76222 Federal Register / Vol. 76, No. 234 / Tuesday, December 6, 2011 / Proposed Rules 

1This provision was added to ERISA by section 

302(b) of the Multiple Employer Welfare 

Arrangement Act of 1983, Public Law 97–473, 96 

Stat. 2611, 2612 which also amended section 514(b) 

of ERISA, 29 U.S.C. 1144(a). Section 514(a) of 

ERISA provides that State laws that relate to 

employee benefit plans are generally preempted by 

ERISA. Section 514(b) sets forth several exceptions 

to the general rule of section 514(a) and subjects 

employee benefit plans that are MEWAs to various 

levels of State regulation depending on whether the 

MEWA is fully insured. Sec. 302(b), Public Law 97– 

473, 96 Stat. 2611, 2613 (29 U.S.C. 1144(b)(6)). 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

29 CFR Part 2520 

RIN 1210–AB51 

Filings Required of Multiple Employer 

Welfare Arrangements and Certain 

Other Related Entities 

AGENCY: Employee Benefits Security 

Administration, Department of Labor. 

ACTION: Proposed rule. 

SUMMARY: This document contains a 

proposed rule under title I of the 

Employee Retirement Income Security 

Act (ERISA) that, upon adoption, would 

implement reporting requirements for 

multiple employer welfare arrangements 

(MEWAs) and certain other entities that 

offer or provide health benefits for 

employees of two or more employers. 

The proposal amends existing reporting 

rules to incorporate new provisions 

enacted as part of the Patient Protection 

and Affordable Care Act (Affordable 

Care Act) to more clearly address the 

reporting obligations of MEWAs that are 

ERISA plans. This regulation is 

designed to impose the minimal amount 

of burden on legally compliant MEWAs 

and entities claiming exception (ECEs) 

while implementing the Secretary’s 

authority to take enforcement action 

against fraudulent or abusive MEWAs 

included in the Affordable Care Act and 

working to protect health benefits for 

businesses and their employees. This 

proposed rule implements the new 

provisions while preserving the filing 

structure and provisions of the 2003 

regulations which direct plan MEWAs 

and non-plan MEWAs to report 

annually and file upon registration or 

origination. 

Elsewhere in this edition of the 

Federal Register, the Employee Benefits 

Security Administration (EBSA) is 

publishing a Notice of Proposed 

Rulemaking related to the Secretary’s 

new enforcement authority with respect 

to MEWAs and Notices of proposed 

revisions of the Form M–1 and the Form 

5500. 

DATES: Written comments on the 

proposed regulations should be 

submitted to the Department of Labor 

on or before March 5, 2012. 

FOR FURTHER INFORMATION CONTACT: 

Suzanne Bach or Kevin Horahan, 

Employee Benefits Security 

Administration, Department of Labor, at 

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

number. 

ADDRESSES: Written comments may be 

submitted to the address specified 

below. All comments will be made 

available to the public. Warning: Do not 

include any personally identifiable 

information (such as name, address, or 

other contact information) or 

confidential business information that 

you do not want publicly disclosed. All 

comments may be posted on the Internet 

and can be retrieved by most Internet 

search engines. Comments may be 

submitted anonymously. 

Department of Labor. Comments to 

the Department of Labor, identified by 

RIN 1210–AB51, by one of the following 

methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Email: E-HPSCAMEWARegistration.

EBSA@dol.gov. 

• Mail or Hand Delivery: Office of 

Health Plan Standards and Compliance 

Assistance, Employee Benefits Security 

Administration, Room N–5653, U.S. 

Department of Labor, 200 Constitution 

Avenue NW., Washington, DC 20210, 

Attention: RIN 1210–AB51; MEWA 

Registration Proposed Regulation. 

Comments received by the 

Department of Labor will be posted 

without change to http:// 

www.regulations.gov and http:// 

www.dol.gov/ebsa, and made available 

for public inspection at the Public 

Disclosure Room, N–1513, Employee 

Benefits Security Administration, 200 

Constitution Avenue NW., Washington, 

DC 20210. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The Health Insurance Portability and 

Accountability Act of 1996 (Pub. L. 

104–191, 110 Stat. 1936) (1996)) 

(HIPAA) amended ERISA to provide for, 

among other things, improved 

portability and continuity of health 

insurance coverage. HIPAA also added 

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

1021(g), providing the Secretary with 

the authority to require, by regulation, 

annual reporting by MEWAs that are not 

ERISA-covered plans. Section 6606 of 

the Patient Protection and Affordable 

Care Act (Affordable Care Act), Pub. L. 

111–148, 124 Stat. 119 (2010), amended 

section 101(g) of ERISA to require that 

such MEWAs register with the 

Department prior to operating in a State. 

Specifically, this section now provides 

that multiple employer welfare 

arrangements providing benefits 

consisting of medical care (within the 

meaning of section 733(a)(2) of ERISA, 

29 U.S.C. 1191b(a)(2)) which are not 

ERISA-covered group health plans must 

register with the Secretary prior to 

operating in a State. The Secretary may 

also, by regulation, direct such multiple 

employer welfare arrangements to 

report, not more frequently than 

annually, in such form and such manner 

as the Secretary specifies for the 

purpose of determining the extent to 

which the requirements of part 7 of 

subtitle B of title I of ERISA are being 

carried out in connection with such 

benefits. 

The term ‘‘multiple employer welfare 

arrangement’’ is defined in section 3(40) 

of ERISA, 29 U.S.C. 1002(40) in 

pertinent part, as an employee welfare 

benefit plan, or any other arrangement 

(other than an employee welfare benefit 

plan), which is established or 

maintained for the purpose of offering 

or providing medical benefits to the 

employees of two or more employers 

(including one or more self-employed 

individuals), or to their beneficiaries, 

except that such term does not include 

any such plan or other arrangement 

which is established or maintained 

under or pursuant to one or more 

agreements which the Secretary finds to 

be collective bargaining agreements, by 

a rural electric cooperative, or by a rural 

telephone cooperative association. For 

purposes of this definition, two or more 

trades or businesses, whether or not 

incorporated, shall be deemed a single 

employer if such trades or businesses 

are within the same control group. The 

term ‘‘control group’’ means a group of 

trades or businesses under common 

control, and the determination of 

whether a trade or business is under 

‘‘common control’’ with another trade or 

business shall be determined under 

regulations of the Secretary applying 

principles similar to the principles 

applied in determining whether 

employees of two or more trades or 

businesses are treated as employed by a 

single employer under section 4001(b) 

of ERISA, 29 U.S.C. 1301(b), except that, 

for purposes of this paragraph, common 

control shall not be based on an interest 

of less than 25 percent.1

The original MEWA reporting 

requirement created under HIPAA was 

enacted in response to a 1992 General 


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Federal Register / Vol. 76, No. 234 / Tuesday, December 6, 2011 / Proposed Rules 76223 

2See, Employee Benefits: States Need Labor’s 

Help Regulating Multiple Employer Welfare 

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

3For example, the 1992 GAO report indicated 

that between 1988 and 1991, MEWAs left at least 

398,000 participants and beneficiaries with over 

$123 million in unpaid claims. Meanwhile more 

than 600 MEWAs failed to comply with State 

insurance laws. See supra note 2. 

4 65 FR 715 (02/11/2000) and 68 FR 17494 (04/ 

09/2003). The Form M–1 has been updated and is 

reissued each year in December by the Department 

and modified periodically to address changes to the 

statutory provisions in part 7 of ERISA. 

5See, United States v. Edwards, plea agreement, 

1:05CR 265 (M.D.N.C. 2006) (In 2005, a MEWA 

operator, whom the Department showed collected 

over 36 million dollars in healthcare insurance 

premiums and failed to obtain health insurance 

coverage for its employer clients which resulted in 

thousands of uncovered employees and 

approximately $8 million in unpaid claims) see also 

Solis v. W.I.N. Ass’n, L.L.C., et. al., slip op. 4:11– 

cv–00616 (S.D. Tex. 2011) (the Department 

investigated a MEWA which failed to make 

payments on health care claims, charged excessive 

fees, engaged in self-dealing, and failed to disclose 

fees to the client employers in the plan. The 

Department obtained a Consent Judgment and 

Order against the MEWA operators for leaving 

hundreds of participants without coverage and 

permanently enjoining them from acting as 

fiduciaries in the future. Also, the court authorized 

the Secretary to bring a collection action for the 

plan losses against one of the MEWA operators 

relative to his ability to restore those plan losses.) 

Accounting Office (GAO) report.2 In the 

report, the GAO detailed a history of 

MEWA fraud and abuse.3 The GAO 

recommended that the Department 

develop a mechanism to help States 

identify MEWAs. The Secretary 

exercised the authority under the 

HIPAA provision by creating the Form 

M–1 under a 2000 interim final rule and 

2003 final rule,4 which generally require 

non-plan and ERISA-covered MEWAs 

(and certain other entities that offer or 

provide group health benefits to the 

employees of two or more employers) to 

file the Form M–1 annually with the 

Secretary. The final rule generally 

directed the administrator of a MEWA, 

whether or not an ERISA-covered group 

health plan, (and certain other entities 

that offer or provide health benefits to 

the employees of two or more 

employers) to file the Form M–1 with 

the Secretary. The purpose of this form 

is to allow the Department to determine 

whether the requirements of part 7 are 

being met. Part 7 of ERISA includes 

statutory amendments made by HIPAA 

and other statutes for which MEWAs 

must annually report compliance. These 

include, but are not limited to, the 

Patient Protection and Affordable Care 

Act of 2010 (Pub. L. 111–148, 124 Stat. 

119), and the Health Care and Education 

Reconciliation Act (Pub. L. 111–152, 

124 Stat. 1029) (these are collectively 

known as the ‘‘Affordable Care Act’’), 

the Paul Wellstone and Pete Domenici 

Mental Health Parity and Addiction 

Equity Act of 2008 (Div. C, title V, 

Subtitle B of Pub. L. 110–343, 122 Stat. 

3881), and the Genetic Information 

Nondiscrimination Act of 2008 (Pub. L. 

110–233, 122 Stat. 881). 

Despite the reporting rules, many of 

the MEWA abuses discussed in the GAO 

report persist today. MEWAs frequently 

are marketed by unlicensed entities that 

avoid State insurance reserve, 

contribution, and consumer protection 

requirements. By avoiding these 

requirements, such entities often are 

able to market insurance coverage at 

rates substantially lower than licensed 

insurers, making them particularly 

attractive to some small employers that 

find it difficult to obtain affordable 

health insurance for their employees. 

Unfortunately, due to insufficient 

funding and inadequate reserves, and in 

some situations, excessive 

administrative fees and fraud, some 

MEWAs have become insolvent and 

unable to pay medical benefit claims. 

Therefore, affected employees and their 

dependents have become financially 

responsible for paying medical claims 

they presumed were covered by 

insurance after paying health insurance 

premiums to MEWAs that become 

insolvent. The unfortunate reality is that 

currently, the Department often does not 

find out about insolvent or fraudulent 

MEWAs until significant harm has 

occurred to employers and participants. 

