WELFARE AND PENSION PLANS

DISCLOSURE ACT

Pub. L. No. 85-836, 85th Cong., 2d Sess., 1958, 72 Stat. 997, as amended by Pub. L. No. 87-420, 87th Cong., 2d Sess., 1962, 76 Stat. 35; 29 U.S.C. §§ 301-09; F.C.A. 29 §§ 301-09

Summary and Description

This law, which is primarily a disclosure statute, has the purpose of safeguarding the funds of employee benefit plans. It requires the administrator of every employee welfare or pension benefit plan subject to the act to make available to plan participants and beneficiaries and to file with the Department of Labor a description of the plan and an annual report. It gives the Secretary of Labor enforcement powers, makes certain acts Federal crimes, and requires the bonding of plan personnel in a position to cause a loss to the plan through fraud or dishonesty.

PLANS COVERED

The act applies, with certain exceptions, to any employee welfare or pension benefit plan, fund, or program which is communicated, or whose benefits are described, in writing to the employees, and which is established or maintained (1) by any employer or employers engaged in commerce or in any industry or activity affecting commerce; (2) by an employee organization or organizations representing employees engaged in commerce or in any industry or activity affecting commerce; or (3) by both.

"Welfare benefits" are defined as medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death, or unemployment.

"Pension benefits" are defined as retirement benefits. Profit-sharing plans are included if benefits are provided at or after retirement. The act does not apply to:

(1) plans which cover not more than 25 participants;

(2) plans administered by the Federal Government or by the government of a State, by a political subdivision of a State, or by an agency or instrumentality of any of the foregoing;

(3) plans established or maintained solely for the purpose of complying with applicable workmen's compensation laws or unemployment compensation disability insurance laws;

(4) plans that are administered by organizations which are exempt from taxation under the provisions of section 501 (a) of the Internal Revenue Code of 1954 and are administered as a corollary to membership in a fraternal benefit society described in section 501 (c) (8) or by organizations described in sections. 501 (c) (3) (such as nonprofit charitable, religious and educa

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tional organizations) and 501 (c) (4) (such as nonprofit civic organizations) of such Code. However, any plan administered by a fraternal benefit society or organization which represents its members for purposes of collective bargaining is not exempt from the provisions of the act.

REPORTING REQUIREMENTS

The plan administrator must file with the Secretary of Labor two copies of the plan description (including all amendments or modifications thereto) and of each annual report.

The plan description is to be filed 90 days after the plan is established. Reporting Form D-1 must be used for this purpose. Any change in the information required in the plan description is to be reported to the Secretary of Labor within 60 days after the change has been effectuated. Reporting Form D-1A must be used for this purpose. The plan description and all amendments must be signed and sworn to by the plan administrator.

The annual financial report is to be filed within 150 days after the end of the plan's fiscal or policy year. Plans covering 100 or more participants at any time during the reporting year are required to file a report disclosing plan operations. Reporting Form D-2 must be used for this purpose. Two copies of the form must be submitted and signed by the plan administrator and must either be sworn to by the administrator or else certified to by an independent certified or licensed public accountant.

Where the administrator is a group of individuals (e.g., a partnership, board of trustees, committee, etc.), all members of the group may sign and swear to the plan description (D-1), plan description amendment (D-1A), and annual report (D-2) or may delegate this responsibility to any one or more members of the group. However, where the administrator is a joint employer-union board or committee, at least one employer representative and one union representative must sign and swear to such reports.

Plans covering fewer than 100 participants during the entire reporting year are exempt from filing the Form D-2 report except where the Secretary of Labor, after investigation, determines that such a report is necessary and appropriate to carry out the purposes of the Act. A Form D-3 has been prescribed for notifying the Department of Labor that a plan covered less than 100 participants during the entire reporting year.

VARIATIONS FROM REPORTING REQUIREMENTS

Provision is made under the Act for varying its publication and reporting requirements. Any interested person, on behalf of a welfare or pension plan, may petition the Department for a rule prescribing a different manner or period for publication of certain information than is otherwise required by the Act. The Department may also initiate this rulemaking process on its own motion. If it is found, on the record, after giving interested persons an opportunity to be heard, that a variation is necessary, an appropriate rule is issued.

CONTENTS OF REPORTS

Plan Description (Form D-1)

The law requires the inclusion of the following information in the initial plan description:

Name and address of the plan.

Plan's fiscal year ending date.

Type of benefit plan (welfare, pension, or combination).

Name and address of the plan administrator or of all persons in a group where more than one constitutes the plan administrator, their official positions with respect to the plan, and their relationship, if any, to the employer or to any employee organization, and other offices, positions, or employment held by them. Names, titles, and addresses of trustees.

Whether the plan is mentioned in a collective bargaining agreement.

Type of administration.

Schedule of benefits.

How the plan is financed.

Identity of any organization through which benefits are provided.

How claims for benefits are to be filed.

Remedies available when claims are denied.

Two copies of the plan or of the bargaining agreement, trust agreement, contract, or other instrument, if any, under which the plan was established and is operated are to be filed as part of the plan description.

Annual Financial Reports (Form D-2)

Information required to be reported annually varies according to the way in which the plan is funded.

