to

require licensure by a State. Those

entities which are either partially or

fully self-funded and which operate in

States in which they are required to be

licensed are expected to require the

greatest amount of time to complete this

section. The range of completion time

assumed for this segment (from 30

minutes to an hour) is intended to allow

for this variation.

The Department is aware that the

States have implemented a range of

regulatory requirements for both

MEWAs and health plans sponsored by

associations which are self-funded and

conducting business in their

jurisdictions. These requirements range

from registration to full compliance

with all of the solvency, rating, and

other requirements of the State

insurance code. The information that

could be provided by the States, if

collected directly from them, would

include only those arrangements which

are aware of the requirements in the

State or States in which they do

business, and which have elected to

comply with those requirements. From

time to time States still report being

unaware of MEWAs operating within

their jurisdictions, or in neighboring

States but covering consumers in their

jurisdictions, until problems are

reported.

With respect to Part IV of the form,

the Department assumed a 15 to 30

minute completion time depending

again on whether or not an arrangement

is fully insured. Fully insured

arrangements are expected to be readily

aware of their compliance with the

specified aspects of Part 7 of ERISA

because their insurance contracts will in

most cases have been amended to bring

them into compliance. Those

arrangements which may not have

considered the status of their

compliance with these requirements

may require additional time to answer

the questions. No estimate of the time to

respond to the question concerning

litigation or enforcement proceedings is

made because rate of litigation among

all plans in general is believed to be

low. While positive responses to this

question are expected to be useful in

assessing compliance with Part 7, the

frequency of positive responses among

the small group of filers is expected to

be very low.

Based upon its experience with many

types of multiple employer group health

plans and other arrangements, the

Department has assumed for its

estimates of burden under the

Paperwork Reduction Act that 90

percent of plans and arrangements will

purchase services to meet the filing

requirement rather than complete the

form in-house. Because these

arrangements by definition include at

least two employers which are unrelated

by ownership and which may or may

not be related by trade or industry, an

entity which is separate from the

arrangement typically handles

administrative duties for the

arrangement. This may be the

association or subsidiary of the

association in the case of a plan

sponsored by a trade association, or a

third party administrator. This entity is

commonly compensated for services

such as billing employers, processing

claims, or marketing the arrangement to

other employers, by the plan or by the

participating employers, through an

assessment to the premium or other

contribution collected from the

employers. It is believed that the filing

would be completed by this separate

entity and that the entity would be

compensated for this service. This

assumption has no implication with

respect to the person or entity obligated

to file the form. The assumption is

intended to provide an estimate of the

cost of filing based on the entity

expected as a practical matter to

perform the tasks required by the form.

In developing the cost of preparation

of the form, the Department has

assumed a professional rate for a

financial manager of approximately $50

per hour. Copying and mailing is

estimated to require 1 minute at a

clerical rate of $15 per hour plus $0.38

for mailing and materials. Electronic

filing of the form is under consideration,

but has not been reflected in these

estimates. The Department requests

comments on the assumptions used in

this analysis.

In the Department’s view, the filing

requirement will not require the

maintenance of records which were not

already maintained by the MEWA in the

ordinary course of its business.

Type of Review: New.

Agency: U.S. Department of Labor,

Pension and Welfare Benefits

Administration.

Titles: Annual Report for Multiple

Employer Welfare Arrangements and

Entities Claiming Exception (Form M–

1).

Affected Public: Individuals or

households; Business or other for-profit;

Not-for-profit institutions.

OMB Number: 1210–NEW.

Frequency of Response: Annually.

Respondents: 2,678.

Responses: 2,678.

Estimated Burden Hours: 874.

Estimated Annual Cost (Operating

and Maintenance): $ 394,300.

Comments submitted with respect to

this information collection request will

be summarized and/or included in the

request for OMB approval of the

information collection request; they will

also become a matter of public record.

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

likely to have a significant economic

impact on a substantial number of small

entities. If an agency determines that a

proposed rule is likely to have a

significant economic impact on a

substantial number of small entities,

section 603 of the RFA requires that the

agency 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 and seeking public

comment on such impact. Small entities

include small businesses, organizations,

and governmental jurisdictions.

Because these rules are being issued

as interim final rules and not as a notice

7162 Federal Register / Vol. 65, No. 29 / Friday, February 11, 2000 / Rules and Regulations

of proposed rulemaking, the RFA does

not apply and the Department is not

required to either certify that the rule

will not have a significant impact on a

substantial number of small businesses

or conduct a regulatory flexibility

analysis. Nevertheless, the Department

has considered the likely impact of this

interim rule on small entities, and

believes the rule will not have a

significant impact on a substantial

number of small entities. The reasons

for this conclusion are explained in the

discussion which follows.

