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Revision of Annual Information Return/Reports

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AGENCY:

Employee Benefits Security Administration, Department of Labor.

ACTION:

Notice of adoption of revisions to Annual Return/Report Forms.

SUMMARY:

This document contains revisions to the Form 5500 Annual Return/Report filed by administrators of certain employee welfare benefit plans that are required to comply with the Form M-1 reporting requirements of 29 CFR 2520.101-2. The revisions are intended to enhance the Department of Labor's ability to enforce the Form M-1 reporting requirements under Title I of the Employee Retirement Income Security Act of 1974, as amended (ERISA). These forms revisions are being published simultaneously with final regulations under Title I of ERISA that implement reporting requirements for MEWAs and certain other entities that offer or provide coverage for medical care benefits for employees of two or more employers.

DATES:

Effective Date: April 1, 2013. Applicability Date: These forms revisions will be applicable for all Form 5500 Annual Return/Report filings beginning with the 2013 Form 5500.

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FOR FURTHER INFORMATION CONTACT:

Janet K. Song, Office of Regulations and Interpretations, Employee Benefits Security Administration, Department of Labor, at (202) 693-8523. This is not a toll-free number.

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SUPPLEMENTARY INFORMATION:

I. Background

Under Titles I and IV of ERISA, and the Internal Revenue Code (Code), as amended, and regulations issued thereunder, pension and welfare benefit plans are generally required to file an annual report concerning, among other things, the financial condition and operation of the plans. Filing the Form 5500 Annual Return/Report of Employee Benefit Plan (Form 5500 Annual Return/Report), including any required attachments and schedules, generally satisfies the annual reporting requirements. The Form 5500 Annual Return/Report is the principal source of information and data concerning the operations, funding and investments of pension and welfare benefit plans. The Form 5500 Annual Return/Report constitutes an integral part of the Start Printed Page 13900enforcement, research and policy development programs of the Department of Labor (Department), the Internal Revenue Service, and the Pension Benefit Guaranty Corporation, and is a source of information and data for use by other federal agencies, Congress, and the private sector in assessing employee benefit, tax, and economic trends and policies. The Form 5500 Annual Return/Report also serves as the primary means by which the operations of plans can be monitored by participants, beneficiaries, and the general public.

In addition to filing the Form 5500 Annual Return/Report, certain employee welfare benefit plans that are multiple employer welfare arrangements (MEWAs), as defined in section 3(40) of ERISA, and Entities Claiming Exception (ECEs), as defined in § 2520.101-2, are also subject to the reporting requirements under § 2520.101-2, which are satisfied by filing a Form M-1, Report for Multiple Employer Welfare Arrangements (MEWAs) and Certain Other Entities Claiming Exception (ECEs) (Form M-1).

II. Multiple Employer Welfare Arrangements and Certain Other Related Entities

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) (Pub. L. 104-191, 110 Stat. 1936) amended ERISA to provide for, among other things, improved portability and continuity of health insurance coverage. HIPAA added section 101(g) to ERISA, providing the Secretary of Labor (Secretary) with the authority to establish, by regulation, annual reporting by MEWAs that are not themselves employee benefit plans within the meaning of ERISA section 3(3) (non-plan MEWAs). The purpose of the reporting requirement was to determine whether MEWAs were in compliance with the requirements created by HIPAA. The Patient Protection and Affordable Care Act (Affordable Care Act), Public Law 111-148, 124 Stat. 119 (2010), amended section 101(g) of ERISA to require non-plan MEWAs to register with the Department prior to operating in a State.

