‘‘(5) CLASS EXEMPTION TREATMENT FOR EX-
ISTING LARGE ARRANGEMENTS.—Under the proce-
dure prescribed pursuant to paragraph (1), if—
‘‘(A) at the time of application for an ex-
emption under section 514(b)(6)(B) with re-
spect to an arrangement which has been in ex-
istence as of the date of the enactment of the
Health Coverage Availability and Affordability
Act of 1996 for at least 3 years, either (A) the
arrangement covers at least 1,000 participants
and beneficiaries, or (B) with respect to the ar-
rangement there are at least 2,000 employees of
eligible participating employers,
‘‘(B) a complete application for the exemp-
tion with respect to the arrangement has been
filed and is pending, and
‘‘(C) the application meets such require-
ments (if any) as the Secretary may provide
with respect to class exemptions under this sub-
section,
the exemption shall be treated as having been grant-
ed with respect to the arrangement unless and until
the Secretary provides appropriate notice that the
exemption has been denied.
‘‘(c) 
FILING
NOTICE
OF
EXEMPTION
WITH
STATES.—An 
exemption 
granted 
under 
section
514(b)(6)(B) to a multiple employer welfare arrangement
shall not be effective unless written notice of such exemp-
tion is filed with the State insurance commissioner of each
State in which at least 5 percent of the individuals covered
under the arrangement are located. For purposes of this
subsection, an individual shall be considered to be located
in the State in which a known address of such individual
is located or in which such individual is employed. The
Secretary may by regulation provide in specified cases for
the application of the preceding sentence with lesser per-
centages in lieu of such 5 percent amount.
‘‘(d) NOTICE OF MATERIAL CHANGES.—In the case
of any multiple employer welfare arrangement exempt
under section 514(b)(6)(B), descriptions of material
changes in any information which was required to be sub-
mitted with the application for the exemption under this
part shall be filed in such form and manner as shall be
prescribed in regulations of the Secretary. The Secretary
may require by regulation prior notice of material changes
with respect to specified matters which might serve as the
basis for suspension or revocation of the exemption.
‘‘(e) REPORTING REQUIREMENTS.—Under regula-
tions of the Secretary, the requirements of sections 102,
103, and 104 shall apply with respect to any multiple em-
ployer welfare arrangement which is or has been exempt
under section 514(b)(6)(B) in the same manner and to
the same extent as such requirements apply to employee
welfare benefit plans, irrespective of whether such exemp-
tion continues in effect. The annual report required under
section 103 for any plan year in the case of any such mul-
tiple employer welfare arrangement shall also include in-
formation described in subsection (b)(3)(F) with respect
to 
the 
plan 
year 
and, 
notwithstanding 
section
104(a)(1)(A), shall be filed not later than 90 days after
the close of the plan year.
‘‘(f) ENGAGEMENT OF QUALIFIED ACTUARY.—The
board of trustees of each multiple employer welfare ar-
rangement which is or has been exempt under section
514(b)(6)(B) shall engage, on behalf of all covered individ-
uals, a qualified actuary who shall be responsible for the
preparation of the materials comprising information nec-
essary to be submitted by a qualified actuary under this
part. The qualified actuary shall utilize such assumptions
and techniques as are necessary to enable such actuary
to form an opinion as to whether the contents of the mat-
ters reported under this part—
‘‘(1) are in the aggregate reasonably related to
the experience of the arrangement and to reasonable
expectations, and
‘‘(2) represent such actuary’s best estimate of
anticipated experience under the arrangement.
The opinion by the qualified actuary shall be made with
respect to, and shall be made a part of, the annual report.
‘‘SEC. 
703. 
REQUIREMENTS 
RELATING 
TO 
SPONSORS,
BOARDS OF TRUSTEES, AND PLAN OPER-
ATIONS.
‘‘(a) IN GENERAL.—A complete application for an ex-
emption under section 514(b)(6)(B) shall include informa-
tion which the Secretary determines to be complete and
accurate and sufficient to demonstrate that the following
requirements are met with respect to the arrangement:
‘‘(1) SPONSOR.—The sponsor is, and has been
(together with its immediate predecessor, if any) for
a continuous period of not less than 5 years before
the date of the application, organized and main-
tained in good faith, with a constitution and bylaws
specifically stating its purpose and providing for
periodic meetings on at least an annual basis, as a
trade association, an industry association, a profes-
sional association, or a chamber of commerce (or
similar business group, including a corporation or
similar organization that operates on a cooperative
basis (within the meaning of section 1381 of the In-
ternal Revenue Code of 1986)), for substantial pur-
poses other than that of obtaining or providing med-
ical care (within the meaning of section 607(1)), and
the applicant demonstrates to the satisfaction of the
Secretary that the sponsor is established as a per-
manent entity which receives the active support of
its members and collects dues or contributions from
its members on a periodic basis, without condi-
tioning such dues or contributions on the basis of
the health status of the employees of such members
or the dependents of such employees or on the basis
of participation in a group health plan. Any sponsor
consisting of an association of entities meeting the
preceding requirements of this paragraph shall be
treated as meeting the requirements of this para-
graph.
‘‘(2) BOARD OF TRUSTEES.—The arrangement
is operated, pursuant to a trust agreement, by a
board of trustees which has complete fiscal control
over the arrangement and which is responsible for
all operations of the arrangement, and the board of
trustees has in effect rules of operation and financial
controls, based on a 3-year plan of operation, ade-
quate to carry out the terms of the arrangement and
to meet all requirements of this title applicable to
the arrangement. The members of the board of
trustees are individuals selected from individuals
who are the owners, officers, directors, or employees
of the participating employers or who are partners
in the participating employers and actively partici-
pate in the business. No such member is an owner,
officer, director, or employee of, or partner in, a con-
tract administrator or other service provider to the
arrangement, except that officers or employees of a
sponsor which is a service provider (other than a
contract administrator) to the arrangement may be
members of the board if they constitute not more
than 25 percent of the membership of the board and
they do not provide services to the arrangement
other than on behalf of the sponsor. The board has
sole authority to approve applications for participa-
tion in the arrangement and to contract with a serv-
ice provider to administer the day-to-day affairs of
the arrangement.
‘‘(3) COVERED
PERSONS.—The instruments
governing the arrangement include a written instru-
ment which provides that, effective upon becoming
‘‘(d) ADDITIONAL REQUIREMENTS.—The Secretary
may provide such additional requirements relating to re-
serves and excess/stop loss coverage as the Secretary con-
siders appropriate. Such requirements may be provided,
by regulation or otherwise, with respect to any arrange-
ment or any class of arrangements.
‘‘(e) ADJUSTMENTS FOR EXCESS/STOP LOSS COV-
ERAGE.—The Secretary may provide for adjustments to
the levels of reserves otherwise required under subsections
(a) and (b) with respect to any arrangement or class of
arrangements to take into account excess/stop loss cov-
erage provided with respect to such arrangement or ar-
rangements.
‘‘(f) ALTERNATIVE MEANS OF COMPLIANCE.—The
Secretary may permit an arrangement to substitute, for
all or part of the requirements of this section, such secu-
rity, guarantee, hold-harmless arrangement, or other fi-
nancial arrangement as the Secretary determines to be
adequate to enable the arrangement to fully meet all its
financial obligations on a timely basis. The Secretary may
take into account, for purposes of this subsection, evidence
provided by the arrangement or sponsor which dem-
onstrates an assumption of liability with respect to the ar-
rangement. Such evidence may be in the form of a con-
tract of indemnification, lien, bonding, insurance, letter of