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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
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
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.
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