Furthermore, while the Department— 

often working with State insurance 

departments—has had some success 

with both civil and criminal cases 

against MEWA operators, the monetary 

judgments are often uncollectible 

leaving the employers and/or individual 

participants without coverage for claims 

that are sometimes very large. This 

proposal implements the statutory 

requirements in a way that limits the 

burden on legitimate MEWAs but gives 

the Secretary, employers, and the 

participants and beneficiaries of the 

plans those employers sponsor 

additional information about these 

entities and a stronger enforcement 

scheme. Having this information will 

aid the enforcement and prevention of 

fraudulent and insolvent MEWAs.5

Pursuant to the Affordable Care Act’s 

change to section 101(g) of ERISA, this 

proposed rule would amend the 2003 

final rule, as well as the rules related to 

annual reports required of MEWAs that 

are group health plans, and solicit 

comments regarding the restructured 

reporting requirements. Specifically, the 

Affordable Care Act amended section 

101(g) of ERISA to require MEWAs that 

provide benefits consisting of medical 

care (within the meaning of section 

733(a)(2) of ERISA) which are not group 

health plans to register with the 

Secretary prior to their operating in a 

State, in addition to reporting annually 

regarding their compliance with part 7 

of ERISA including the Public Health 

Service Act (PHS Act) market reforms 

incorporated by reference in section 715 

of ERISA. These proposed regulations 

implement the 101(g) MEWA 

registration provision which directs 

MEWAs to report compliance with the 

part 7 rules including the PHS Act 

sections 2701 through 2728. By 

requiring MEWAs to register with the 

Department before operating in a State 

by filing the Form M–1 to provide 

additional information, this proposed 

rule would enhance the State and 

Federal governments’ joint mission to 

prevent and take enforcement action 

against fraudulent and abusive MEWAs 

and limit the losses suffered by 

American workers, their families, and 

businesses in instances when abusive 

MEWAs become insolvent and fail to 

reimburse medical claims. 

The Affordable Care Act reorganizes, 

amends, and adds to the provisions in 

part A of title XXVII of the PHS Act, 

42 U.S.C. 300gg–1 et seq., relating to 

group health plans and health insurance 

issuers in the group and individual 

markets. The term ‘‘group health plan’’ 

is defined in title XXVII of the PHS Act, 

part 7 of ERISA, and chapter 100 of the 

Code and includes both insured and 

self-insured group health plans. The 

Affordable Care Act adds section 

715(a)(1) to ERISA, 29 U.S.C. 

1185d(a)(1), and section 9815(a)(1) to 

the Internal Revenue Code (the Code), 

26 U.S.C. 9815(a)(1), to incorporate the 

provisions of part A of title XXVII of the 

PHS Act into ERISA and the Code, and 

make them applicable to group health 

plans, and health insurance issuers 

providing health insurance coverage in 

connection with group health plans. 

The PHS Act sections incorporated by 

this reference are sections 2701 through 

2728. PHS Act sections 2701 through 

2719A are substantially new, though 

they incorporate some provisions of 

prior law. PHS Act sections 2722 

through 2728 are sections of prior law 

renumbered, with some, mostly minor, 

changes. Section 1251 of the Affordable 

Care Act, as modified by section 10103 

of the Affordable Care Act and section 

2301 of the Reconciliation Act, 

42 U.S.C. 18011, specifies that certain 

plans or coverage existing as of the date 

of enactment (i.e., grandfathered health 

plans) are only subject to certain 

provisions. 


jlentini on DSK4TPTVN1PROD with PROPOSALS2
76224 Federal Register / Vol. 76, No. 234 / Tuesday, December 6, 2011 / Proposed Rules 

II. Overview of Proposal 

A. Proposed Amendment to 29 CFR 

§ 2520.101–2 Under ERISA Section 

101(g) 

These proposed rules would amend 

existing filing rules for MEWAs and 

ECEs in order to implement changes 

made to ERISA section 101(g) in the 

Affordable Care Act. Like the 2003 

regulations, ECEs and MEWAs are 

treated largely the same for filing 

purposes. The main distinction in filing 

requirements is that ECEs are only 

subject to annual M–1 filings for the 

first three years following an origination 

event. We preserved this special rule 

included in the 2003 regulations for 

ECEs as well as e the special filing 

events applicable to MEWAs. In keeping 

with this structure, we propose to 

extend the new filing events prescribed 

by the Affordable Care Act provision to 

MEWAs and ECEs alike. 

Paragraph (a) of the proposal sets 

forth section 101(g) of ERISA that 

directs MEWAs that provide benefits 

consisting of medical care (within the 

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

to register with the Secretary prior to 

operating in a State, and to report 

annually regarding compliance with 

part 7 of ERISA. While the language in 

section 101(g) of ERISA only applies to 

MEWAs that are not group health plans 

(‘‘non-plan MEWAs’’), the proposal 

preserves the structure promulgated as 

part of the final 2003 regulations, which 

required both MEWAs that are group 

health plans (‘‘plan MEWAs’’) and nonplan MEWAs to file the Form M–1, 

based on authority found in sections 

505 and 734 of ERISA. 29 U.S.C. 1135 

and 1191c. Section 505 of ERISA states 

that the Secretary may prescribe such 

regulations as she finds necessary or 

appropriate to carry out the provisions 

of Title I of ERISA. Section 734 of 

ERISA allows the Secretary to 

promulgate such regulations as may be 

necessary or appropriate to carry out the 

provisions of part 7 of ERISA. 

Paragraph (b) defines the terms used 

in the proposal, with some additions 

and modifications from the 2003 final 

rule. Amended paragraph (c) sets forth 

the requirement that, with certain 

exceptions, all MEWAs and certain 

entities that claim not to be a MEWA 

solely due to the exception in section 

3(40)(A)(i) of ERISA (referred to as 

Entities Claiming Exception or ECEs) 

file reports with the Department. 

Paragraph (d) describes how MEWAs 

and ECEs will comply with the 

proposed rule by filing the Form M–1, 

and the conditions under which the 

Secretary may reject a filing. 

Paragraph (e) sets forth the times 

when MEWAs and ECEs will file the 

Form M–1. Paragraph (f) directs that the 

Form M–1 be filed electronically. In 

addition to minimizing errors and 

providing faster access to reported data, 

electronic filing will also be less 

burdensome on the filer. Once 

information about the MEWA or ECE is 

entered into the system, filers will have 

the option of allowing the system to 

copy information provided on a past 

filing into a new filing. This transfer of 

past information provides filers an easy 

way to update or verify information. 

The information provided through Form 

M–1 filings will then be accessible by 

the public and other interested parties 

such as State regulators. 

Paragraph (g) explains the civil 

penalties that may result from a failure 

to comply with the proposed rule. Civil 

penalties for failure to file a report 

required by ERISA section 101(g) or 

§ 2520.101–2 have been applicable for 

non-plan MEWAs under ERISA section 

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

these proposed regulations, the 

Department has extended similar civil 

penalties for a failure to file an annual 

report by plan MEWAs under ERISA 

section 502(c)(2). 

Also, new criminal penalties were 

added by the Affordable Care Act under 

ERISA section 519 for any person who 

knowingly submits false statements or 

false representations of fact in filing 

reports required under the proposal. See 

paragraph 2 below for these changes 

that are being proposed to §§ 2520.103– 

1, 104–20, and 104–41 to further 

enhance the Department’s ability to 

enforce these provisions with regard to 

MEWAs that are group health plans. 

1. Basis and Scope 

These proposed regulations set forth 

rules implementing section 101(g) of 

ERISA, as amended by section 6606 of 

the Affordable Care Act, which directs 

MEWAs that are not group health plans 

to register with the Secretary prior to 

operating in a State. These proposed 

regulations also update the existing 

requirement in section 101(g) of ERISA 

that MEWAs, which are group health 

plans, and certain other entities 

claiming an exception, file the Form 

M–1 upon the occurrence of specified 

events as well as annually. 

2. Definitions 

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

proposed rule adds a definition of 

‘‘operating,’’ and defines it as any 

activity including but not limited to 

marketing, soliciting, providing, or 

offering to provide benefits consisting of 

medical care. This definition, which 

includes marketing and administrative 

activities, governs registration and 

origination filing events for the Form 

M–1 filing for MEWAs and ECEs. 

b. Origination. In order to implement 

the Affordable Care Act amendment to 

ERISA section 101(g), the Department 

amended the 2003 filing rules. The rule 

is meant to apply equally to MEWAs 

and ECEs. The 2003 rules treated 

MEWAs and ECEs equally for purposes 

of special filings by having a combined 

rule for both of these entities to 

determine if special filings were 

necessary which relied on the 

origination definition. The Department 

concluded it to be more responsive to 

the change in the section 101(g) 

statutory language to now refer to 

special filings by MEWAs as a 

registration. The effect of this is that 

MEWAs and ECEs are no longer 

collectively referencing the term 

origination, but now have separate 

origination and registration terms— 

albeit subject to the same special filing 

events. 

The proposed rule first indicates 

events which require a special filing in 

the definition of origination. A special 

filing is required when (in the case of an 

ECE): 

‘‘(i) The ECE first begins operating 

(within the meaning of (b)(8) of this 

section) with regard to the employees of 

two or more employers (including one 

or more self-employed individuals); (ii) 

The ECE, while required to report 

pursuant to paragraph (c)(1)(ii) of this 

section, begins operating in any 

additional State; (iii) The ECE begins 

operating following a merger with 

another ECE (unless all of the ECEs that 

participate in the merger previously 

were last originated at least three years 

prior to the merger); (iv) The number of 

employees receiving coverage for 

medical care under the ECE is at least 

50 percent greater than the number of 

such employees on the last day of the 

previous calendar year (unless the 

increase is due to a merger with another 

ECE under which all ECEs that 

participate in the merger were last 

originated at least three years prior to 

the merger); or (v) The ECE experiences 

a material change in the information 

reported on the most recently filed Form 

M–1 as defined by the Form M–1 

instructions. Event (i) Was modified to 

comply with the new statutory 

requirement that filings be made prior to 

operating in a State. Events (ii) and (v) 

are new special filing events which 

were added to instruct entities to re-file 

with the Department so that it has the 

most up-to-date information. 

c. Reporting. The proposed rule adds 

a definition of ‘‘reporting.’’ ‘‘Reporting’’ 


jlentini on DSK4TPTVN1PROD with PROPOSALS2
Federal Register / Vol. 76, No. 234 / Tuesday, December 6, 2011 / Proposed Rules 76225 

6Title XVII, Public Law 105–277, 112 Stat. 2681 

(Oct. 21, 1998). 

7Public Law 107–347, 116 Stat. 2899 (Dec. 17, 

2002). 

8For further information on the Department of 

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

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

or ‘‘to report’’ means to file the Form M– 

1 as required pursuant to section 101(g) 

of ERISA; § 2520.101–2; or the 

instructions to the Form M–1. The term 

‘‘reporting’’ is used in order to 

correspond to the terminology of 

§ 2560.502c–5 which uses the generic 

term ‘‘report’’ to describe the Form M– 

1 filing process, including the annual 

report, registration, and origination 

filings. 

d. State. The proposed rule adds a 

definition of ‘‘State’’ and defines the 

term by reference to § 2590.701–2. This 

definition was added because MEWAs 

must register, and ECEs must make an 

origination filing, prior to operating in 

a State. 

3. Persons Required To Report 

Paragraph (c) of the proposed rule sets 

forth the persons required to report 

under the proposed rule. As under the 

2003 final rule, the proposed rule 

directs the administrator of a MEWA 

that provides benefits consisting of 

medical care, whether or not the MEWA 

is a group health plan, to file the Form 

M–1. It also requires filing by the 

administrator of an ECE that offers or 

provides coverage consisting of medical 

care during the first three years after the 

ECE is originated. 

4. Information To Be Reported 

Paragraph (d) of the proposed rule 

clarifies that the reporting requirements 

of § 2520.101–2 will only be satisfied by 

filing a completed copy of the Form M– 

1, including any additional statements 

pursuant to the Form M–1 Instructions. 

5. Reporting Requirements and Timing 

Paragraph (e) of the proposed rule 

retains from the 2003 final rule’s 

standards that both MEWAs and ECEs 

must file the Form M–1 annually, with 

ECEs only having to file annually for the 

first 3 years following an origination. 