For purposes of this discussion, the

Department has deemed a small entity

to be an employee benefit plan with

fewer than 100 participants. The basis of

this definition is found in section

104(a)(2) of ERISA, which permits the

Secretary of Labor to prescribe

simplified annual reports for pension

plans which cover fewer than 100

participants. For this purpose, it is

assumed that arrangements with fewer

than 100 participants and which are (1)

multiemployer collectively bargained

group health plans originated within the

last three years, (2) non-collectively

bargained multiple employer group

health plans, or (3) other multiple

employer arrangements which provide

medical benefits, are small plans.

PWBA believes that assessing the

impact of this proposed rule on small

plans is an appropriate substitute for

evaluating the effect on small entities as

that term is defined in the RFA. As

explained earlier, it is estimated that

2,678 plans and arrangements will file

the MEWA annual reporting form. Of

the total number of Form 5500 filers

included in this total, the number of

plans with fewer than 100 participants

is estimated at 257, or about 11 percent.

This number may be slightly

understated because data from Form

5500 filings were used to develop the

estimate of multiple employer group

health plans which fall within the

definition of a ‘‘welfare plan’’ for

purposes of ERISA. That data generally

excludes welfare plans with fewer than

100 participants which are either

unfunded or fully insured due to this

group’s exemption from filing

requirements.

Consideration of the number of small

plans affected by this filing requirement

is more meaningful in the context of the

total number of small private group

health plans estimated to exist. Based

on the health coverage reported in the

Employee Benefits Supplement to the

1993 Current Population Survey, and a

1993 Small Business Administration

survey of retirement and other benefit

coverages in small firms, it is estimated

that there are approximately 2.6 million

private group health plans with fewer

than 100 participants. As such, even if

all of the potential filers of this form

were small plans, only one-tenth of one

percent of small group health plans

would be affected by this requirement.

It is expected, however, that a very

small number of these arrangements

will have fewer than 100 participants.

By their nature, the affected

arrangements must involve at least two

employers, which decreases the

likelihood of coverage of fewer than 100

participants. Also, underlying goals of

the formation of these arrangements,

such as gaining purchasing and

negotiating power through economies of

scale, improving administrative

efficiencies, and gaining access to

additional benefit design features, are

not as readily accomplished if the group

of covered lives remains small. Finally,

although an average provides no insight

into the number of arrangements which

have fewer than 100 participants, it may

still be noted that the average number of

participants per arrangement in the data

examined to estimate the number of

potential filers appeared to be between

2,500 and 3,000.

It is known, however, that the

employers typically involved in these

arrangements are small (that is, have

fewer than 500 employees, which is

generally consistent with the definition

of small entity found in regulations

issued by the Small Business

Administration (13 CFR § 121.201)). For

example, RWJF data referenced earlier

show that 12 million employees at

836,000 establishments indicated they

obtained coverage through pooled

purchasing arrangements. This averages

just over 14 employees per

establishment. Further, while some

employers of 500 or more employees

may be included in multiple employer

arrangements providing health benefits,

groups of this size are typically

considered large enough to realize the

advantages of economies of scale on

their own. It can generally be assumed,

therefore, that nearly all employers

participating in these arrangements are

small. The number of small employers

assumed to be affected is 836,000.

The total annual cost of the filing

requirement is estimated at $437,400.

The filing requirement applies to the

administrator of the estimated 2,678

plans or arrangements, and is expected

to cost an average of about $164 per

plan or arrangement. If this amount

were passed on directly to the

employers assumed to participate in

these arrangements, their additional cost

would amount to about $0.50 per year

on average.

It is expected that this requirement

will be satisfied by professional staff of

an entity that provides administrative

services to the group health plan or

arrangement under an existing

agreement. Entities with expertise in

management, accounting, and benefits

administration are often either formed

by the group of employers for the

purpose of managing a group health

plan, or are responsible for establishing

the plan or arrangement and making it

available to the employers.

No federal rules have been identified

that duplicate, overlap, or conflict with

this interim final rule. The Department

has considered a number of reporting

formats, and has proposed a form

intended to collect only the information

necessary to assess compliance with

Part 7 of ERISA as simply as possible,

given the complexities of these

arrangements and the regulatory

framework in which they operate. The

design of the form, which requires

reporting by arrangements rather than

employers participating in the

arrangements, limits the number of

filers which will be required to comply

with the requirement. Compliance

guides have been made part of the

report package for the purpose of

lessening the time required to assess

compliance, and assisting the

arrangements in achieving compliance

where additional action is required.