On February 11, 2000, the Department published an interim final rule implementing the Form M-1 regulation under § 2520.101-2. 65 FR 7152. On April 9, 2003, the Department published the final rule. 68 FR 17494. Although ERISA section 101(g) by its terms only applies to non-plan MEWAs, in order to effectuate MEWA compliance and based on the regulatory authority found in ERISA sections 505 and 734, the Form M-1 regulation required administrators of non-plan MEWAs, plan MEWAs, and certain other entities [1] to file the Form M-1 with the Secretary.[2] ERISA sections 505 and 734 provide the Secretary with the authority to require plan MEWAs and ECEs to comply with the Form M-1 reporting requirements of § 2520.101-2, but because ERISA section 101(g) only applies to non-plan MEWAs, only non-plan MEWAs are subject to civil penalties under ERISA section 502(c)(5) for failure to comply with the Form M-1 requirements.[3]

On December 6, 2011, the Department published in the Federal Register proposed rules on Filings Required of Multiple Employer Welfare Arrangements and Certain Other Related Entities, proposing amendments to the Form M-1 reporting regulation under ERISA section 101(g) and the annual reporting regulations under ERISA sections 103 and 104. The purpose of the proposed changes was to strengthen the Form M-1 reporting requirements for all plans required to file the Form M-1. 76 FR 76222. Simultaneously, the Department published a notice of proposed forms revisions to the Form 5500 Annual Return/Report (76 FR 76252) and a notice of proposed forms revisions to the Form M-1 (76 FR 76250).

The Department received six comments on the proposed amendments to the Form M-1 regulation and proposed form revisions to the Form M-1, but did not receive any comments on the proposed amendments to the annual reporting regulations under ERISA sections 103 and 104 or the proposed revisions to the Form 5500 Annual Return/Report. Therefore the Department has decided to adopt the changes to the annual reporting regulations under ERISA sections 103 and 104 and revisions to the Form 5500 Annual Return/Report largely as proposed, except for technical changes to the Form 5500 Annual Return/Report and instructions to clarify the Form 5500 reporting requirements and conform them to the final Form M-1 regulation by making it clear that all plans required to file the Form M-1 (plan MEWAs and ECEs) are required to file a Form 5500 and answer the new Form M-1 compliance questions on the Form 5500.[4] The changes to the Form 5500 Annual Return/Report and instructions are applicable for all Form 5500 Annual Return/Report filings beginning with the 2013 Form 5500. For the 2013 Form 5500, the compliance questions will be included in the Form 5500 instructions and welfare benefit plan filers will be required to include the answers as an attachment to their Annual Return/Report. A new Part III will be included in the Form 5500 for the 2014 Form 5500 and later year Forms 5500. Elsewhere in this edition of the Federal Register, the Employee Benefits Security Administration is publishing the Final Rules amending the annual reporting regulations under ERISA sections 103 and 104 as part of the Final Rules on Filing Required of Multiple Employer Welfare Arrangements and Certain Other Related Entities (Final Rules).

III. Discussion of the Forms Revisions

As in the proposal, the final forms revisions make compliance with the Form M-1 filing requirements an integral part of compliance with ERISA's Form 5500 annual reporting requirements for plans required to file the Form M-1 by requiring all such plans to file a Form 5500 Annual Return/Report (with new Form M-1 compliance questions), regardless of the plan size or type of funding. The changes to the Form 5500 and its instructions, together with companion Final Rules amending the annual reporting regulations under ERISA section 103 and 104, being published separately in today's Federal Register, accomplish several interrelated objectives.

First, § 2520.103-1 is being amended to codify the addition of Form M-1 compliance questions to the Form 5500. As in the proposal, the Final Rules amend the content of the annual report under § 2520.103-1 by requiring all plans subject to the Form M-1 Start Printed Page 13901requirements to include as part of the Form 5500 Annual Return/Report “[a]ny statements or information required by the instructions to the Form 5500 relating to information regarding compliance with the filing requirements under § 2520.101-2.” The forms revisions being adopted in this Notice implement this requirement by adding a new Part III to the Form 5500, which asks for information regarding whether an employee welfare benefit plan is subject to the Form M-1 filing requirements during the plan year, and if so, whether the plan is currently in compliance with the Form M-1 filing requirements under § 2520.101-2. Plan administrators that indicate the plan is subject to the Form M-1 filing requirements must enter a Receipt Confirmation Code for the Form M-1 annual report or, if the plan was not required to file the Form M-1 annual report, the most recent Form M-1 required to be filed by the plan. This was adjusted slightly from the proposal to simplify the reporting requirement. The proposal asked for the Receipt Confirmation Code for the most recent Form M-1 including Form M-1 filings (e.g., origination or registration filings) made after the latest Form M-1 annual report. Failure to answer the Form M-1 compliance questions will subject the Form 5500 Annual Return/Report to rejection as incomplete and civil penalties may be assessed pursuant to ERISA section 502(c)(2). For the 2013 Form 5500 year, the Part III questions will be included in the Form 5500 instructions and welfare benefit plan filers will be required to include the answers to the new questions in a non-standard attachment. The new Part III will be included in the Form 5500 for the 2014 Form 5500 and later year Forms 5500.