As mentioned previously, MEWAs 

and ECEs are also subject to special 

filings in certain circumstances. Special 

filing events were included in the 2003 

regulation, but have been relabeled and 

expanded to implement statutory 

language under the proposed rules. To 

clarify the new section 101(g) 

registration standard for MEWAs and 

make parallel changes to the origination 

events for ECEs, the proposed rule 

contains five registration and 

origination events for MEWAs and 

ECEs, only one of which is new (a 

second filing event existed in the 2003 

rules but has been modified). 

The 2003 regulation generally 

requires a special filing when a MEWA 

or ECE (1) Begins operating or providing 

coverage for medical care to employees 

of two or more employers; (2) begins 

offering or providing coverage for 

medical care to employees of two or 

more employers after a merger with 

another MEWA or ECE; or (3) increases 

the number of employees receiving 

medical care under the MEWA or ECE 

by at least 50 percent over the number 

of employees on the last day of the 

previous calendar year. These filing 

events are generally preserved in the 

proposed rules. However, the first event 

was modified to conform to the 

statutory language under ERISA section 

101(g) directing MEWAs to register with 

the Secretary by filing a Form M–1 prior 

to operating in any State. Additionally, 

the proposed rule directs that a filing be 

made in the event a MEWA or ECE 

expands its operations into additional 

States or experiences a material change 

as defined in the Form M–1 

instructions. This filing event was 

added to direct an entity to update its 

Form M–1 filing in the event that it 

experiences changes in its financial or 

custodial information. In the event an 

entity experiences a material change, 

the online filing system will allow them 

to log on to the online filing system, 

give them the option of importing data 

from its most recent completed filing, 

and make the necessary changes. The 

Department is particularly interested in 

receiving comments on this 

requirement. Consistent with the 2003 

regulations, while this rule directs 

MEWAs to submit filings for the 

duration of their existence, ECEs are 

only required to file during the three 

year period following an origination 

event that is not a material change. ECEs 

that experience a material change must 

file during this period but are not 

required to file beyond that three year 

period. 

The proposed rule also applies new 

timing standards on MEWAs and ECEs 

for these special filings. Under the 2003 

regulations, MEWAs and ECEs file the 

Form M–1 within 90 days of the 

occurrence of a special filing event. The 

proposed rule directs entities to file 30 

days prior to or within 30 days of the 

event, depending on the type. The 

timing requirements implement section 

6606 of the Affordable Care Act which 

says that the filling must happen ‘‘prior 

to operating in a State’’ and will also 

facilitate the Department’s timely 

receipt of information related to the 

other special filing events described 

above. 

A provision is included in the 

proposed rule to discourage ‘‘blanket 

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

filings that cover multiple States, unless 

the filer expects to begin operating in all 

the named States in the near future. 

Blanket filings that list States where the 

filer has no immediate intent to operate 

could frustrate the law’s goal of 

gathering and maintaining timely and 

accurate information on MEWAs. Under 

this provision, a filing is considered 

lapsed with respect to a State if benefits 

consisting of medical care are not 

offered or provided in the State (or 

States) during the calendar year 

immediately following the filing. A new 

filing would be submitted if the filer 

intends to continue to operate in that 

State. 

To minimize the burden of 

compliance, we propose to permit 

MEWAs and ECEs to make a single 

filing to satisfy multiple filing events so 

long as the filing is timely for each 

filing. 

As in the 2003 rule, filing extensions 

are available in this proposal. Any filing 

deadline that is a Saturday, Sunday, or 

federal holiday is automatically 

extended to the next business day. A 

more substantial extension is available 

for MEWAs and ECEs that request such 

an extension following the procedure 

outlined in the Instructions to the Form 

M–1. 

6. Electronic Filing 

Paragraph (f) of the proposed rule 

eliminates the option to file a paper 

copy of the completed Form M–1. As is 

now the case for all Form 5500 Annual 

Report filings, and consistent with the 

goals of E-government, as recognized by 

the Government Paperwork Elimination 

Act 6 and the E-Government Act of 

2002,7 we propose that the Form M–1 be 

filed electronically. Electronic filing of 

benefit plan information, among other 

program strategies, would facilitate 

EBSA’s achievement of its Strategic 

Goal to ‘‘assure the security of the 

retirement, health and other workplace 

related benefits of American workers 

and their families.’’ EBSA’s strategic 

goal directly supports the Secretary of 

Labor’s Strategic Goal to ‘‘secure health 

benefits.’’ 8 A cornerstone of our 

enforcement program is the collection, 

analysis, and disclosure of benefit plan 

information. Electronic filing will 

minimize errors and provide faster 

access to reported data, assisting EBSA 

in its enforcement, oversight, and 

disclosure roles and ultimately 

enhancing the security of plan benefits. 

Electronic filing of the M–1 would also 

reduce the paperwork burden and costs 


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9These plan MEWAs would only need to file 

Form 5500 annual return/report and, if applicable, 

Schedule A (Insurance Information) and Schedule 

G, Part III (nonexempt transactions). They would 

not be eligible to file the Form 5500–SF (Short Form 

5500 Annual Return/Report of Small Employee 

Benefit Plan) under § 2520.104–41 and § 2520.103– 

1(c)(2)(ii). The Form 5500–SF does not include 

Schedule A insurance information and the 

Department believes that plan MEWAs subject to 

this proposal that claim to provide insured benefits 

should be required to complete the Schedule A so 

that enforcement officials and the public have 

information about the insurance policy and 

insurance company through which the MEWA is 

providing insurance coverage. In addition, an 

unrelated technical correction to § 2520.104–41 is 

being included in this rulemaking to add an express 

reference to the Form 5500–SF. 

related to printing and mailing forms 

and, with the use of secure account 

access, allow updating of previously 

reported information to facilitate 

simplified future reporting. Finally, 

consistent with current practice, the 

information would be available for 

reference by participants, beneficiaries, 

participating employers, and other 

interested parties such as State 

regulators. 

7. Penalties 

a. Civil penalties and procedures. The 

proposed rule retains the references to 

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

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

civil penalties and procedures. 

b. Criminal penalties and procedures. 

The Affordable Care Act section 6601 

added ERISA section 519 which 

prohibits a person from making false 

statements or representations of fact in 

connection with a MEWAs financial 

condition, the benefits it provides, or its 

regulatory status as it relates to 

marketing or sale of a MEWA. The 

Affordable Care Act also amended 

ERISA section 501(b) to impose criminal 

penalties on any person who is 

convicted of violating the prohibition in 

ERISA section 519. The proposed rule 

adds a cross-reference to section 501(b) 

and 519 of ERISA, 29 U.S.C. 1131 and 

1149 for the purpose of implementing 

these new rules as they relate to filing 

a Form M–1 prior to operating in a State 

or other registration and origination 

filings. 

c. Cease and desist and summary 

seizure and procedures. Section 6605 of 

the Affordable Care Act adds section 

521 to ERISA, which authorizes the 

Secretary to issue cease and desist 

orders, without prior notice or a 

hearing, when it appears to the 

Secretary that the alleged conduct of a 

MEWA is ‘‘fraudulent, or creates an 

immediate danger to the public safety or 

welfare, or is causing or can be 

reasonably expected to cause 

significant, imminent, and irreparable 

public injury.’’ This section also allows 

the Secretary to issue an order to seize 

the assets of a MEWA that the Secretary 

determines to be in a financially 

hazardous condition. The regulation 

providing guidance on the cease and 

desist orders and summary seizure rules 

published elsewhere in this Federal 

Register also include regulatory 

guidance on the procedural rules for 

this process. A cease and desist order 

containing a prohibition against 

transacting business with any MEWA or 

plan would prevent the MEWA or a 

person from avoiding the cease and 

desist order by shutting the MEWA 

down and re-establishing it in a new 

location or under a new identity. 

As such, the proposed rule adds a 

cross-reference to section 521 of ERISA 

and § 2560.521 regarding the Secretary’s 

authority to issue cease and desist and 

summary seizure orders. 

B. Proposed Amendment to Regulations 

Under ERISA Section 104(a)(1), 29 

U.S.C. 1024(a)(1) 

Additional changes are being 

proposed to further enhance the 

Department’s ability to enforce 

§ 2520.101–2. The primary change is the 

addition of a new paragraph (f) to 

§ 2520.103–1 regarding the content of 

the annual report. As part of this 

proposal, existing paragraph (f) of 

§ 2520.103–1 would be redesignated 

paragraph (g), but would be otherwise 

unchanged. New § 2520.103–1(f) would 

apply to all MEWAs that are ERISAcovered plans and that are subject to the 

requirements of § 2520.101–2. This 

change provides that all such MEWAs 

must prove compliance with 

§ 2520.101–2 (filing the Form M–1) in 

order to satisfy the annual reporting 

requirements of § 2520.103–1. Pursuant 

to ERISA section 502(c)(2), 29 U.S.C. 

1132(c)(2), a plan administrator who 

fails to file a Form 5500 Annual Return/ 

Report with a proof of compliance with 

§ 2520.101–2 may be subject to a civil 

penalty of up to $1,100 a day (or higher 

amount if adjusted pursuant to the 

Federal Civil Penalties Inflation 

Adjustment Act of 1990, as amended) 

for each day a plan administrator fails 

or refuses to file a complete report. 

Although ERISA sections 505 and 734 

give the Secretary the authority to 

require MEWAs that are group health 

plans to comply with the requirements 

of § 2520.101–2, there is, however, no 

corresponding ERISA civil penalty for a 

failure to comply with those 

requirements. These proposed changes 

to the Form 5500 annual reporting 

requirements for MEWAs that are group 

health plans will enhance the 

Department’s ability to enforce the Form 

M–1 requirements and ensure that 

MEWAs are subject to the same rules 

under the law. 

Conforming changes adding 

references to new § 2520.103–1(f) are 

proposed for §§ 2520.103–1(a)(2), (b), (c) 

and § 2520.104–41. A corresponding 

change is also proposed for § 2520.104– 

20 to eliminate the limited filing 

exemption for insured or unfunded, 

fully insured, or combination unfunded/ 

fully insured plan MEWAs with fewer 

than 100 participants. It is important to 

note that while the addition of 

§ 2520.103–1(f) and the change to 

§ 2520.104–20 would eliminate the 

annual reporting exemption for such 

plan MEWAs with fewer than 100 

participants, these plan MEWAs are 

subject to the existing (and proposed) 

standards of § 2520.101–2. Moreover, 

the impact of satisfying the annual 

reporting would be substantially less 

burdensome because in addition to 

being eligible for the simplified annual 

reporting for small welfare plans, these 

plan MEWAs would be exempt under 

§ 2520.104–44 from completing 

Schedule I (Financial Information).9

Thus, these changes give the Secretary 

an important enforcement tool while 

imposing minimal burden on plan 

MEWAs. Because it is not clear that 

there are any unfunded/fully insured 

plan MEWAs with fewer than 100 

participants, the Department does not 

believe this is overly burdensome but 

rather ensures that all MEWAs are 

treated the same. Nonetheless, the 

Department is particularly interested in 

receiving comments regarding any 

undue burden this elimination may 

create. 

III. Regulatory Impact Analysis 

A. Executive Order 12866 

Under Executive Order 12866, the 

Department must determine whether a 

regulatory action is ‘‘significant’’ and 

therefore subject to the requirements of 

the Executive Order and subject to 

review by the Office of Management and 

Budget (OMB). Under section 3(f) of the 

Executive Order, a ‘‘significant 

regulatory action’’ is an action that is 

likely to result in a rule (1) Having an 

annual effect on the economy of $100 

million or more, or adversely and 

materially affecting a sector of the 

economy, productivity, competition, 

jobs, the environment, public health or 

safety, or State, local or tribal 

governments or communities (also 

referred to as ‘‘economically 

significant’’); (2) creating serious 

inconsistency or otherwise interfering 

with an action taken or planned by 

another agency; (3) materially altering 


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10 65 FR 715 (02/11/2000) and 68 Fed. Reg. 17494 

(04/09/2003). The Form M–1 has been updated and 

is reissued each year in December by the 

Department and modified periodically to address 

changes to the statutory provisions in part 7 of 

ERISA. 

