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not required to comply with subsections provisions can be determined finally and 13 (a) and (b) of the Act with respect authoritatively only by the courts. It to any welfare or pension benefit plan is necessary, however, for the Laborcovered by the Act which is established Management Services Administrator to or maintained for the benefit of persons reach informed conclusions as to the other than the employees of such in- meaning of the law to enable him to carry surance carrier or service or other simi- out his statutory duties of administralar organization.

tion and enforcement. The interpreta[34 F.R. 5158, Mar. 13, 1969)

tions of the Labor-Management Services

Administrator contained in this part, $ 465.24 Conditions of exemption.

which are issued upon the advice of the This exemption applies only to those Solicitor of Labor, indicate the construcinsurance carriers, service or other simi- tion of the law which will guide the lar organizations providing or under- Labor-Management Services Adminiswriting welfare or pension plan benefits trator in performing his duties unless and in accordance with State law.

until he is directed otherwise by authori(34 F.R. 5158, Mar. 13, 1969)

tative ruling of the courts or unless and

until he subsequently decides that his PART 485--PROHIBITION AGAINST prior interpretation is incorrect. Under

BONDING BY PARTIES INTERESTED section 12 of the Act, the interpretations IN THE PLAN

contained in this part, if relied upon in

good faith, will constitute a defense in Sec. 485.1 Introductory statement.

any action or proceeding based on any 485.2 General.

Act or omission in alleged violation of 485.3 Disqualification of agents, brokers and section 13(c) of the Act. The omission, sureties.

however, to discuss a particular problem 485.4 Application of 13(c) to "party in in this part, or in interpretations supinterest”.

plementing it, should not be taken to AUTHORITY: The provisions of this part 485 indicate the adoption of any position by issued under sec. 13, 76 Stat. 39, 29 U.S.C. the Labor-Management Services Admin308d; Secretary's Order No. 24–63 (28 F.R. istrator with respect to such problem 9172) and Secretary's Order No. 25-63 (28

or to constitute an administrative inF.R. 9173).

terpretation or practice. InterpretaSOURCE: The provisions of this part 485 tions of the Labor-Management Services appear at 28 F.R. 14412, Dec. 27, 1963, unless Administrator with respect to 13(c) are otherwise noted.

set forth in this part to provide those § 485.1 Introductory statement.

affected by the provisions of the Act (a) This part discusses the meaning

with “a practical guide * as to how and scope of seccion 13(c) of the Welfare

the office representing the public inand Pension Plans Disclosure Act of 1958

terest in its enforcement will seek to (76 Stat. 39, 29 U.S.C. 308d(c)) (herein

apply it” (Skidmore v. Swift & Co., 323 after referred to as the Act). This pro

U.S. 134, 138). vision makes it unlawful "for any per

(c) To the extent that prior opinions son to procure any bond (required by the and interpretations relating to 13(c) are Act] from any surety or other company

inconsistent with the principles stated in or through any agent or broker in whose this part, they are hereby rescinded and business operations such plan or any withdrawn. party in interest in such plan has any

§ 485.2 General. significant control or financial interest, direct or indirect.” Because the prohibi

The purpose of section 13(c), as shown tion contained in this provision is broadly

by its legislative history, is similar to a stated, it becomes a matter of impor

closely related provision contained in tance to determine more specifically the

section 502(a) of the Labor-Management

Reporti and Disclosure Act of 1959 (73 types of arrangements intended to be prohibited.

Stat. 536; 29 U.S.C. 502(a)). The fun(b) The provisions of section 13 of

damental purpose of Congress under the Act, including 13(c) are subject to

13(c) is to insure against potential the general investigatory authority of

abuses arising from significant financial the Director, Office of Labor-Manage

or other influential interests affecting ment and Welfare-Pension Reports, em

the objectivity of the plan or parties in bodied in section 9 of the Act. The cor- interest in the plan and agents, brokers, rectness of an interpretation of these or surety or other companies, in securing

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and providing the bond specified in sec- of an employee organization having tion 13(a). As will be explained more members covered by such plan." fully below, this prohibition, however, (b) A basic question presented is was not intended to preclude the placing whether the effect of 13(c) is to prohibit of bonds through or with certain parties persons from placing a bond through or in interest in plans which provide a va- with any “party in interest” in the plan. riety of services to the plan, one of which The language used in 13(c) appears to is a bonding service.

indicate that in this connection the in§ 485.3 Disqualification of agents, bro

tent of Congress was to eliminate those kers and sureties.