Second, § 2520.104-20 is being amended to ensure that all plan MEWAs and ECEs regardless of size or funding are required to answer the new Form M-1 compliance questions on the Form 5500. Section 2520.104-20 now expressly provides that plans required to file the Form M-1 (plan MEWAs and ECEs) are not eligible for the exemption from filing a Form 5500 that applies to certain unfunded, fully insured, and combination unfunded/insured small welfare plans. That change is being reflected in the changes to the instructions for the Form 5500 being adopted in this Notice. Unless those plans are required to file the Form 5500 with the new Form M-1 compliance questions, the Department would continue to have no ERISA civil penalty process to enforce compliance of the Form M-1 filing obligations of small plan MEWAs and ECEs.

Third, § 2520.103-1(c)(2) is being amended to provide that plan MEWAs and ECEs are not eligible to file the short form, Form 5500-SF, because the Form 5500-SF does not include specific Schedule A insurance information questions, and the Department believes that plan MEWAs and ECEs that claim to provide insured benefits should be required to complete the Schedule A to report information about the insurance policy and insurance company. That change is being reflected in the changes to the instructions to the Form 5500 and Form 5500-SF being adopted in this Notice.

The burden of preparing and filing the Form 5500 Annual Return/Report for the few small plan MEWAs and ECEs that may be affected by this change would be minimized because, in addition to being eligible for the otherwise available simplified annual reporting requirements for small welfare plans provided under § 2520.104-41, plans that meet all of the requirements under § 2520.104-44 are exempt from certain financial reporting and audit requirements (e.g., completing Schedule I (Financial Information)).[5] Thus, many plan MEWAs and ECEs may only need to file a Form 5500 and, if applicable, Schedule A (Insurance Information) and Schedule G, Part III (to report any nonexempt transactions).

IV. Findings on the Revised Form 5500 Annual Return/Report as a Limited Exemption and Simplified Reporting

Section 104(a)(2)(A) of ERISA authorizes the Secretary to prescribe by regulation simplified reporting for pension plans that cover fewer than 100 participants. Section 104(a)(3) of ERISA authorizes the Secretary to exempt any welfare plan from all or part of the reporting and disclosure requirements of Title I of ERISA or to provide simplified reporting and disclosure if the Secretary finds that such requirements are inappropriate as applied to such plans. Section 110 of ERISA permits the Secretary to prescribe for pension plans alternative methods of complying with any of the reporting and disclosure requirements if the Secretary finds that: (1) The use of the alternative method is consistent with the purposes of Title I of ERISA, provides adequate disclosure to plan participants and beneficiaries, and provides adequate reporting to the Secretary; (2) the application of the statutory reporting and disclosure requirements would increase costs to the plan or impose unreasonable administrative burdens with respect to the operation of the plan; and (3) the application of the statutory reporting and disclosure requirements would be adverse to the interests of plan participants in the aggregate. For purposes of Title I of ERISA, the filing of a completed Form 5500 Annual Return/Report, including the filing by eligible plans of the Form 5500-SF, in accordance with the instructions and related regulations, generally would constitute compliance with the simplified report, limited exemption and/or alternative method of compliance in § 2520.103-1. In addition, section 505 of ERISA authorizes the Secretary to prescribe such regulations as the Secretary finds necessary or appropriate to carry out the provisions of Title I of ERISA.