11See, Employee Benefits: States Need Labor’s 

Help Regulating Multiple Employer Welfare 

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

12As part of the Affordable Care Act, Congress 

also enacted ERISA section 521, which authorized 

the Secretary to issue cease and desist orders, 

without prior notice or a hearing, when it appears 

to the Secretary that a MEWA’s alleged conduct is 

fraudulent, creates an immediate danger to the 

public safety or welfare, or causes or can reasonably 

be expected to cause significant, imminent, and 

irreparable public injury. Section 521 also 

authorizes the Secretary to issue a summary order 

to seize the assets of a MEWA that the Secretary 

determines to be in financially hazardous 

condition. The Department also is proposing rules 

for these provisions, which are published elsewhere 

in today’s Federal Register. 

13The proposal would remove the small welfare 

plan filing exemption under § 2520.104–20. 

Currently, under § 2520.104–20, small insured or 

unfunded welfare benefit plans, including small 

plan MEWAs, are exempt from certain reporting 

and disclosure provisions, including the 

requirement to file an annual Form 5500. By 

removing this exemption, all plan MEWAs will now 

be required to file a Form 5500 with a proof of filing 

a timely Form M–1 filing in order to satisfy the 

annual reporting requirements under ERISA 

Sections 103 and 104. However, small insured and 

unfunded plan MEWAs would be exempt under 

§ 2520.104–44 from completing Schedule I 

(Financial Information). As with other small welfare 

benefit plans subject to the annual reporting 

requirements, small plan MEWAs would be 

required to complete Schedule A (Insurance 

Information), if applicable. 

14 If a MEWA fails to prove that it filed the 

M–1 on its Form 5500, it could be subject to a civil 

penalty of up to $1,000 a day for each day the plan 

administrator fails or refuses to file a complete 

report. 

15Section 2520.101–2(b)(8) of the proposed rule 

provides that the term ‘‘operating’’ means any 

activity including but not limited to marketing, 

soliciting, providing, or offering to provide medical 

care benefits. 

the budgetary impacts of entitlement 

grants, user fees, or loan programs or the 

rights and obligations of recipients 

thereof; or (4) raising novel legal or 

policy issues arising out of legal 

mandates, the President’s priorities, or 

the principles set forth in the Executive 

Order. OMB has determined that this 

action is not economically significant 

within the meaning of section 3(f)(1) of 

the Executive Order but is significant 

under section 3(f)(4) of the Executive 

Order, because it raises novel legal or 

policy issues arising from the 

President’s priorities. 

The Department estimates that the 

total cost of this proposed rule would be 

approximately $124,300 in the first year, 

or an average of approximately $272 for 

each of the 457 entities expected to file 

the Form M–1. These costs are all 

associated with the information 

collection request contained in this 

proposal and, therefore, are discussed in 

the Paperwork Reduction Act Section, 

below. 

1. Summary and Need for Regulatory 

Action 

As discussed earlier in this preamble, 

section 6606 of the Affordable Care Act 

amended section 101(g) of ERISA to 

require the Secretary of Labor to 

promulgate regulations requiring 

MEWAs providing medical care benefits 

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

of ERISA) that are not ERISA-covered 

group health plans (non-plan MEWAs) 

to register with the Secretary before 

operating in a State. 

Before this proposed amendment, 

ERISA section 101(g) permitted the 

Secretary to establish an annual 

reporting requirement on non-plan 

MEWAs that provide medical care 

benefits to determine whether such 

MEWAs comply with the requirements 

of Part 7 of ERISA. The Secretary 

exercised this authority by creating the 

Form M–1 under a 2000 interim final 

rule and 2003 final rule.10

The original MEWA reporting 

requirement was enacted by Congress as 

part of the Health Insurance Portability 

and Accountability Act of 1996 in 

response to a 1992 General Accounting 

Office (GAO) recommendation 

contained in a GAO report.11 As 

discussed above, the GAO 

recommended that the Department 

develop a mechanism to help States 

identify fraudulent and abusive 

MEWAs. The HIPAA provision led to 

the Department’s creation of the Form 

M–1, which generally requires non-plan 

and ERISA-covered MEWAs (and 

certain other entities that offer or 

provide group health benefits to the 

employees of two or more employers) to 

file Form M–1 annually with the 

Secretary. 

In addition to amending the 

Department’s MEWA reporting 

regulation to require MEWAs to register 

with the Secretary before operating in a 

State, these proposed rules also direct 

Form M–1 filers to provide additional 

information regarding the MEWA or 

ECE and apply new timing standards for 

the special filings that are made when 

a MEWA’s or ECE’s status changes. 

These amendments will aid the 

Department in its oversight of MEWAs 

consistent with its expanded authority 

provided by the Affordable Care Act 12

and allow it to provide critical 

information to State insurance 

departments that coordinate their 

investigations and enforcement actions 

against fraudulent and abusive MEWAs 

with the Department. 

Over the last several years, the 

Department has observed a downward 

trend in the number of MEWAs that file 

the Form M–1, raising concerns that 

some existing MEWAs are not filing the 

form. Under the 2003 regulations, the 

Department has the ability to impose 

penalties on ERISA-covered MEWAs 

that fail to file the M–1 only in limited 

circumstances and if a determination 

regarding plan status were made by the 

Secretary. To address this issue and 

encourage compliance with the M–1 

filing requirement, the Department also 

is proposing as part of this regulatory 

action to amend the Form 5500 annual 

reporting standards by requiring all 

ERISA-covered MEWAs, including 

MEWAs with less than 100 

participants,13 to file Form 5500 and 

provide on the form proof of a timely 

filed Form M–1 in order for the plan 

administrator to avoid the Department’s 

imposition of ERISA section 502(c)(2) 

penalties.14

These proposed amendments to the 

Department’s MEWA reporting 

standards would provide a cost effective 

means to implement the expanded 

MEWA reporting as enacted in the 

Affordable Care Act. As stated above, 

the Department estimates that the 

average cost for each entity that the 

Department expects to file the revised 

form would average approximately 

$272. 

2. Benefits of Proposed Rule 

As discussed earlier in this preamble, 

section 6606 of the Affordable Care Act 

amended section 101(g) of ERISA 

directing the Secretary of Labor to 

promulgate regulations requiring 

MEWAs providing medical care benefits 

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

of ERISA) that are not ERISA-covered 

group health plans (non-plan MEWAs) 

to register with the Secretary before 

operating in a State. By implementing 

this statutory amendment, the 

Department would receive prior notice 

of a MEWA’s intention to commence 

operations in a State. Such notification 

would help the Department and State 

insurance commissioners to ensure that 

MEWAs are being lawfully operated and 

that sufficient insurance has been 

purchased or adequate reserves 

established to pay benefit claims before 

the MEWAs begin operating 15 in a 

State. The proposed rule would improve 

MEWA compliance and deter fraudulent 

and abusive MEWA practices, thereby 

protecting and securing the benefits of 

participants and beneficiaries by 

ensuring that MEWA assets are 

preserved and benefits timely paid. 

These potential benefits have not been 


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16EBSA estimates of labor rates include wages, 

other benefits, and overhead based on the National 

Occupational Employment Survey (May 2009, 

Bureau of Labor Statistics) and the Employment 

Cost Index (October 2010, Bureau of Labor 

Statistics). 

17These are rounded values. The totals may differ 

slightly as a result. 

18There were 46 MEWA originations in 2006, 52 

originations in 2007 and 26 originations in 2008. 

This averages to 41 originations per year. 

quantified, but the Department expects 

that they will more than justify their 

costs. 

3. Costs of Proposed Rule 

The costs of the proposed rule are 

associated with the amendments to the 

Form M–1 and Form 5500 reporting 

requirements and are therefore 

discussed in the Paperwork Reduction 

Act section, below. 

B. Paperwork Reduction Act 

As part of its continuing effort to 

reduce paperwork and respondent 

burden, the Department of Labor 

conducts a preclearance consultation 

program to provide the general public 

and Federal agencies with an 

opportunity to comment on proposed 

and continuing collections of 

information in accordance with the 

Paperwork Reduction Act of 1995 (PRA 

95) (44 U.S.C. 3506(c)(2)(A)). This helps 

to ensure that requested data can be 

provided in the desired format, 

reporting burden (time and financial 

resources) is minimized, collection 

instruments are clearly understood, and 

the impact of collection requirements on 

respondents can be properly assessed. 

Currently, the Department is soliciting 

comments concerning the proposed 

information collection request (ICR) 

included in this proposed rule. A copy 

of the ICR may be obtained by 

contacting the individual identified 

below in this notice. The Department 

has submitted a copy of the proposed 

information collection to OMB in 

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

review of its information collections. 

The Department and OMB are 

particularly interested in comments 

that: 

• Evaluate whether the proposed 

collection of information is necessary 

for the proper performance of the 

functions of the agency, including 

whether the information will have 

practical utility; 

• Evaluate the accuracy of the 

agency’s estimate of the burden of the 

collection of information, including the 

validity of the methodology and 

assumptions used; 

• Enhance the quality, utility, and 

clarity of the information to be 

collected; and 

• Minimize the burden of the 

collection of information on those who 

are to respond, including through the 

use of appropriated automated, 

electronic, mechanical, or other 

technological collection techniques or 

other forms of information technology, 

e.g., permitting electronic submission of 

responses. 

Comments should be sent to the 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, Room 10235, New Executive 

Office Building, Washington, DC 20503; 

Attention: Desk Officer for the Employee 

Benefits Security Administration. 

Although comments may be submitted 

through February 6, 2012. Address 

requests for copies of the ICR to G. 

Christopher Cosby, Office of Policy and 

Research, U.S. Department of Labor, 

Employee Benefits Security 

Administration, 200 Constitution 

Avenue NW., Room N 5647, 

Washington, DC 20210. Telephone (202) 

219–8410; Fax: (202) 219–4745. These 

are not toll free numbers. 

Between 2006 and 2009, an average of 

457 entities filed Form M–1 with the 

Department (a high of 508 in 2006 and 

a low of 397 in 2009). Of the total 

filings, on average, 197 were submitted 

via mail and 260 were submitted 

electronically through the Form M–1 

electronic filing system provided by the 

Department via the Internet. The 

fraction filing electronic returns has 

been increasing and reached nearly 65 

percent in 2009. This proposed rule will 

require all filings to be submitted 

electronically. 

As discussed above and pursuant to 

section 6606, the proposed rule would 

amend the information required to be 

disclosed on the Form M–1 by adding 

new data elements. Therefore, the 

Department assumes that all MEWA 

plan administrators that file the Form 

M–1 in-house (an estimated 10 percent 

of filers) would spend two hours 

familiarizing themselves with the 

changes to the form that would be made 

by the proposed regulation. This would 

result in a total hour burden of 92 hours 

(46 MEWAs * 2 hours). The Department 

estimates that Part I of the Form (the 

identifying information) would require 

five minutes to complete. The time 

required to complete Part II would vary 

based on the number of States in which 

the entity provides coverage, and the 

Department estimates that this would 

require 60 minutes for single-State filers 

and 120 minutes for multi-State filers. 

The Department expects the time 

required to complete Part III would be 

15 minutes for fully-insured filers and 

30 minutes for self-insured filers. Table 

1 below summarizes the estimates of 

time required to complete each part of 

the form. Based on the foregoing, the 

Department estimates that the total hour 

burden for MEWAs to file the Form 

M–1 using in-house resources would be 

178 hours in the first year with an 

equivalent cost of $16,200 assuming all 

work will be performed by an employee 

benefits professional at $91.21 per 

hour.16 The cost to submit electronic 

filings would be negligible. 