Unfunded Plans. If the only assets from which benefits are paid are the general assets of the employer or of the union, the report shall include only the total benefits paid and the average number of employees eligible for participation during each of the past 5 years. Plans funded through a trust or other fund must report the following:

Amount contributed by each employer.
Amount contributed by the employees.
Amount of benefits paid.

Number of employees covered.

Assets and liabilities, specifying the amount of certain types of assets.

Receipts and disbursements, including salaries, fees, and commissions charged to the plan, to whom paid, in what amount, and for what purpose.

A detailed list of all investments in properties of any party-ininterest and of all loans made to any party-in-interest.

Pension funds must in addition report the type and basis of funding, actuarial assumptions used, and the amount of current and past service liabilities.

Plans under which benefits are provided by an insurance carrier must report the following:

Amount contributed by each employer.

Amount contributed by the employees.
Amount of benefits paid.

Number of employees covered.

Premium rate and total premium charges paid to each carrier.
Approximate number of persons covered by each class of

benefits.

Total amount of premiums received by each carrier.
Total claims paid.

Dividends or refunds paid to the plan by the carrier.
Commissions, fees, or other costs paid by the carrier.
Amounts held to provide benefits after retirement.
Remainder of premiums.

Names and addresses of the brokers, agents, or other persons to whom commissions or fees were paid, the amount paid to each, and for what purpose.

(Special provisions are made for cases where the insurance carrier does not maintain separate experience records and therefore is unable to supply all the foregoing information.)

Pension plans must in addition report the type and basis of funding, actuarial assumptions used, the amount of current and past service liabilities based on those assumptions (except for benefits completely guaranteed by the carrier), and the amount of all reserves accumulated under the plan.

The insurance carrier is required to certify to the plan administrator, within 120 days after the end of the plan's fiscal year, the information needed for completion of the annual financial report.

PUBLISHING REQUIREMENTS

In order to comply with the publishing requirements of the act, the plan administrator shall:

(1) make available in the principal office of the plan, for examination by a participant or beneficiary, copies of (a) the description of the plan (including all amendments or modifications thereto upon their effective dates) and (b) the latest annual report;

(2) upon written request, deliver to a participant or beneficiary a copy of the description (including all amendments or modifications thereto upon their effective dates) and an adequate summary of the latest annual report, by mailing such documents to the last known address of the participant or beneficiary making the request.

PUBLIC DOCUMENT ROOM

The act requires the Secretary of Labor to make available for public examination in the public document room of the U.S. Department of Labor the plan descriptions and the annual reports, including copies of documents relating to the plan, which are submitted for filing with the Department. The Public Document Room is located just outside Washington at 8757 Georgia Avenue, Silver Spring, Md.

BONDING REQUIREMENTS

Section 13 of the Act contains bonding requirements which apply to every administrator, officer, and employee who handles funds or other property of the plan. The Act requires bonding by a corporate surety in an amount not less than 10 percent of the amount of funds or other property handled in the preceding reporting year, and establishes a minimum amount of $1,000. A maximum amount of $500,000 is also established by the Act except that a proviso allows the Secretary of Labor upon due notice, hearing, and consideration of the record to prescribe an amount in excess of $500,000 but not to exceed 10 percent of the funds handled.

The purpose of the bond is to provide protection to the plan against loss by reason of acts of fraud or dishonesty. It shall be unlawful for any administrator, officer, or employee required to be bonded, to receive, handle, disburse, or otherwise exercise custody or control of any of the funds or other property of any employee welfare benefit plan or employee pension benefit plan, without being bonded as required and it shall be unlawful for any administrator, officer, or employee of such plan, or any other person having authority to direct the performance of such functions, or any of them, to be performed by any such person, with respect to whom the bonding requirements have not been met. Any bond shall be in a form or of a type approved by the Secretary, and surety companies with which bonds are placed must be on the approval list of the Secretary of the Treasury.

There are exemptions from bonding under the Act as follows:

(1) A plan under which the only assets from which benefits are paid are the general assets of a union or of an employer is exempt from the bonding requirements.

(2) The Secretary of Labor may exempt a plan from the bonding requirements of section 13 when in his opinion the plan administrator offers adequate evidence

(a) of the financial responsibility of the plan, or

(b) that other bonding arrangements provide adequate protection.

Under (a), it has been determined that Form LMSA-606, Agreement and Undertaking To Pay Fidelity Losses of Welfare or Pension Benefit Plan and Securities Deposit Escrow Agreement, properly executed, will be considered adequate evidence of the financial responsibility of the plan.

CIVIL ENFORCEMENT

The Secretary of Labor may upon his own motion or upon complaint. of violation investigate a plan. However, he must first require certification of the annual report if it has been sworn to, but not certified. After requiring certification, should the complaint of violation still be unsatisfied or, acting on his own motion, should the Secretary still have reasonable cause to believe investigation may disclose violations, the Secretary may proceed to investigate the plan.

Whenever it appears to the Secretary of Labor that there is a violation of the act, he may bring an action in the proper district court of the United States to enjoin the act or practice. Upon a proper showing a permanent or temporary injunction or restraining order will be granted.