[Code of Federal Regulations]

[Title 29, Volume 9]

[Revised as of July 1, 2006]

From the U.S. Government Printing Office via GPO Access

[CITE: 29CFR2520.104-46]



[Page 447-449]

 

                             TITLE 29--LABOR

 

 CHAPTER XXV--EMPLOYEE BENEFITS SECURITY ADMINISTRATION, DEPARTMENT OF 

                                  LABOR

 

PART 2520_RULES AND REGULATIONS FOR REPORTING AND DISCLOSURE--Table of 

Contents

 

    Subpart D_Provisions Applicable to Both Reporting and Disclosure 

                              Requirements

 

Sec.  2520.104-46  Waiver of examination and report of an independent 

qualified public accountant for employee benefit plans with fewer than 

100 participants.



    (a) General. (1) Under the authority of section 103(a)(3)(A) of the 

Act, the Secretary may waive the requirements of section 103(a)(3)(A) in 

the case of a plan for which simplified annual reporting has been 

prescribed in accordance with section 104(a)(2) of the Act.

    (2) Under the authority of section 104(a)(3) of the Act the 

Secretary may exempt any employee welfare benefit plan from certain 

annual reporting requirements.

    (b) Application. (1)(i) The administrator of an employee pension 

benefit plan for which simplified annual reporting has been prescribed 

in accordance with section 104(a)(2)(A) of the Act and Sec.  2520.104-41 

is not required to comply with the annual reporting requirements 

described in paragraph (c) of this section, provided that with respect 

to each plan year for which the waiver is claimed--

    (A)(1) At least 95 percent of the assets of the plan constitute 

qualifying plan assets within the meaning of paragraph (b)(1)(ii) of 

this section, or

    (2) Any person who handles assets of the plan that do not constitute 

qualifying plan assets is bonded in accordance with the requirements of 

section 412 of the Act and the regulations issued thereunder, except 

that the amount of the bond shall not be less than the value of such 

assets;

    (B) The summary annual report, described in Sec.  2520.104b-10, 

includes, in addition to any other required information:

    (1) Except for qualifying plan assets described in paragraph 

(b)(1)(ii)(A), (B) and (F) of this section, the name of each regulated 

financial institution holding (or issuing) qualifying plan assets and 

the amount of such assets reported by the institution as of the end of 

the plan year;

    (2) The name of the surety company issuing the bond, if the plan has 

more than 5% of its assets in non-qualifying plan assets;

    (3) A notice indicating that participants and beneficiaries may, 

upon request and without charge, examine, or receive copies of, evidence 

of the required bond and statements received from the regulated 

financial institutions describing the qualifying plan assets; and

    (4) A notice stating that participants and beneficiaries should 

contact the Regional Office of the U.S. Department of Labor's Employee 

Benefits Security Administration if they are unable to examine or obtain 

copies of the regulated financial institution statements or evidence of 

the required bond, if applicable; and



[[Page 448]]



    (C) in response to a request from any participant or beneficiary, 

the administrator, without charge to the participant or beneficiary, 

makes available for examination, or upon request furnishes copies of, 

each regulated financial institution statement and evidence of any bond 

required by paragraph (b)(1)(i)(A)(2).

    (ii) For purposes of paragraph (b)(1), the term ``qualifying plan 

assets'' means:

    (A) Qualifying employer securities, as defined in section 407(d)(5) 

of the Act and the regulations issued thereunder;

    (B) Any loan meeting the requirements of section 408(b)(1) of the 

Act and the regulations issued thereunder;

    (C) Any assets held by any of the following institutions:

    (1) A bank or similar financial institution as defined in Sec.  

2550.408b-4(c);

    (2) An insurance company qualified to do business under the laws of 

a state;

    (3) An organization registered as a broker-dealer under the 

Securities Exchange Act of 1934; or

    (4) Any other organization authorized to act as a trustee for 

individual retirement accounts under section 408 of the Internal Revenue 

Code.

    (D) Shares issued by an investment company registered under the 

Investment Company Act of 1940;

    (E) Investment and annuity contracts issued by any insurance company 

qualified to do business under the laws of a state; and,

    (F) In the case of an individual account plan, any assets in the 

individual account of a participant or beneficiary over which the 

participant or beneficiary has the opportunity to exercise control and 

with respect to which the participant or beneficiary is furnished, at 

least annually, a statement from a regulated financial institution 

referred to in paragraphs (b)(1)(ii)(C), (D) or (E) of this section 

describing the assets held (or issued) by such institution and the 

amount of such assets.