In revising the Form 5500 Annual Return/Report and making the amendments to the Department's annual reporting regulations, the Department has attempted to balance the needs of participants and beneficiaries and the Department to obtain information necessary to protect ERISA rights and interests with the costs attendant with the reporting of information to the federal government. The Department finds under sections 104(a)(2)(A) and 104(a)(3) of ERISA that the use of the Form 5500 Annual Return/Report, with the new Form M-1 compliance questions, is consistent with the purposes of Title I of ERISA and provides adequate disclosure to participants and beneficiaries and adequate reporting to the Secretary.

Taking into account the above, the Department has determined that these revisions to the Form 5500 Annual Return/Report are necessary and appropriate to carry out the provisions of Title I of ERISA. The revised Form 5500 Annual Return/Report also continues to provide for the reporting and disclosure of financial and other plan information described in section 103 of ERISA in a uniform, efficient, and understandable manner, thereby facilitating the disclosure of such information to plan participants and beneficiaries.

V. Paperwork Reduction Act Statement

According to the Paperwork Reduction Act of 1995 (Pub. L. 104-13) Start Printed Page 13902(PRA), no persons are required to respond to a collection of information unless such collection displays a valid OMB control number. The Department notes that a Federal agency cannot conduct or sponsor a collection of information unless it is approved by the Office of Management and Budget (OMB) under the PRA, and displays a currently valid OMB control number, and the public is not required to respond to a collection of information unless it displays a currently valid OMB control number. See 44 U.S.C. 3507. Also, notwithstanding any other provisions of law, no person shall be subject to penalty for failing to comply with a collection of information if the collection of information does not display a currently valid OMB control number. See 44 U.S.C. 3512.

The Department has filed a revision with OMB regarding the impact this Notice would have on the information collection request titled “Form 5500, Annual Return/Report of Employee Benefit Plan,” which was approved by OMB under OMB Control Number 1210-0110 and is currently scheduled to expire on March 31, 2014. The final regulation titled “Filings Required of Multiple Employer Welfare Arrangements and Certain Other Related Entities,” published elsewhere in today's issue of the Federal Register, revises the content of the Form 5500 to require an ERISA-covered plan that is subject to Form M-1 requirements to include “[a]ny statements or information required by the instructions to the Form 5500 relating to information regarding compliance with the filing requirements under § 2520.101-2.” Accordingly, the Department is finalizing a new Part III to the Form 5500, which asks for information regarding whether an employee welfare benefit plan is subject to the Form M-1 requirements during the plan year, and if so, whether the plan is currently in compliance with the Form M-1 requirements under § 2520.101-2. Plan administrators that indicate the plan is subject to the Form M-1 requirements also would be required to enter the Receipt Confirmation Code for the Form M-1 annual report or the most recent Form M-1 filing made with the Department. Failure to answer the Form M-1 compliance questions will subject the Form 5500 Annual Return/Report to rejection as incomplete and civil penalties may be assessed pursuant to ERISA section 502(c)(2). The Department believes that the burden associated with this revision would be de minimis, because plan administrators would know whether the plan is subject to and in compliance with the Form M-1 requirements and they would have the Receipt Confirmation Codes readily available.

The final rule also requires all plans subject to the Form M-1 requirements to file Form 5500, regardless of the plan size or type of funding. The limited exemption available for certain small welfare plans that meet the requirements of § 2520.104-20 is being amended to expressly state that plans subject to the Form M-1 requirements are not eligible for the exemption. In addition, such plans would not be eligible to file the Form 5500-SF. Although the Department does not have sufficient data to estimate the number of plan MEWAs and ECEs that may be affected by this revision, it expects the number to be small, because 90 percent of entities that file Form M-1 with the Department cover more than 100 participants. Moreover, the burden of preparing and filing the Form 5500 Annual Return/Report for the few small plans that might be affected by this rule would be minimal, because, in addition to being eligible for the simplified annual reporting requirements for small welfare plans provided under § 2520.104-41, small plans that meet the requirements of § 2520.104-44 are exempt from completing certain otherwise applicable financial reporting and audit requirements, such as completing the Schedule I (Financial Information). Thus, the affected plans may only need to file a Form 5500 and, if applicable, Schedule A and Schedule G, Part III (to report any nonexempt transactions). The Department estimates that affected plans would incur a cost of $450 to engage a third-party service provider to prepare the form and schedules for submission. Any burden for small ECEs is even less because these plans are subject to the Form M-1 filing requirements only for the three year period following any origination event.