instances where the existing financial Since 13(c) is to be construed as dis

interest or control held by the “party in qualifying any agent, broker, surety or

interest” in the agent, broker, surety or other company from having a bond

other company is incompatible with an placed through or with it, if the plan or

unbiased exercise of judgment in regard any party in interest in the plan has a to procuring the bond or bonding the significant financial interest or control

plan's personnel. Accordingly, not all in such agent, broker, surety or other

parties in interest are disqualified from company, a question of fact will neces

procuring or providing bonds for the sarily arise in many cases as to whether

plan. Thus where a “party in interest" the financial interest or control held is

or its affiliate provides multiple benefit sufficiently significant to disqualify the

plan services to plans, persons are not agent, broker or surety. Although no

prohibited from availing themselves of rule of guidance can be established to

the bonding services provided by the govern each and every case in which this

“party in interest” or its affiliate merely question arises, in general, the essential

because the plan has already availed ittest is whether the existing financial in

self, or will avail itself, of other services terest or control held is incompatible

provided by the "party in interest." In with an unbiased exercise of judgment in

this case, it is inherent in the nature of regard to procuring the bond or bonding

the "party in interest” or its affiliate as plan's personnel. regard to he

an individual or organization providing foregoing, it is also to be pointed out that

multiple benefit plan services, one of lack of knowledge or consent on the part

which is a bonding service, that the existof persons responsible for procuring

ing financial interest or control held is. bonds with respect to the existence of a

not, in and of itself, incompatible with an

unbiased exercise of judgment in regard significant financial interest or control rendering the bonding arrangement un

to procuring the bond or bonding the lawful will not be deemed a mitigating

plan's personnel. In short, there is no factor where such persons have failed to

distinction between this type of relationmake a reasonable examination into the

ship and the ordinary arm's length busipertinent circumstances affecting the

ness relationship which may be estab

lished between a plan-customer and an procuring of the bond.

agent, broker or surety company, a rela$ 485.4. Application of 13(c) to “party tionship which Congress could not have in interest”.

intended to disturb. On the other hand, (a) Under 13(c), an agent, broker or where a “party in interest” in the plan surety or other company is disqualified or an affiliate does not provide a bonding from having a bond placed through or service as part of its general business with it if a "party in interest" in the plan operations, 13(C) would prohibit any has any significant control or financial person from procuring the bond through interest in such agent, broker, surety or or with any agent, broker, surety or other other company. Section 3(13) of the

company, with respect to which the Act defines the term “party in interest” "party in interest” has any significant to mean “any administrator, officer, trus- control or financial interest, direct or intee, custodian, counsel, or employee of direct. In this case, the failure of the any employee welfare benefit plan or em- “party in interest” or its affiliate to proployee pension benefit plan or a person vide a bonding service as part of its genproviding benefit plan services to any eral business operations raises the possuch plan, or an employer any of whose sibility of less than an arm's length employees are covered by such a pian or business relationship between the plan officer or employee or agent of such em- and the agent, broker, surety or other ployer, or an officer or agent or employee company since the objectivity of either

the plan or the agent, bruker or surety any information therefor under this Act may be influenced by the “party in shall maintain records on the matters of interest”.

which disclosure is required which will (c) The application of the principles provide in sufficient detail the necessary discussed in this section is illustrated by basic information and data from which the following examples:

the documents thus required may be veri

fied, explained, or clarified, and checked Example (1). B, a broker, renders actuarial and consultant services to plan P. B has also

for accuracy and completeness, and shall procured a group life insurance policy for include vouchers, worksheets, receipts, plan P. B may also place a bond for p with and applicable resolutions, and shall keep surety company S, provided that neither B such records available for examination nor P has any significant control or financial

for a period of not less than five years Interest, direct or indirect, in S and provided

after the filing of the documents based that neither P nor any other “party in interest” in P, e.g., an officer of the plan, has any

on the information which they contain.” significant control or financial interest, dl

(b) The provisions of section 11 of the rect or indirect, in B or S.

Act are subject to the investigatory auExample (2). I, a life insurance company,

thority of the Director, Office of Laborhas provided a group life insurance policy for Management and Welfare-Pension Replan P. I is afiliated with S, a surety com- ports, embodied in section 9 of the Act. pany, and has a significant financial interest

The correctness of an interpretation of or control in S. P is not prohibited from ob

these provisions can be determined itaining a bond from S since I's affiliation with S does not ordinarily, in and of itself, affect

nally and authoritatively only by the the objectivity of P in procuring the bond or

courts. It is necessary, however, for the the objectivity of S in bonding P's personnel. Labor-Management Services AdminisHowever, if any other "party in interest” as trator (hereafter referred to as “the Addefined in Section 3(13) of the Act, such as ministrator") to reach informed concluthe employer whose employees are covered by

sions as to the meaning of the law to P, should have a significant financial interest

enable him to carry out his duties of or control in S, S could not write the bond

administration and enforcement. The for P, since the employer's interest affects the objectivity of P and S.

interpretations of the Administrator

contained in this part, which are issued PART 486-GENERAL STATEMENT

upon the advice of the Solicitor of LaCONCERNING THE RETENTION OF

bor, indicate the construction of the law

which will guide the Administrator in RECORDS PROVISIONS OF THE

performing his duties unless and until WELFARE AND PENSION PLANS he is directed otherwise by authoritative DISCLOSURE ACT

rulings of the courts or unless and until

he subsequently decides that his prior inSec. 486.1 Introductory statement.

terpretation is incorrect. Under section 486.2 Persons who must retain records.

