Advisory Opinion 1975-86

Dear :

This is in reply to your letter dated July 11, 1975, forwarding comments from                                                                             of                                                                covering reporting requirements for insured welfare plans under the Employee Retirement Income Security Act of 1974 (ERISA). He is also concerned about the liability of being a fiduciary under this Act.

The Department of Labor is making every effort to reduce the reporting and disclosure burdens to the extent feasible. For example, on August 15, 1975, the Department published regulations in the Federal Register whereunder employee welfare benefit plans which cover fewer than 100 participants at all times during a plan year are exempt from certain reporting and disclosure provisions if the benefits are provided solely from the general assets of the employer or employee organization maintaining the plan or if the benefits are provided exclusively through insurance contracts or policies, the premiums for which are paid directly by the employer or employee organization from its general assets. This exemption also applies to plans where employees (or members of labor organizations) contribute to insurance premiums, but only if the employee or member contributions are forwarded to the insuring organization within three months after they are made.

Regarding                                                                  's comment about "open ended" liability of being a fiduciary, I think he is over-reacting to the fiduciary provisions of ERISA. Health and life insurance plans funded through insurance carriers are relatively simple plans to operate within the fiduciary provisions. ERISA section 403(b)(1) takes this into account by providing an exemption from the requirement of establishing a trust for any assets of a plan which consist of insurance contracts or policies issued by a state-regulated insurance company. A comment on this provision is made in the Conference Report (H.R. Report No. 93-1280) on ERISA at the bottom of page 298 as follows:

Although these contracts need not be held in trust, nevertheless, the person who holds the contract is to be a fiduciary and is to act in accordance with the fiduciary rules of the substitute with respect to these contracts. For example, this person is to prudently take and keep exclusive control of the contracts, and is to use prudent care and skill to preserve this property.

Hopefully,                                                       's counsel will advise that it is not reasonable to terminate the plan because of ERISA.

Your correspondence is returned herewith.