Appendix A—Changes to Existing Form 5500—A New Part III Is Added to the Form 5500 on Form M-1 Compliance

For the 2013 Form 5500, the questions will be included in the Form 5500 instructions and welfare benefit plan filers will be required to include the answers as an attachment to their annual return/report. The new Part III will be included in the Form 5500 for the 2014 Form 5500 and later year Forms 5500.

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Appendix B—Changes to Form 5500 Instructions

The changes to the instructions to the Form 5500 are as follows:

Section 1: Who Must File

  • The following instructions will be added to the instructions for Welfare Benefit Plan:

Plans required to file a Form M-1, Report for Multiple Employer Welfare Arrangements (MEWAs) and Certain Entities Claiming Exception (ECEs), are not eligible for the filing exemption in 29 CFR 2520.104-20 described below. Such plans are required to file the Form 5500 regardless of the plan size or type of funding.

Section 4: What To File

  • The following instructions will be added to the instructions for General Schedules, Schedule I:

Note. A welfare plan that would have been eligible for the filing exemption under 29 CFR 2520.104-20 but for the fact that it is required to file a Form M-1 is exempt from completing a Schedule I if it meets the requirements of 29 CFR 2520.104-44(b)(1).

  • The following tip will be added to the instructions for Small Welfare Plan filing requirements:

Quick Reference Chart of Form 5500, Schedules, and Attachments (Not Applicable for Form 5500-SF Filers)

  • The following sentence will be added at the end of footnote 3:

All Plans required to file Form M-1, Report for Multiple Employer Welfare Arrangements (MEWAs) and Certain Entities Claiming Exception (ECEs), must file an annual report regardless of plan size or type of funding.

Section 5: Line-by-Line Instructions for the Form 5500 and Schedules

  • The following instructions for new Part III will be added as follows:

Part III—Form M-1 Compliance Information (to be completed by welfare benefit plans)

Line 11a. All plans providing welfare benefits must complete Part III, line 11a by answering either “Yes” or “No.” Do not leave the answer blank. Check “Yes” and complete line 11, elements 11b and 11c if the plan is a multiple employer welfare arrangement or an Entity Claiming Exception (ECE) subject to the Form M-1 filing requirements. If the answer is “No,” skip elements 11b and 11c of line 11.

Generally, a Form M-1 annual report must be filed each year by March 1st following the calendar year in which a plan operates subject to the Form M-1 filing requirement. (For example, a plan MEWA that was operating in 2013 must file the 2013 Form M-1 annual report by March 1, 2014.) In addition, Form M-1 filings are necessary in the case of certain registration, origination, or special events. See the instructions for Form M-1, Report for Multiple Employer Welfare Arrangements (MEWAs) and Certain Entities Claiming Exception (ECEs), http://www.askebsa.dol/​gov/​mewa, and 29 CFR 2520.101-2 for more information regarding the Form M-1 filing requirements for plan MEWAs and ECEs.

Line 11b. All plans that answered “Yes” in line 11a must complete line 11b by answering either “Yes” or “No.” Do not leave the answer blank.

Line 11c. All plans that answered “Yes” in line 11a must enter a Receipt Confirmation Code for the 2013 Form M-1 annual report that was required to be filed with the Department under the Form M-1 filing requirements. The Receipt Confirmation Code is a unique code generated by the Form M-1 electronic filing system. You can find this code under the “completed filings” area when you log into your Form M-1 electronic filing system at http://www.askebsa.dol/​gov/​mewa.