The Department estimates that the 

annual hour burden for Form M–1 

filings prepared in-house in subsequent 

years would be approximately 94 hours 

as summarized in Table 2.17 The 

Department estimate is based on the 

assumption that approximately 41 new 

MEWAs 18 will file the Form M–1 each 

year, and thus, approximately four new 

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

would take two hours for these 

administrators, resulting in an hour 

burden of eight hours. The Department 

estimates that MEWAs preparing the 

form in-house would spend four hours 

completing part I, 68 hours completing 

Part II, and 15 hours completing part III. 

The equivalent cost of this annual hour 

burden is estimated to be $8,600, 

assuming a $91.21 hourly labor rate for 

an employee benefits professional. 

TABLE 1—TIME TO FILL OUT FORM

[Minutes] 

Fully-insured Self-insured 

One State Multi States One State Multi States 

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

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

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


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19This assumption is made in connection with 

EBSA’s principal reporting form, the Form 5500, 

and was validated through a filer survey. 

TABLE 1—TIME TO FILL OUT FORM—Continued 

[Minutes] 

Fully-insured Self-insured 

One State Multi States One State Multi States 

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

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

Fully-insured Self-insured 

Total 

One State Multi States One State Multi States 

Number of MEWAs ................................................................................. 16 17 8 5 46 

Review: Year 1 ........................................................................................ 32 34 16 10 92 

New Filing: Subsequent Years ................................................................ 3 3 1 1 8 

Part I ........................................................................................................ 1 1 1 0.5 4 

Part II ....................................................................................................... 16 33 8 11 68 

Part III ...................................................................................................... 4 4 4 3 15 

Total Time: Year 1 ........................................................................... 53 73a 29 24 178 

Total Time: Subsequent Years ........................................................ 24 41 14 15 94 

1. Cost Burden 

The Department assumes that 90 

percent of the 457 MEWAs (411 

MEWAs) that will file the Form M–1 

will use third-party service providers to 

complete and submit the Form M–1.19

Because the Department is proposing to 

add additional data elements to the 

form, the Department assumes that in 

the year of implementation, all service 

providers would spend additional time 

familiarizing themselves with the 

changes. The Department estimates that 

MEWAs that use third party service 

providers would incur the cost of one 

hour for service providers to review the 

new rule as service providers likely will 

provide this service for multiple 

MEWAs and therefore spread this 

burden across multiple MEWAs. This 

results in a one-time cost burden of 

$37,500 (411 MEWAs * 1 hour * 

$91.21). 

The total estimated cost burden for 

preparing the form is arrived at by 

multiplying the number of filers (found 

in Table 3) by the amount of time 

required to prepare the documents 

(Table 1) and multiplying this result by 

the hourly cost of an employee benefits 

professional ($91.21 dollars an hour). 

Based on the foregoing, the total cost 

burden for MEWAs that use purchased 

third-party resources to file the M–1 

form is $108,100 hours in the first year 

and $70,700 in later years. Table 3 

summarizes the estimates of the cost 

burden. 

TABLE 3—COST BURDEN TO PREPARE FORM M–1, THIRD-PARTY PREPARATION

Fully-insured Self-insured 

Total 

One State Multi States One State Multi States 

Number of MEWAs ................................................................................. 140 149 73 49 411 

Review: Year 1 ........................................................................................ $12,800 $13,600 $6,700 $4,500 $37,500 

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

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

Part II ....................................................................................................... $12,800 $27,100 $6,600 $8,900 $55,400 

Part III ...................................................................................................... $3,200 $3,400 $3,300 $2,200 $12,100 

Total Time: Year 1 ........................................................................... $29,800 $45,200 $17,200 $15,900 $108,100 

Total Time: Subsequent Years ........................................................ $17,100 $31,600 $10,500 $11,500 $70,700 

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

The proposed regulations direct an 

ERISA-covered plan MEWA that is 

subject to Form M–1 requirements to 

include proof of filing the Form M–1 as 

part of the Form 5500. Accordingly, the 

Department is proposing to add a new 

Part III to the Form 5500, which would 

ask for information regarding whether 

the employee welfare benefit plan is a 

MEWA subject to the Form M–1 

requirements, and if so, whether the 

plan is currently in compliance with the 

Form M–1 requirements under 

§ 2520.101–2. Plan administrators that 

indicate the plan is a MEWA subject to 

the Form M–1 requirements also would 

be required to enter the receipt 

confirmation code for the most recent 

Form M–1 filed with the Department. 

Failure to answer the Form M–1 

compliance questions will result in 

rejection of the Form 5500 Annual 

Return/Report as incomplete and civil 

penalties may be assessed pursuant to 

ERISA section 502(c)(2). The 

Department believes that the burden 

associated with this revision would be 


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20U.S. Small Business Administration, ‘‘Table of 

Small Business Size Standards Matched to North 

American Industry Classification System Codes,’’ 

http://www.sba.gov/sites/default/files/ 

Size_Standards_Table.pdf. 

21 Kaiser Family Foundation and Health Research 

Educational Trust ‘‘Employer Health Benefits, 2009 

Annual Survey.’’ The reported numbers are from 

Exhibit 1.2 and are for the category Annual, all 

Small Firms (3–199 workers). 

de minimis, because plan administrators 

would know whether the plan MEWA is 

subject to and in compliance with the 

Form M–1 requirements and they would 

have the receipt confirmation code for 

the most recent Form M–1 filing readily 

available. 

The proposed regulations also would 

remove the exemption from filing the 

Form 5500 for ERISA-covered MEWAs 

that are unfunded or insured and have 

fewer than 100 participants. Following 

the methodology used to calculate the 

burden in the Form 5500 regulations, 

the Department estimates that small 

ERISA-covered MEWAs filing a Form 

5500 and completing Schedule A and 

Part III of Schedule G would incur an 

annual cost of $450 to engage a thirdparty service provider to prepare the 

form and schedules for submission. The 

Department does not have sufficient 

data to determine the number of small, 

ERISA-covered MEWAs that would be 

required to file the Form 5500 under the 

proposed rule, but believes that the 

number of such MEWAs would be 

small, because 90 percent of MEWAs 

that file Form M–1 with the Department 

cover more than 100 participants. 

2. Cost to the Government 

The Department estimates that the 

cost to the Federal government to 

process Form M–1s is approximately 

$7,200. This includes the cost to process 

online submissions and maintain the 

processing system, and was estimated 

by the offices within EBSA that are 

responsible for overseeing these 

activities. 

TABLE 4—Cost of Federal 

Government of Form M–1 

Processing of M1 Forms: 

Online .......................................... $2,200 

Maintenance of System .............. 5,000 

Total ......................................... 7,200 

These paperwork burden estimates 

are summarized as follows: 

Type of Review: Revised collection. 

Agency: Employee Benefits Security 

Administration, Department of Labor. 

Title: MEWA Form M–1. 

OMB Control Number: 1210–0116. 

Affected Public: Business or other forprofit; not-for-profit institutions. 

Estimated Number of Respondents: 

457 (first year); 457 (three-year average). 

Estimated Number of Responses: 457 

(first year); 457 (three-year average). 

Frequency of Response: Annually. 

Estimated Annual Burden Hours: 178 

(first year); 122 (three-year average). 

Estimated Annual Burden Cost: 

$108,100 (first year); $83,200 (three-year 

average). 

C. Regulatory Flexibility Act 

The Regulatory Flexibility Act 

(5 U.S.C. 601 et seq.) (RFA) imposes 

certain requirements with respect to 

Federal rules that are subject to the 

notice and comment requirements of 

section 553(b) of the Administrative 

Procedure Act (5 U.S.C. 551 et seq.) and 

are likely to have a significant economic 

impact on a substantial number of small 

entities. Unless an agency certifies that 

a rule will not have a significant 

economic impact on a substantial 

number of small entities, section 603 of 

the RFA requires the agency to present 

an initial regulatory flexibility analysis 

at the time of the publication of the 

notice of proposed rulemaking 

describing the impact of the rule on 

small entities. Small entities include 

small businesses, organizations and 

governmental jurisdictions. 

The Department does not have data 

regarding the total number of MEWAs 

that currently exist. The best 

information the Department has to 

estimate the number of MEWAs is based 

on filing of the Form M–1, which is an 

annual report that MEWAs and certain 

collectively bargained arrangements file 

with the Department. Nearly 400 

MEWAs filed the Form M–1 with the 

Department in 2009, the latest year for 

which data is available. 

The Small Business Administration 

uses a size standard of less than 

$7 million in average annual receipts as 

the cut off for small business in the 

finance and insurance sector.20 While 

the Department does not collect revenue 

information on the Form M–1, it does 

collect data regarding the number of 

participants covered by MEWAs that file 

Form M–1 and can use participant data 

and average premium data to determine 

the number of MEWAs that are small 

entities, because their revenues do not 

exceed the $7 million threshold. For 

2009, the average single coverage annual 

premium was $4,717 and the average 

annual family coverage premium was 

$12,696.21 Combining these premium 

estimates with estimates of the ratio of 

policies to the covered population from 

the Current Population Survey at 

employers with less than 500 workers 

(0.309 for single coverage and 0.217 for 

family coverage), the Department 

estimates that 60 percent of MEWAs 

(243 MEWAs) are small entities. 

While this number is a relatively large 

fraction of all MEWAs, it is about 7 

percent when expressed as a fraction of 

all participants covered by MEWAs. In 

addition, the Department notes that the 

reporting burden that would be imposed 

on all MEWAs by the proposed rule is 

estimated as an average cost of $272 for 

each MEWA filing Form M–1. For all 

but the smallest MEWAs (less than 15 

participants), this represents less than 

one-half of one percent of revenues. 

The proposed regulations also would 

remove the exemption from filing the 

Form 5500 for ERISA-covered MEWAs 

that are unfunded or insured, fully 

insured, or combination unfunded/fully 

insured covering fewer than 100 

participants. As discussed in the PRA 

section above, the Department estimates 

that these small ERISA-covered MEWAs 

would incur an annual cost of $450 to 

engage a third-party service provider to 

prepare the form and schedules for 

submission. The Department does not 

have sufficient data to determine the 

number of small plan MEWAs that 

would be required to file the Form 5500 

under the proposed rule. About 10 

percent (48) of MEWAs filing Form 

M–1 in 2009 had less than 100 

participants. However, the 2009 Form 

M–1 lacks information on the source of 

funding to determine which of these 

small MEWAs would be subject to the 

proposed rule. 

Accordingly, the Department hereby 

certifies that this proposed regulation 

would not have a significant economic 

impact on a substantial number of small 

entities. The Department invites public 

comments regarding this finding. 

D. Unfunded Mandates Reform Act 

For purposes of the Unfunded 

Mandates Reform Act of 1995 (2 U.S.C. 

1501 et seq.), as well as Executive Order 

12875, this proposed rule does not 

include any federal mandate that may 

result in expenditures by State, local, or 

tribal governments, or the private sector, 

which may impose an annual burden of 

$100 million. 

E. Executive Order 13132 

When an agency promulgates a 

regulation that has federalism 

implications, Executive Order 13132 

(64 FR 43255, August 10, 1999), requires 

the Agency to provide a federalism 

summary impact statement. Pursuant to 

section 6(c) of the Order, such a 

statement must include a description of 

the extent of the agency’s consultation 

with State and local officials, a 

summary of the nature of their concerns 

and the agency’s position supporting the 


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need to issue the regulation, and a 

statement of the extent to which the 

concerns of the State have been met. 

This regulation has federalism 

implications, because the States and the 

Federal government share dual 

jurisdiction over MEWAs that are 

employee benefit plans or hold plan 

assets. Generally, States are primarily 

responsible for overseeing the financial 

soundness and licensing of MEWAs 

under State insurance laws. The 

Department enforces ERISA’s fiduciary 

responsibility provisions against 

MEWAs that are ERISA plans or hold 

plan assets. 