Small Business Regulatory Enforcement

Fairness Act

The interim final rule being issued

here is subject to the provisions of the

Small Business Regulatory Enforcement

Fairness Act of 1996 (5 U.S.C. 801 et

seq.) and has been transmitted to

Congress and the Comptroller General

for review.

Unfunded Mandates Reform Act

Because these rules are issued as

interim final rules and not as a notice

of proposed rulemaking, the Unfunded

Mandates Reform Act of 1995 (Pub. L.

104–4) does not apply. However,

consistent with the policy embodied in

the Unfunded Mandates Reform Act,

this interim final 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.

Statutory Authority

Sec. 29 U.S.C. 1024, 1027, 1059, 1132(c)(5),

1135, 1171–1173, 1181–1183, 1191–1194;

Sec. 101, Pub. L. 104–191, 101 Stat. 1936 (29

U.S.C. 1181); Secretary of Labor’s Order No.

1–87, 52 FR 13139, April 21, 1987.

Federal Register / Vol. 65, No. 29 / Friday, February 11, 2000 / Rules and Regulations 7163

1Section 1421(d)(1) of the Small Business Job

Protection Act of 1996 (Pub. L. 104–188) created a

new section 101(g) of ERISA relating to Simple

Retirement Accounts. Subsequently, section

101(e)(1) of HIPAA also created a new section

101(g) of ERISA relating to MEWA reporting.

Accordingly, when referring to section 101(g) of

ERISA relating to MEWA reporting, this document

cites section 101(g){h} of ERISA.

List of Subjects in 29 CFR Part 2510

Employee benefit plans, Employee

Retirement Income Security Act,

Multiple Employer Welfare

Arrangements, Pension and Welfare

Benefit Administration, Reporting and

recordkeeping requirements.

For the reasons set out in the

preamble, Part 2520 of Chapter XXV of

Title 29 of the Code of Federal

Regulations is amended as follows:

PART 2520—[AMENDED]

1. The authority for Part 2520 is

revised to read:

Authority: Secs. 101, 102, 103, 104, 105,

109, 110, 111(b)(2), 111(c), 502(c)(5), 505,

701–703, 711–713, 731–734 Pub. L. 93–406,

88 Stat. 840–852 and 894 (29 U.S.C. 1021–

1025, 1029–1031, 1135, 1171–1173, 1181–

1183, 1191–1194), as amended by Pub. L.

104–191, 101 Stat. 1936 and Pub. L. 104–204,

101 Stat. 2944; Secretary of Labor’s Order No.

27–74, 13–76, 1–87, and Labor Management

Services Administration Order 2–6.

Sections 2520.102–3, 2520.104b–1

and 2520.104b–3 are also issued under

sec. 101(a), (c) and (g)(4) of Pub. L. 104–

191, 110 Stat. 1936, 1939, 1951 and

1955 and sec. 603 of Pub. L. 104–204,

110 Stat. 2935 (29 U.S.C. 1185 and

1191c).

2. Part 2520 is amended by adding

§ 2520.101–2 to read:

§ 2520.101–2 Annual reporting by multiple

employer welfare arrangements and certain

other entities offering or providing

coverage for medical care to the employees

of two or more employers.

(a) Basis and scope. Section

101(g){h} 1 of the Act permits the

Secretary of Labor to require, by

regulation, multiple employer welfare

arrangements (MEWAs) providing

benefits that consist of medical care

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

of the Act), and that are not group

health plans, 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 the Act are being carried out

in connection with such benefits.

Section 734 of the Act provides that the

Secretary may promulgate such

regulations as may be necessary or

appropriate to carry out the provisions

of part 7 of the Act. This section sets out

requirements for annual 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 the Act (Entities Claiming

Exception or ECEs). These 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:

Administrator means—

(1) The person specifically so

designated by the terms of the

instrument under which the MEWA or

ECE is operated;

(2) 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 the Act);

or

(3) In the case of a MEWA or ECE for

which an administrator is not

designated and a plan sponsor cannot be

identified, 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.

Entity Claiming Exception (ECE)

means an entity that claims it is not a

MEWA due to the exception in section

3(40)(A)(i) of the Act. (In general, this

exception is for entities that are

established and maintained under or

pursuant to one or more agreements that

the Secretary finds to be collective

bargaining agreements).

Group health plan means a group

health plan within the meaning of

section 733(a) of the Act and

§ 2590.701–2.

Health insurance issuer means a

health insurance issuer within the

meaning of section 733(b)(2) of the Act

and § 2590.701–2.