12 of the Act, the interpretations con486.3 Records to be retained.

tained in this part, if relied upon in good 486.4 Manner of keeping records.

faith, will constitute a defense in any 486.5 Period records must be maintained. action or proceeding based on any act or AUTHORITY: The provisions of this Part 486

omission in alleged violation of section 11 issued pursuant to sec. 5, 72 Sta.t. 999, 76 Stat. of the Act. The omission, however, to 86, sec. 11, 76 Stat. 38; 29 U.S.C. 304, 308b; discuss a particular problem in this part, Secretary's Order 24-63 (28 F.R. 9172), and or in interpretations supplementing it, Secretary's Order 25-63 (28 F.R. 9173).

should not be taken to indicate the adopSOURCE: The provisions of this part 486 tion of any position by the Administraappear at 28 P.R. 14413, Dec. 27, 1963, unless tor with respect to such problem or to otherwise noted.

constitute an administrative interpre§ 486.1 Introductory statement.

tation or practice. Interpretations of

the Administrator with respect to section (a) This part reflects interpretive 11 are set forth in this part to provide positions of the Department of Labor those affected by the provisions of the with respect to several aspects of the

Act with a “practical guide * as to record retention requirements of section

how the office representing the public in11 of the Welfare and Pension Plans Dis

terest in its enforcement will seek to apclosure Act (72 Stat. 997, 76 Stat. 35; 29 ply it" (Skidmore v. Swift & Co., 323 U.S. U.S.C. 301, et seq.). This section pro- 134, 138). vides that: “Every person required to file (c) To the extent that prior opinions any description or report or to certify and interpretations relating to section

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11 are inconsistent with the principles would tend to support information restated in this part, they are hereby re- quired in any report under the Act. scinded and withdrawn,

(c) Records maintained shall also in$ 486.2 Persons who must retain rec

clude, where appropriate, information ords.

certified to the Administrator by an in

surance carrier or service or other orga(a) Section 11 of the Welfare and

nization. Other records such as payrolls Pension Plans Disclosure Act applies to

from contributing employers, which the (1) Any person or persons required to

reporting person, trustee, or organizafile any plan description or annual re

tion, as described in § 486.2 obtains in port under section 6 or section 7 of the

the regular course of its operations, to Act;

the extent such records may be used for (2) Any person or persons who may be said verifying or checking shall also be required to publish a report upon re

retained. quest pursuant to section 7(a) of the Act; and

§ 486.4 Manner of keeping records. (3) Any insurance carrier or service

(a) Records must be kept in reasonor other organization required under

able order, in a safe and accessible place section 7(g) of the Act to certify any in

and in such a manner that they may be formation necessary for the preparation

readily inspected and examined by the or filing of any such description or

Director, Office of Labor-Management report.

and Welfare-Pension Reports or his duly (b) The statutory duty on such per

authorized representative. sons to maintain records cannot be (b) The preservation of records on avoided by contract, delegation or other

microfilm for the periods required by the wise. Thus, if the administrator of a

Act will satisfy the requirements relatplan arranges with an independent con

ing to the retention of records, provided tractor (such as a corporate trustee or

that adequate projection or other viewbenefit plan consultant) to perform

ing equipment is available for inspecting functions with respect to the plan and,

the microfilm and provided further that pursuant to the arrangement, such in

the microfilmed records are clear redependent contractor prepares or re

productions of the original records, and ceives the type of records contemplated

identifiable as to dates. by § 486.3 and keeps physical custody

(c) Nothing in this section precludes of such records, the statutory require

the use of punch cards or magnetic tape ment to see that such records are re

for processing records; Provided, howtained for the required period remains ever, That where records of original with the administrator and he must entry or worksheets are converted to make such agreements and arrange

punch cards or tape, the original records ments with the independent contractor

and worksheets must be retained for the as are necessary to insure that they are required period. so retained.

§ 486.5 Period records must be main.

tained. § 486.3 Records to be retained.

Persons described in § 486.2 are re(a) The records required to be re

quired to maintain the described records tained are all documents which will pro

for a period of not less than five years vide in sufficient detail the necessary

after the filing of the documents based basic information and data from which

on the information which they contain. the description and reports which are

It should be noted that even though a required or may be required under the

plan administrator need not publish an Act may be verified, explained or clari

annual report pursuant to section 7(a) fied, and checked for accuracy and com

of the Act (unless specifically required pleteness.

to do so), because such plan covers more (b) Such records include (but are not

than 25, but fewer than 100 participants, limited to) resolutions and matters re

every person or organization described lating to the plan for which a descrip

in $ 486.2 must retain for a period of tion or annual report is or may be re

not less than five years after the date quired to be filed, journals, ledgers,

that an annual report would have been checks, invoices, bank statements, con

due (but for the exemption) the records tracts, agreements, vouchers, worksheets, described in $ 486.3 which relate to inreceipts, claim records and payrolls of formation which would have been reany party described in § 486.2 which quired in such report.

FINDING AIDS

A list of current CFR volumes, a list of superseded CFR volumes, and a list of CFR titles, subtitles, chapters, subchapters and parts are included in the subject index volume to the Code of Federal Regulations which is published separately and revised annually.

Table of CFR Titles and Chapters
Alphabetical List of CFR Subtitles and Chapters
Redesignation Tables
List of Sections Affected

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