Over the years, the Department and 

State insurance departments have 

worked closely and coordinated their 

investigations and other actions against 

fraudulent and abusive MEWAs. For 

example, EBSA regional offices have 

met with State officials in their regions 

and supported their enforcement efforts 

to shut down fraudulent and abusive 

MEWAs. By requiring MEWAs to 

register with Department before 

operating in a State by filing Form M– 

1 and to provide additional information, 

this proposed rule would enhance the 

State and Federal governments’ joint 

mission to take enforcement action 

against fraudulent and abusive MEWAs 

and limit the losses suffered by 

American workers, their families, and 

businesses when abusive MEWAs 

become insolvent and fail to reimburse 

medical claims. 

List of Subjects in 29 CFR Part 2520 

Accounting, Employee benefit plans, 

Pensions, Reporting and recordkeeping 

requirements. 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

29 CFR Chapter XXV 

For the reasons set out in the 

preamble, part 2520 of Chapter XXV of 

Title 29 of the Code of Federal 

Regulations is amended as follows: 

PART 2520—[AMENDED] 

1. The authority for part 2520 is 

revised to read: 

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

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

Labor’s Order 3–2010, 75 FR 55354 

(September 10, 2010). Sec. 2520.101–2 also 

issued under 29 U.S.C. 1181–1183, 1181 

note, 1185, 1185a–d, and 1191–1191c. Sec. 

2520.103–1 also issued under 26 U.S.C. 6058 

note. Sec. 2520.101–6 also issued under 

§ 502(a)(3), 120 Stat. 780, 940 (2006); Secs. 

2520.102–3, 2520.104b–1 and 2520.104b–3 

also issued under 29 U.S.C. 1003, 1181–1183, 

1181 note, 1185, 1185a–d, 1191, and 1191a– 

c. Secs. 2520.104b–1 and 2520.107 also 

issued under 26 U.S.C. 401 note, 111 Stat. 

788; 

2. Section 2520.101–2 is revised to 

read as follows: 

§ 2520.101–2 Filing by Multiple Employer 

Welfare Arrangements and Certain Other 

Related Entities. 

(a) Basis and scope. Section 101(g) of 

the Employee Retirement Income 

Security Act (ERISA), as amended by 

the Patient Protection and Affordable 

Care Act, requires the Secretary of Labor 

(the Secretary) to establish, by 

regulation, a requirement that multiple 

employer welfare arrangements 

(MEWAs) providing benefits that consist 

of medical care (as described in 

paragraph (b)(6), below), which are not 

group health plans, register with the 

Secretary prior to operating in a State. 

Section 101(g) also permits the 

Secretary to require, by regulation, such 

MEWAs to report, not more frequently 

than annually, in such form and manner 

as the Secretary may require, for the 

purpose of determining the extent to 

which the requirements of part 7 of 

subtitle B of title I of ERISA (part 7) are 

being carried out in connection with 

such benefits. Section 734 of ERISA 

provides that the Secretary may 

promulgate such regulations as may be 

necessary or appropriate to carry out the 

provisions of part 7. This section sets 

out requirements for reporting by 

MEWAs that provide benefits that 

consist of medical care and by certain 

entities that claim not to be a MEWA 

solely due to the exception in section 

3(40)(A)(i) of ERISA (referred to in this 

section as Entities Claiming Exception 

or ECEs). The reporting requirements 

apply regardless of whether the MEWA 

or ECE is a group health plan. 

(b) Definitions. As used in this 

section, the following definitions apply: 

(1) Administrator means—(i) The 

person specifically so designated by the 

terms of the instrument under which the 

MEWA or ECE is operated; 

(ii) If the MEWA or ECE is a group 

health plan and the administrator is not 

so designated, the plan sponsor (as 

defined in section 3(16)(B) of ERISA); or 

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

which an administrator is not 

designated and a plan sponsor cannot be 

identified, jointly and severally, the 

person or persons actually responsible 

(whether or not so designated under the 

terms of the instrument under which the 

MEWA or ECE is operated) for the 

control, disposition, or management of 

the cash or property received by or 

contributed to the MEWA or ECE, 

irrespective of whether such control, 

disposition, or management is exercised 

directly by such person or persons or 

indirectly through an agent, custodian, 

or trustee designated by such person or 

persons. 

(2) Entity Claiming Exception (ECE) 

means an entity that claims it is not a 

MEWA on the basis that the entity is 

established or maintained pursuant to 

one or more agreements that the 

Secretary finds to be collective 

bargaining agreements within the 

meaning of section 3(40)(A)(i) of ERISA 

and § 2510.3–40. 

(3) Excepted benefits means excepted 

benefits within the meaning of section 

733(c) of ERISA and § 2590.701–2. 

(4) Group health plan means a group 

health plan within the meaning of 

section 733(a) of ERISA and § 2590.701– 

2. 

(5) Health insurance issuer means a 

health insurance issuer within the 

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

and § 2590.701–2. 

(6) Medical care means medical care 

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

of ERISA and § 2590.701–2. 

(7) Multiple employer welfare 

arrangement (MEWA) means a multiple 

employer welfare arrangement within 

the meaning of section 3(40) of ERISA. 

(8) Operating means any activity 

including but not limited to marketing, 

soliciting, providing, or offering to 

provide benefits consisting of medical 

care. 

(9) Origination means the occurrence 

of any of the following events (and an 

ECE is considered to have been 

originated when any of the following 

events occurs)— 

(i) The ECE begins operating with 

regard to the employees of two or more 

employers (including one or more selfemployed individuals); 

(ii) The ECE, while required to report 

pursuant to paragraph (c)(1)(ii) of this 

section, begins operating in any 

additional State; 

(iii) The ECE begins operating 

following a merger with another ECE 

(unless all of the ECEs that participate 

in the merger previously were last 

originated at least three years prior to 

the merger); 

(iv) The number of employees 

receiving coverage for medical care 

under the ECE is at least 50 percent 

greater than the number of such 

employees on the last day of the 

previous calendar year (unless the 

increase is due to a merger with another 

ECE under which all ECEs that 

participate in the merger were last 

originated at least three years prior to 

the merger); or 

(v) The ECE, during the three-year 

period following an event described in 

(b)(9)(i)–(iv) above, experiences a 


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material change as defined in the Form 

M–1 instructions. 

(10) Reporting or to report means to 

file the Form M–1 as required pursuant 

to sections 101(g); § 2520.101–2; or the 

instructions to the Form M–1. 

(11) State means State within the 

meaning of § 2590.701–2. 

(c) Persons required to report—(1) 

General rule. Except as provided in 

paragraph (c)(2) of this section, the 

following persons are required to report 

under this section: 

(i) The administrator of a MEWA 

regardless of whether the entity is a 

group health plan; and 

(ii) The administrator of an ECE 

during the three year period following 

an event described in (b)(9)(i)–(iv). 

(2) Exceptions—(i) Nothing in this 

paragraph (c) shall be construed to 

require reporting under this section by 

the administrator of a MEWA or ECE 

described under this paragraph (c)(2)(i). 

(A) A MEWA or ECE licensed or 

authorized to operate as a health 

insurance issuer in every State in which 

it offers or provides coverage for 

medical care to employees; 

(B) A MEWA or ECE that provides 

coverage that consists solely of excepted 

benefits, which are not subject to part 7. 

If the MEWA or ECE provides coverage 

that consists of both excepted benefits 

and other benefits for medical care that 

are not excepted benefits, the 

administrator of the MEWA or ECE is 

required to report under this section; 

(C) A MEWA or ECE that is a group 

health plan not subject to ERISA, 

including a governmental plan, church 

plan, or a plan maintained solely for the 

purpose of complying with workmen’s 

compensation laws, within the meaning 

of sections (4)(b)(1), 4(b)(2), or 4(b)(3) of 

ERISA, respectively; or 

(D) A MEWA or ECE that provides 

coverage only through group health 

plans that are not covered by ERISA, 

including governmental plans, church 

plans, or plans maintained solely for the 

purpose of complying with workmen’s 

compensation laws within the meaning 

of sections 4(b)(1), 4(b)(2), or 4(b)(3) of 

ERISA, respectively (or other 

arrangements not covered by ERISA, 

such as health insurance coverage 

offered to individuals other than in 

connection with a group health plan, 

known as individual market coverage); 

(ii) Nothing in this paragraph (c) shall 

be construed to require reporting under 

this section by the administrator of an 

entity that would not constitute a 

MEWA or ECE but for the following 

circumstances under this paragraph 

(c)(2)(ii). 

(A) The entity provides coverage to 

the employees of two or more trades or 

businesses that share a common control 

interest of at least 25 percent at any time 

during the plan year, applying the 

principles similar to the principles of 

section 414(c) of the Internal Revenue 

Code; 

(B) The entity provides coverage to 

the employees of two or more employers 

due to a change in control of businesses 

(such as a merger or acquisition) that 

occurs for a purpose other than avoiding 

Form M–1 filing and is temporary in 

nature. For purposes of this paragraph, 

‘‘temporary’’ means the MEWA or ECE 

does not extend beyond the end of the 

plan year following the plan year in 

which the change in control occurs; or 

(C) The entity provides coverage to 

persons (excluding spouses and 

dependents) who are not employees or 

former employees of the plan sponsor, 

such as non-employee members of the 

board of directors or independent 

contractors, and the number of such 

persons who are not employees or 

former employees does not exceed one 

percent of the total number of 

employees or former employees covered 

under the arrangement, determined as of 

the last day of the year to be reported 

or, determined as of the 60th day 

following the date the MEWA or ECE 

began operating in a manner such that 

a filing is required pursuant to 

paragraph (e)(2)(ii), (iii), or (iv) of this 

section. 

(3) Examples. The rules of this 

paragraph (c) are illustrated by the 

following examples: 

Example 1. (i) Facts. MEWA A begins 

operating by offering coverage to the 

employees of two or more employers on 

January 1, 2012. MEWA A is licensed or 

authorized to operate as a health insurance 

issuer in every State in which it offers 

coverage for medical care to employees. 

(ii) Conclusion. In this Example 1, the 

administrator of MEWA A is not required to 

report via Form M–1. MEWA A meets the 

exception to the filing requirement in 

paragraph (c)(2)(i)(A) of this section because 

it is licensed or authorized to operate as a 

health insurance issuer in every State in 

which it offers coverage for medical care to 

employees. 

Example 2. (i) Facts. Company B maintains 

a group health plan that provides benefits for 

medical care for its employees (and their 

dependents). Company B establishes a joint 

venture in which it has a 25 percent stock 

ownership interest, determined by applying 

the principles under section 414(c) of the 

Internal Revenue Code, and transfers some of 

its employees to the joint venture. Company 

B continues to cover these transferred 

employees under its group health plan. 

(ii) Conclusion. In this Example 2, the 

administrator is not required to file the Form 

M–1 because Company B’s group health plan 

meets the exception to the filing requirement 

in paragraph (c)(2)(ii)(A) of this section. This 

is because Company B’s group health plan 

would not constitute a MEWA but for the fact 

that it provides coverage to two or more 

trades or businesses that share a common 

control interest of at least 25 percent. 

Example 3. (i) Facts. Company C maintains 

a group health plan that provides benefits for 

medical care for its employees. The plan year 

of Company C’s group health plan is the 

fiscal year for Company C, which is October 

1st–September 30th. Therefore, October 1, 

2012–September 30, 2013 is the 2013 plan 

year. Company C decides to sell a portion of 

its business, Division Z, to Company D. 

Company C signs an agreement with 

Company D under which Division Z will be 

transferred to Company D, effective 

September 30, 2013. The change in control of 

Division Z therefore occurs on September 30, 

2013. Under the terms of the agreement, 

Company C agrees to continue covering all of 

the employees that formerly worked for 

Division Z under its group health plan until 

Company D has established a new group 

health plan to cover these employees. Under 

the terms of the agreement, it is anticipated 

that Company C will not be required to cover 

the employees of Division Z under its group 

health plan beyond the end of the 2014 plan 

year, which is the plan year following the 

plan year in which the change in control of 

Division Z occurred. 