Medical care means medical care

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

of the Act and § 2590.701–2.

Multiple employer welfare

arrangement (MEWA) means a multiple

employer welfare arrangement within

the meaning of section 3(40) of the Act.

Origination means the occurrence of

any of the following three events (and

a MEWA or ECE is considered to have

been originated when any of the

following three events occurs)—

(1) The MEWA or ECE first begins

offering or providing coverage for

medical care to the employees of two or

more employers (including one or more

self-employed individuals);

(2) The MEWA or ECE begins offering

or providing coverage for medical care

to the employees of two or more

employers (including one or more selfemployed individuals) after a merger

with another MEWA or ECE (unless all

of the MEWAs or ECEs that participate

in the merger previously were last

originated at least three years prior to

the merger); or

(3) The number of employees

receiving coverage for medical care

under the MEWA or 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

MEWA or ECE under which all MEWAs

and ECEs that participate in the merger

were last originated at least three years

prior to the merger).

(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 that

offers or provides benefits consisting of

medical care, regardless of whether the

entity is a group health plan; and

(ii) The administrator of an ECE that

offers or provides benefits consisting of

medical care during the first three years

after the ECE is originated.

(2) Exception. Nothing in this

paragraph (c) shall be construed to

require reporting under this section by

the administrator of a MEWA or ECE if

the MEWA or ECE is 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.

(3) Construction. For purposes of this

section, the following rules of

construction apply—

(i) Whether or not an entity is a

MEWA or ECE is determined by the

administrator acting in good faith.

Therefore, if an administrator makes a

good faith determination at the time

when a filing under this section would

otherwise be required that the entity is

maintained pursuant to one or more

collective bargaining agreements, the

entity is an ECE, and the administrator

of the ECE is not required to file if its

most recent origination was more than

three years. Even if the entity is later

determined to be a MEWA, filings are

not required prior to the determination

that the entity is a MEWA if at the time

the filings were otherwise due, the

administrator made a good faith

determination that the entity was an

ECE. However, filings are required for

7164 Federal Register / Vol. 65, No. 29 / Friday, February 11, 2000 / Rules and Regulations

years after the determination that the

entity is a MEWA.

(ii) In contrast, while an

administrator’s good faith determination

that an entity is an ECE may eliminate

the requirement that the administrator

of the entity file under this section for

more than three years after the entity’s

origination date, the administrator’s

determination, nonetheless, does not

affect the applicability of State law to

the entity. Accordingly, incorrectly

claiming the exception may eliminate

the need to file under this section, if the

claiming of the exception is done in

good faith. However, the claiming of the

exception for ECEs under this filing

requirement does not prevent the

application of State law to an entity that

is later determined to be a MEWA. This

is because the filing, or the failure to

file, under this section does not in any

way affect the application of State law

to a MEWA.

(d) Information to be reported (1) The

annual report required by this section

shall consist of a completed copy of the

Form M–1 ‘‘Annual Report for Multiple

Employer Welfare Arrangements

(MEWAs) and Certain Entities Claiming

Exception (ECEs)’’ (Form M–1) and any

additional statements required in the

instructions to the Form M–1. This

report is available by calling 1–800–

998–7542 and on the Internet at

http://www.dol.gov/dol/pwba.

(2) The Secretary may reject any filing

under this section if the Secretary

determines that the filing is incomplete,

in accordance with § 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 the Act and § 2560.502c–5).

(e) Timing—(1) Period to be Reported.

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 offers or provides

coverage for medical care to the

employees of two or more employers

(including one or more self-employed

individuals).

(2) Filing deadline—(i) General March

1 filing due date. Subject to the

transition rule described in paragraph

(e)(2)(ii) of this section, a completed

copy of the Form M–1 is required to be

filed on or before each March 1 that

follows a period to be reported (as

described in paragraph (e)(1) of this

section). However, if March 1 is a

Saturday, Sunday, or federal holiday,

the form must be filed no later than the

next business day.

(ii) Transition rule for Year 2000

filings. For the year 1999 period to be

reported, a completed copy of the Form

M–1 is required to be filed no later than

May 1, 2000.

(iii) Special rule requiring a 90–Day

Origination Report when a MEWA or

ECE is originated—(A) In general.

Subject to paragraph (e)(2)(ii)(B) of this

section, when a MEWA or ECE is

originated, the administrator of the

MEWA or ECE is also required to file a

completed copy of the Form M–1 within

90 days of the origination date (unless

90 days after the origination date is a

Saturday, Sunday, or federal holiday, in

which case the form must be filed no

later than the next business day).