    (iii)(A) For purposes of this paragraph (b)(1), the determination of 

the percentage of all plan assets consisting of qualifying plan assets 

with respect to a given plan year shall be made in the same manner as 

the amount of the bond is determined pursuant to Sec. Sec.  2580.412-11, 

2580.412-14, and 2580.412-15.

    (B) Examples. Plan A, which reports on a calendar year basis, has 

total assets of $600,000 as of the end of the 1999 plan year. Plan A's 

assets, as of the end of year, include: investments in various bank, 

insurance company and mutual fund products of $520,000; investments in 

qualifying employer securities of $40,000; participant loans, meeting 

the requirements of ERISA section 408(b)(1), totaling $20,000; and a 

$20,000 investment in a real estate limited partnership. Because the 

only asset of the plan that does not constitute a ``qualifying plan 

asset'' is the $20,000 real estate investment and that investment 

represents less than 5% of the plan's total assets, no bond would be 

required under the proposal as a condition for the waiver for the 2000 

plan year. By contrast, Plan B also has total assets of $600,000 as of 

the end of the 1999 plan year, of which $558,000 constitutes 

``qualifying plan assets'' and $42,000 constitutes non-qualifying plan 

assets. Because 7%--more than 5%--of Plan B's assets do not constitute 

``qualifying plan assets,'' Plan B, as a condition to electing the 

waiver for the 2000 plan year, must ensure that it has a fidelity bond 

in an amount equal to at least $42,000 covering persons handling non-

qualifying plan assets. Inasmuch as compliance with section 412 requires 

the amount of bonds to be not less than 10% of the amount of all the 

plan's funds or other property handled, the bond acquired for section 

412 purposes may be adequate to cover the non-qualifying plan assets 

without an increase (i.e., if the amount of the bond determined to be 

needed for the relevant persons for section 412 purposes is at least 

$42,000). As demonstrated by the foregoing example, where a plan has 

more than 5% of its assets in non-qualifying plan assets, the bond 

required by the proposal is for the total amount of the non-qualifying 

plan assets, not just the amount in excess of 5%.

    (2) The administrator of an employee welfare benefit plan that 

covers fewer than 100 participants at the beginning



[[Page 449]]



of the plan year is not required to comply with annual reporting 

requirements described in paragraph (c) of this section.

    (c) Waiver. The administrator of a plan described in paragraph 

(b)(1) or (2) of this section is not required to:

    (1) Engage an independent qualified public accountant to conduct an 

examination of the financial statements of the plan;

    (2) Include within the annual report the financial statements and 

schedules prescribed in section 103(b) of the Act and Sec. Sec.  

2520.103-1, 2520.103-2, and 2520.103-10; and

    (3) Include within the annual report a report of an independent 

qualified public accountant as prescribed in section 103(a)(3)(A) of the 

Act and Sec.  2520.103-1.

    (d) Limitations. (1) The waiver described in this section does not 

affect the obligation of a plan described in paragraph (b) (1) or (2) of 

this section to file a Form 5500 ``Annual Return/Report of Employee 

Benefit Plan,'' including any required schedules or statements 

prescribed by the instructions to the form. See Sec.  2520.104-41.

    (2) For purposes of this section, an employee pension benefit plan 

for which simplified annual reporting has been prescribed includes an 

employee pension benefit plan which elects to file a Form 5500 as a 

small plan pursuant to Sec.  2520.103-1(d) with respect to the plan year 

for which the waiver is claimed. See Sec.  2520.104-41.

    (3) For purposes of this section, an employee welfare benefit plan 

that covers fewer than 100 participants at the beginning of the plan 

year includes an employee welfare benefit plan which elects to file a 

Form 5500 as a small plan pursuant to Sec.  2520.103-1(d) with respect 

to the plan year for which the waiver is claimed. See Sec.  2520.104-41.

    (4) A plan that elects to file a Form 5500 as a large plan pursuant 

to Sec.  2520.103-1(d) may not claim a waiver under this section.



[43 FR 10151, Mar. 10, 1978, as amended at 43 FR 14010, Apr. 4, 1978; 45 

FR 51447, Aug. 1, 1980; 54 FR 8629, Mar. 1, 1989; 65 FR 21085, Apr. 19, 

2000; 65 FR 62973, Oct. 19, 2000]