(ii) Conclusion. In this Example 3, the 

administrator of Company C’s group health 

plan is not required to report via Form M– 

1 on March 1, 2014 for fiscal year 2013 

because it is subject to the exception to the 

filing requirement in paragraph (c)(2)(ii)(B) of 

this section for an entity that would not 

constitute a MEWA but for the fact that it is 

created by a change in control of businesses 

that occurs for a purpose other than to avoid 

filing the Form M–1 and is temporary in 

nature. Under the exception, ‘‘temporary’’ 

means the MEWA does not extend beyond 

the end of the plan year following the plan 

year in which the change in control occurs. 

The administrator is not required to file the 

2013 Form M–1 because it is anticipated that 

Company C will not be required to cover the 

employees of Division Z under its group 

health plan beyond the end of the 2014 plan 

year, which is the plan year following the 

plan year in which the change in control of 

businesses occurred. 

Example 4. (i) Facts. Company E maintains 

a group health plan that provides benefits for 

medical care for its employees (and their 

dependents) as well as certain independent 

contractors who are self-employed 

individuals. The plan is therefore a MEWA. 

The administrator of Company E’s group 

health plan uses calendar year data to report 

for purposes of the Form M–1. The 

administrator of Company E’s group health 

plan determines that the number of 

independent contractors covered under the 

group health plan as of the last day of 

calendar year 2012 is less than one percent 

of the total number of employees and former 

employees covered under the plan 

determined as of the last day of calendar year 

2012. 

(ii) Conclusion. In this Example 4, the 

administrator of Company E’s group health 

plan is not required to report via Form M– 


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1 for calendar year 2012 (a filing that is 

otherwise due by March 1, 2013) because it 

is subject to the exception to the filing 

requirement provided in paragraph 

(c)(2)(ii)(C) of this section for entities that 

cover a very small number of persons who 

are not employees or former employees of the 

plan sponsor. 

(d) Information to be reported— (1) 

Any reporting required by this section 

shall consist of a completed copy of the 

Form for Multiple Employer Welfare 

Arrangements (MEWAs) and Certain 

Entities Claiming Exception (ECEs) 

(Form M–1) and any additional 

statements required pursuant to the 

Instructions to the Form M–1. 

(2) Rejected filings.—The Secretary 

may reject any filing under this section 

if the Secretary determines that the 

filing is incomplete, in accordance with 

§ 2560.502c–5. 

(3) If the Secretary rejects a filing 

under paragraph (d)(2) of this section, 

and if a revised filing satisfactory to the 

Secretary is not submitted within 45 

days after the notice of rejection, the 

Secretary may bring a civil action for 

such relief as may be appropriate 

(including penalties under section 

502(c)(5) of ERISA and § 2560.502c–5). 

(e) Reporting requirements and 

timing—(1) Period for which reporting is 

required. A completed copy of the Form 

M–1 is required to be filed for each 

calendar year during all or part of which 

the MEWA or ECE is operating. 

(2) Filing deadline—(i)(A) General 

March 1 filing due date for annual 

filings. Except as provided in paragraph 

(e)(2)(i)(B) of this section, a completed 

copy of the Form M–1 is required to be 

filed on or before each March 1 that 

follows a period for which reporting is 

required (as described in paragraph 

(e)(1) of this section). 

(B) Exception. Paragraph (e)(2)(i) of 

this section does not apply to ECEs and 

MEWAs if, between October 1 and 

December 31, they experience an 

origination or registration event and 

make the subsequent, timely filing. 

Thus, no annual report is due in March 

if a MEWA has a registration event or 

an ECE has an origination event 

between October 1 and December 31. 

However the exception applies only if 

the MEWA or ECE makes a timely filing 

pursuant to paragraph (e)(2)(ii), (iii), or 

(iv) of this section. 

(ii) Special rule requiring an 

Origination Filing when an ECE is 

originated—(A) In general. Except as 

provided in paragraph (e)(2)(ii)(B) of 

this section, when an ECE is originated, 

the administrator of the ECE is also 

required to file a completed copy of the 

Form M–1 30 days prior to the 

origination date. 

(B) Exception. Paragraph (e)(2)(ii)(A) 

of this section does not apply to ECEs 

that experience an origination as 

described in paragraphs (b)(9)(iii), (iv), 

or (v) of this section. Such entities are 

required to file a completed copy of the 

Form M–1 by the 30th day following the 

origination date. 

(iii) Special rule requiring that a 

MEWA register with the Secretary prior 

to operating in a State—(A) In general. 

Except as provided in paragraph 

(e)(2)(iii)(B) of this section, the 

administrator of the MEWA is required 

to register with the Secretary by filing a 

completed Form M–1 30 days prior to 

operating in any State. 

(B) Exception. Paragraph (e)(2)(iii)(A) 

of this section does not apply to 

MEWAs that, prior to the effective date 

of this section, were already in 

operation in a State (or States). Such 

entities are required to submit an annual 

filing pursuant to annual reporting rules 

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

section for that State (or those States). 

(iv) Special rule requiring MEWAs to 

make additional registration filings. 

Subsequent to registering with the 

Secretary pursuant to paragraph 

(e)(2)(iii)(A), the administrator of a 

MEWA shall make an additional 

registration filing: 

(A) 30 days prior to operating in any 

additional State or States that were not 

indicated on a previous report filed 

pursuant to paragraph (e)(2)(i) or 

(e)(2)(iii)(A); 

(B) Within 30 days of the MEWA 

operating with regard to the employees 

of an additional employer (or 

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

with another MEWA; 

(C) Within 30 days of the date the 

number of employees receiving coverage 

for medical care under the MEWA is at 

least 50 percent greater than the number 

of such employees on the last day of the 

previous calendar year; or 

(D) Within 30 days of experiencing a 

material change as defined in the Form 

M–1 instructions. 

(v) Anti-abuse rule. If a MEWA or ECE 

neither offers nor provides benefits 

consisting of medical care within a State 

during the calendar year immediately 

following the year in which an 

origination filing is made by the ECE 

pursuant to paragraph (e)(2)(ii) (due to 

an event described in paragraph 

(b)(9)(ii)) or a registration filing is made 

by the MEWA pursuant to (e)(2)(iii)(A) 

or (e)(2)(iv)(A), with respect to operating 

in such State, such filing will be 

considered to have lapsed. 

(vi) Multiple filings not required in 

certain circumstances. If multiple filings 

are required under this paragraph (e)(2), 

a single filing will satisfy this section so 

long as the filing is timely for each 

required filing. 

(vii) Extensions. (A) An extension 

may be granted for filing a report 

required by paragraph (e)(2)(i)(A) of this 

section, if the administrator complies 

with the extension procedure prescribed 

in the Instructions to the Form M–1. 

(B) If the filing deadline set forth in 

this paragraph (e)(2) is a Saturday, 

Sunday, or federal holiday, the form 

must be filed no later than the next 

business day. 

(3) Examples. The rules of this 

paragraph (e) are illustrated by the 

following examples: 

Example 1. (i) Facts. MEWA A began 

offering coverage for medical care to the 

employees of two or more employers on July 

1, 2003 (and continues to offer such 

coverage). MEWA A has satisfied all filing 

requirements to date. 

(ii) Conclusion. In this Example 1, the 

administrator of MEWA A must continue to 

file a completed Form M–1 each year by 

March 1 but the administrator is not required 

to register with the Secretary because MEWA 

A meets the exception to the registration 

requirement in paragraph (e)(2)(iii)(B) of this 

section and has not experienced any event 

described in paragraph (e)(2)(iv) that would 

require registering with the Secretary. 

Example 2. (i) Facts. As of February 22, 

2012, MEWA B is preparing to operate in 

States Y and Z. MEWA B is not licensed or 

authorized to operate as a health insurance 

issuer in any State and does not meet any of 

the other exceptions set forth in paragraph 

(c)(2) of this section. 

(ii) Conclusion. In this Example 2, the 

administrator of MEWA B is required to 

register with the Secretary by filing a 

completed Form M–1 30 days prior to 

operating in States Y or Z. The administrator 

of MEWA B must also report by filing the 

Form M–1 annually by every March 1 

thereafter. 

Example 3. (i) Facts. As of March 28, 2012, 

MEWA C is operating in States V and W. 

MEWA C has satisfied the requirements of 

(e)(2)(iii) with respect to those States. MEWA 

C is not licensed or authorized to operate as 

a health insurance issuer in any State and 

does not meet any of the other exceptions set 

forth in (c)(2) of this section. On April 1, 

2012 MEWA C begins operating in State X. 

(ii) Conclusion. In this Example 3, the 

administrator of MEWA C is required to 

make an additional registration filing with 

the Secretary 30 days prior to operating in 

State X. Additionally, the administrator of 

MEWA C must continue to file the Form M– 

1 annually by every March 1 thereafter. 

Example 4. (i) Facts. ECE A began offering 

coverage for medical care to the employees 

of two or more employers on January 1, 2007 

and ECE A has not been involved in any 

mergers or experienced any other origination 

as described in paragraph (b)(9) of this 

section. 

(ii) Conclusion. In this Example 4, ECE A 

was originated on January 1, 2007 and has 

not been originated since then. Therefore, the 


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administrator of ECE A is not required to file 

a Form M–1 on March 1, 2012 because the 

last time the ECE A was originated was 

January 1, 2007 which is more than 3 years 

prior to March 1, 2012. Further, the ECE has 

satisfied its reporting requirements by 

making 3 timely annual filings after its 

origination. 

Example 5. (i) Facts. ECE B wants to begin 

offering coverage for medical care to the 

employees of two or more employers on July 

1, 2012. 

(ii) Conclusion. In this Example 5, the 

administrator of ECE B must file a completed 

Form M–1 on or before June 1, 2012 (which 

is 30 days prior to the origination date). In 

addition, the administrator of ECE B must file 

an updated copy of the Form M–1 by March 

1, 2013 because the last date ECE B was 

originated was June 1, 2012 (which is less 

than 3 years prior to the March 1, 2013 due 

date). Furthermore, the administrator of ECE 

B must file the Form M–1 by March 1, 2014 

and again by March 1, 2015 (because July 1, 

2012 is less than three years prior to March 

1, 2014 and March 1, 2015, respectively). 

However, if ECE B is not involved in any 

mergers and does not experience any other 

origination as described in paragraph (b)(9) of 

this section, there would not be a new 

origination date and no Form M–1 is required 

to be filed after March 1, 2015. 

Example 6. (i) Facts. ECE D, which 

currently operates in State A, is making 

preparations to operate in State B on 

November 1, 2012 and thus must make an 

origination filing by October 2, 2012 (30 days 

prior to the origination date). ECE D makes 

this filing timely. 

(ii) Conclusion. In this Example 6, ECE D 

experiences an origination and makes a 

timely filing on October 2, 2012. Thus ECE 

D is exempt from the next annual filing due 

March 1, 2013 pursuant to the filing deadline 

exception under (e)(2)(i)(B) of this section. 

However, the ECE must continue to file 

annual reports for the subsequent years on 

March 1, 2014 and March 1, 2015. 

Example 7. (i) Facts. MEWA E begins 

distributing marketing materials on August 

31, 2012. 

(ii) Conclusion. In this Example 7, because 

MEWA E began operating on August 31, 

2012, the administrator of MEWA E must 

register with the Secretary by filing a 

completed Form M–1 on or before August 1, 

2012 (30 days prior to operating in any State). 

In addition, the administrator of MEWA E 

must file the Form M–1 annually by every 

March 1 thereafter. 