(B) Exceptions. (1) Paragraph

(d)(2)(ii)(A) of this section does not

apply if the origination occurred

between October 1 and December 31.

(2) Paragraph (d)(2)(ii)(A) of this

section does not apply before May 1,

2000. Therefore, for an entity that is

originated, for example, on January 1,

2000, no 90–day origination report is

required. Nonetheless, for an entity

originated, for example, on April 1,

2000, a 90–day origination report is

required to be completed and filed no

later than June 30, 2000.

(iv) Extensions. An extension may be

granted for filing a report if the

administrator complies with the

extension procedure prescribed in the

Instructions to the Form M–1.

(f) Filing address. A completed copy

of the Form M–1 is filed with the

Secretary by sending it to the address

prescribed in the Instructions to the

Form M–1.

(g) Civil penalties and procedures. For

information on civil penalties under

section 502(c)(5) of the Act for persons

who fail to file the information required

under this section (including a

transition rule applicable to filings due

in the year 2000), see § 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 the Act, see

§ 2570.90 et seq.

(h) Examples. The rules of this section

are illustrated by the following

examples:

Example 1. (i) MEWA A began offering

coverage for medical care to the employees

of two or more employers July 1, 1989 (and

continuous to offer such coverage). MEWA A

does not claim the exception under section

3(40)(A)(i) of ERISA.

(ii) In this Example 1, the administrator of

MEWA A must file a completed copy of the

Form M–1 by May 1, 2000. Furthermore, the

administrator of MEWA A must file the Form

M–1 annually by every March 1 thereafter.

Example 2. (i) ECE B began offering

coverage for medical care to the employees

of two or more employers on January 1, 1992.

ECE B has not been involved in any mergers

and in 1999 the number of employees to

which ECE B provides coverage for medical

care is not at least 50 percent greater than the

number of such employees on December 31,

1998.

(ii) In this Example 2, ECE B was

originated was on January 1, 1992 has not

been originated since then. Therefore, the

administrator of ECE B is not required to file

a Form M–1 on May 1, 2000 because the last

time the ECE B was originated was January

1, 1992 which more than 3 years prior to May

1, 2000.

Example 3. (i) ECE C began offering

coverage for medical care to the employees

of two or more employers on July 1, 1998.

(ii) In this Example 3, the administrator of

ECE C must file a completed copy of the

Form M–1 by May 1, 2000 because the last

date A was originated was July 1, 1998,

which is less than 3 years prior to the May

1, 2000 due date. Furthermore, the

administrator of ECE C must file a year 2000

annual report by March 1, 2001 (because July

1, 1998 is less than three years prior to March

1, 2001). However, if ECE C is not involved

in any mergers that would result in a new

origination date and if ECE C does not

experience a growth of 50 percent or more in

the number of employees to which ECE C

provides coverage from the last day of the

previous calendar year to any day in the

current calendar year, then no Form M–1

report is required to be filed after March 1,

2001.

Example 4. (i) MEWA D begins offering

coverage to the employees of two or more

employers on January 1, 2000. MEWA D 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) In this Example 4, the administrator of

MEWA D is not required to file Form M–1

on May 1, 2000 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 5. (i) MEWA E is originated on

September 1, 2000.

(ii) In this Example 5, because MEWA E

was originated on September 1, 2000, the

administrator of MEWA E must file a

completed copy of the Form M–1 on or

before November 30, 2000 (which is 90 days

after the origination date). In addition, the

administrator of MEWA E must file a

completed copy of the Form M–1 annually by

every March 1 thereafter.

(i) Compliance dates—(1) Subject to

paragraph (i)(2) of this section, reports

filed pursuant to this reporting

requirement are first due by May 1,

2000. (Therefore, on May 1, 2000, filings

are due with respect to MEWAs or ECEs

that provided coverage in calendar year

1999.)

(2) 90-Day Origination Reports

(described in paragraph (e)(2)(ii) of this

section) are first due by May 1, 2000.

Therefore, for an entity that is

Federal Register / Vol. 65, No. 29 / Friday, February 11, 2000 / Rules and Regulations 7165

originated, for example, on January 1,

2000, no 90-day origination report is

required. Nonetheless, for an entity

originated, for example, on April 1,

2000, a 90-day origination report is

required to be completed and filed no

later than June 30, 2000.

Signed at Washington, DC, this 4th day of

February 2000.

Leslie B. Kramerich,

Acting Assistant Secretary, Pension and

Welfare Benefits Administration, U.S.

Department of Labor.

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[FR Doc. 00–2935 Filed 2–10–00; 8:45 am]

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