Example 8. (i) Facts. Same facts as 

Example 7, but MEWA E registers on or 

before August 1, 2012 by filing a Form M– 

1 indicating it will begin operating in every 

State. However, in the calendar year 

immediately following the filing, MEWA E 

only offered or provided benefits consisting 

of medical care to participants in State Z. 

(ii) Conclusion. In this Example 8, the 

registration for all States (other than State Z) 

have lapsed under (e)(2)(v) because MEWA E 

only offered or provided benefits consisting 

of medical care to participants in State Z in 

the calendar year immediately following the 

filing. If subsequently, MEWA E begins 

offering or providing benefits consisting of 

medical care to participants in any additional 

State (or States), it must make a new 

registration filing pursuant to (e)(2)(iv)(A) of 

this section. 

(f) Electronic Filing. A completed 

Form M–1 is filed with the Secretary by 

submitting it electronically as 

prescribed in the Instructions to the 

Form M–1. 

(g) Penalties—(1) Civil penalties and 

procedures. For information on civil 

penalties under section 502(c)(5) of 

ERISA for persons who fail to file the 

information required under this section, 

see § 2560.502c–5. For information 

relating to administrative hearings and 

appeals in connection with the 

assessment of civil penalties under 

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

§§ 2570.90 through 2570.101. 

(2) Criminal penalties and 

procedures. For information on criminal 

penalties under section 519 of ERISA for 

persons who knowingly make false 

statements or false representation of fact 

with regards to the information required 

under this section, see section 501(b) of 

ERISA. 

(3) Cease and desist and summary 

seizure orders. For information on the 

Secretary’s authority to issue a cease 

and desist or summary seizure order 

under section 521 of ERISA, see 

§ 2560.521. 

3. Section 2520.103–1 is amended by: 

a. Revising paragraphs (a) 

introductory text, (a)(2), (b) introductory 

text and (c)(1), 

b. Amending paragraph (c)(2)(ii)(C) by 

removing the reference ‘‘and’’ at the end 

of the paragraph, 

c. Removing the period at the end of 

paragraph (c)(2)(ii)(D) and adding the 

reference ‘‘and’’ at the end of paragraph, 

d. Adding a new paragraph 

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

e. Redesignating paragraph (f) as 

paragraph (g) and add a new paragraph 

(f). 

The revisions and additions read as 

follows: 

§ 2520.103–1 Contents of the annual 

report. 

(a) In general. The administrator of a 

plan required to file an annual report in 

accordance with section 104(a)(1) of the 

Act shall include with the annual report 

the information prescribed in paragraph 

(a)(1) of this section or in the simplified 

report, limited exemption or alternative 

method of compliance described in 

paragraph (a)(2) of this section. 

* * * * * 

(2) Under the authority of subsections 

104(a)(2), 104(a)(3) and 110 of the Act, 

and section 1103(b) of the Pension 

Protection Act of 2006, a simplified 

report, limited exemption or alternative 

method of compliance is prescribed for 

employee welfare and pension benefit 

plans, as applicable. A plan filing a 

simplified report or electing the limited 

exemption or alternative method of 

compliance shall file an annual report 

containing the information prescribed in 

paragraph (b), paragraph (c), or 

paragraph (f) of this section, as 

applicable, and shall furnish a summary 

annual report as prescribed in 

§ 2520.104b–10. 

(b) Contents of the annual report for 

plans with 100 or more participants 

electing the limited exemption or 

alternative method of compliance. 

Except as provided in paragraphs (d) 

and (f) of this section and in 

§§ 2520.103–2 and 2520.104–44 the 

annual report of an employee benefit 

plan covering 100 or more participants 

at the beginning of the plan year which 

elects the limited exemption or 

alternative method of compliance 

described in paragraph (a)(2) of this 

section shall include: 

* * * * * 

(c) * * * 

(1) Except as provided in paragraph 

(c)(2), (d) and (f) of this section, and in 

§§ 2520.104–43 and 2520.104a–6, the 

annual report of an employee benefit 

plan that covers fewer than 100 

participants at the beginning of the plan 

year shall include a Form 5500 ‘‘Annual 

Return/Report of Employee Benefit 

Plan’’ and any statements or schedules 

required to be attached to the form, 

completed in accordance with the 

instructions for the form, including 

Schedule A (Insurance Information), 

Schedule SB (Single Employer Defined 

Benefit Plan Actuarial Information), 

Schedule MB (Multiemployer Defined 

Benefit Plan and Certain Money 

Purchase Plan Actuarial Information), 

Schedule D (DFE/Participating Plan 

Information), Schedule I (Financial 

Information—Small Plan), and Schedule 

R (Retirement Plan Information). See the 

instructions for this form. 

(2) * * * 

(ii) * * * 

(E) Is not a multiple employer welfare 

arrangement subject to the filing 

requirements under § 2520.101–2. 

* * * * * 

(f) Plans which are multiple employer 

welfare arrangements. The annual 

report of an employee welfare benefit 

plan that is a multiple employer welfare 

arrangement subject to the filing 

requirements under § 2520.101–2 shall 

include: 

(1)(i) For a plan with 100 or more 

participants, the information prescribed 

in paragraph (b) of this section; or 

(ii) For a plan with fewer than 100 

participants, except as provided in 


jlentini on DSK4TPTVN1PROD with PROPOSALS2
Federal Register / Vol. 76, No. 234 / Tuesday, December 6, 2011 / Proposed Rules 76235 

1The term ‘‘multiple employer welfare 

arrangement’’ is defined at ERISA § 3(40), 29 U.S.C. 

1002(40). 

§ 2520.104–44, the information 

prescribed in paragraph (c) of this 

section; and 

(2) Any statements or information 

required by the instructions to the Form 

5500 relating to multiple employer 

welfare arrangements, including 

information regarding compliance with 

the filing requirements under 

§ 2520.101–2. 

* * * * * 

4. Section 2520.104–20 is amended by 

removing the reference ‘‘and’’ in 

paragraph (b)(2)(iii), removing the 

period at the end of the sentence and 

adding the reference ‘‘and’’ to the end 

of the sentence in paragraph (b)(3)(ii), 

and adding a new paragraph (b)(4) to 

read as follows: 

§ 2520.104–20 Limited exemption for 

certain small welfare plans. 

* * * * * 

(b)(4) Which are not multiple 

employer welfare arrangements subject 

to the filing requirements under 

§ 2520.101–2. 

* * * * * 

5. In § 2520.104–41, revise paragraph 

(c) to read as follows: 

§ 2520.104–41 Simplified annual reporting 

requirements for plans with fewer than 100 

participants. 

* * * * * 

(c) Contents. The administrator of an 

employee pension or welfare benefit 

plan described in paragraph (b) of this 

section shall file, in the manner 

described in § 2520.104a–5, a completed 

Form 5500 ‘‘Annual Return/Report of 

Employee Benefit Plan’’ or, to the extent 

eligible, a completed Form 5500–SF 

‘‘Short Form Annual Return/Report of 

Small Employee Benefit Plan,’’ and any 

required schedules or statements 

prescribed by the instructions to the 

applicable form, including, if 

applicable, the information described in 

§ 2520.103–1(f)(2), and, unless waived 

by § 2520.104–44 or § 2520.104–46, a 

report of an independent qualified 

public accountant meeting the 

requirements of § 2520.103–1(b). 

Signed this 28th day of November 2011. 

Phyllis C. Borzi, 

Assistant Secretary, Employee Benefits 

Security Administration, Department of 

Labor. 

[FR Doc. 2011–30918 Filed 12–5–11; 8:45 am] 

BILLING CODE 4510–29–P 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

29 CFR Parts 2560 and 2571 

RIN 1210–AB48 

Ex Parte Cease and Desist and 

Summary Seizure Orders—Multiple 

Employer Welfare Arrangements 

AGENCY: Employee Benefits Security 

Administration, Department of Labor. 

ACTION: Proposed rules. 

SUMMARY: This document contains two 

proposed rules under the Employee 

Retirement Income Security Act of 1974 

(ERISA) to facilitate implementation of 

new enforcement authority provided to 

the Secretary of Labor by the Patient 

Protection and Affordable Care Act 

(Affordable Care Act). The Affordable 

Care Act authorizes the Secretary to 

issue a cease and desist order, ex parte 

(i.e. without prior notice or hearing), 

when it appears that the alleged conduct 

of a multiple employer welfare 

arrangement (MEWA) is fraudulent, 

creates an immediate danger to the 

public safety or welfare, or is causing or 

can be reasonably expected to cause 

significant, imminent, and irreparable 

public injury. The Secretary may also 

issue a summary seizure order when it 

appears that a MEWA is in a financially 

hazardous condition. The first proposed 

regulation establishes the procedures for 

the Secretary to issue ex parte cease and 

desist orders and summary seizure 

orders with respect to fraudulent or 

insolvent MEWAs. The second 

proposed regulation establishes the 

procedures for use by administrative 

law judges (ALJs) and the Secretary 

when a MEWA or other person 

challenges a temporary cease and desist 

order. 

DATES: Written comments on the 

proposed regulations should be 

submitted to the Department of Labor 

on or before March 5, 2012. 

FOR FURTHER INFORMATION CONTACT: 

Stephanie Lewis, Plan Benefits Security 

Division, Office of the Solicitor, 

Department of Labor, at (202) 693–5588 

or Suzanne Bach, Employee Benefits 

Security Administration, Department of 

Labor, at (202) 693–8335. These are not 

toll-free numbers. 

ADDRESSES: Written comments may be 

submitted to the address specified 

below. All comments will be made 

available to the public. Warning: Do not 

include any personally identifiable 

information (such as name, address, or 

other contact information) or 

confidential business information that 

you do not want publicly disclosed. All 

comments may be posted on the Internet 

and can be retrieved by most Internet 

search engines. Comments may be 

submitted anonymously. 

Department of Labor. Comments may 

be submitted to the Department of 

Labor, identified by RIN 1210–AB48, by 

one of the following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Email: E-OHPSCA521Orders.

EBSA@dol.gov. 

• Mail or Hand Delivery: Office of 

Health Plan Standards and Compliance 

Assistance, Employee Benefits Security 

Administration, Room N–5653, U.S. 

Department of Labor, 200 Constitution 

Avenue NW., Washington, DC 20210, 

Attention: RIN 1210–AB48; Section 521 

Orders Proposed Regulations. 

Comments received by the 

Department of Labor will be posted 

without change to http://www.

regulations.gov and http://www.dol.gov/ 

ebsa, and made available for public 

inspection at the Public Disclosure 

Room, N–1513, Employee Benefits 

Security Administration, 200 

Constitution Avenue NW., Washington, 

DC 20210. 

SUPPLEMENTARY INFORMATION: 

I. Background 

Section 6605 of the Patient Protection 

and Affordable Care Act (Affordable 

Care Act), Public Law No. 111–148, 124 

Stat. 119 adds section 521 to ERISA, 

which gives the Secretary of Labor new 

enforcement authority with respect to 

MEWAs.1 124 Stat. 780. This section 

authorizes the Secretary to issue ex 

parte cease and desist orders when it 

appears to the Secretary that the alleged 

conduct of a MEWA is ‘‘fraudulent, or 

creates an immediate danger to the 

public safety or welfare, or is causing or 

can be reasonably expected to cause 

significant, imminent, and irreparable 

public injury.’’ 29 U.S.C. 1151(a). A 

person that is adversely affected by the 

issuance of a cease and desist order may 

request an administrative hearing 

regarding the order. 29 U.S.C. 1151(b). 

This section also allows the Secretary to 

issue an order to seize the assets of a 

MEWA that the Secretary determines to 

be in a financially hazardous condition. 

29 U.S.C. 1151(e). 

ERISA section 521 gives the Secretary 

legal remedies to address fraudulent and 


jlentini on DSK4TPTVN1PROD with PROPOSALS2