If a plan was not required to file a 2013 Form M-1 annual report, enter the Receipt Confirmation Code for the most recent Form M-1 that was required to be filed under the Form M-1 filing requirements on or before the date of filing the 2013 Form 5500. (For example, if a plan was not required to file a 2013 Form M-1 annual report by March 1, 2014 for the 2013 calendar year because it experienced a registration event between Start Printed Page 13904October 1 and December 31, 2013, and made a timely Form M-1 registration filing, the plan must enter on line 11c of the 2013 Form 5500 the Receipt Confirmation Code issued for the Form M-1 registration filing.)

Instructions for Schedule G (Form 5500) Financial Transaction Schedules

  • The following instructions will be added to the “Caution” paragraph in Part III—Nonexempt Transactions:

A Plan that is required to file a Form M-1, Report for Multiple Employer Welfare Arrangements (MEWAs) and Certain Entities Claiming Exception (ECEs), but that is not required to file the Schedule I because it has fewer than 100 participants and meets the requirements of 29 CFR 2520.104-44, must complete Schedule G, Part III, to report nonexempt transactions.

Instructions for Schedule I (Form 5500) Financial Information—Small Plan

  • The following instructions will be added to the “Exception” paragraph under General Instructions for Who Must File:

A Plan that is required to file a Form M-1, Report for Multiple Employer Welfare Arrangements (MEWAs) and Certain Entities Claiming Exception (ECEs) is not required to file the Schedule I if it has fewer than 100 participants at the beginning of the plan year and meets the requirements of 29 CFR 2520.104-44.

Appendix C—Changes to Existing Form 5500-SF Instructions

General Changes

The instructions to the Form 5500-SF will be updated to clarify that plans subject to the Form M-1 filing requirements (plan MEWAs and Entities Claiming Exception) are not eligible to file the Form 5500-SF and must file the Form 5500, with all required schedules and attachments. The changes are as follows:

Who May File

  • The following paragraph 6 will be added to the instructions:

6. The plan is not required to file a Form M-1, Report for Multiple Employer Welfare Arrangements (MEWAs) and Certain Entities Claiming Exception (ECEs) during the plan year.

Specific Line-by-Line Instructions (Form 5500-SF)

  • The following paragraph 6 will be added to the instructions for Part II, Line 6:

6. The plan is not required to file a Form M-1, Report for Multiple Employer Welfare Arrangements (MEWAs) and Certain Entities Claiming Exception (ECEs) during the plan year.

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Signed at Washington, DC, this 26th day of February 2013.

Phyllis C. Borzi,

Assistant Secretary, Employee Benefits Security Administration, Department of Labor.

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Footnotes

1.  The Form M-1 regulations require limited Form M-1 filing for certain group health plans that claim not to be a MEWA solely due to the exception in section 3(40)(A)(i) of ERISA for collectively bargained plans. These entities are referred to as Entities Claiming Exception or ECEs.

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2.  In the preamble to the 2000 interim final rule, the Department explained “[a]n important reason for requiring these groups to file is that the administrator of a MEWA may incorrectly determine that it is a group health plan or that it is established or maintained pursuant to a collective bargaining agreement. A reporting requirement limited only to MEWAs that are not group health plans may not result in reporting by many such MEWAs, thus greatly reducing the value of the data collected.” See 65 FR 7152, 7153 (Feb. 11, 2000).

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3.  Pursuant to ERISA section 502(c)(5), a civil penalty of up to $1,100 (or higher amount if adjusted pursuant to the Federal Civil Penalties Inflation Adjustment Act of 1990, as amended) a day may be assessed for each day a non-plan MEWA fails to file a complete Form M-1.

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4.  Unlike plan MEWAs that are under a permanent requirement to file the Form M-1, 29 CFR 2520.101-2 requires an ECE to file the Form M-1 only during the three years following each origination event (an ECE may experience more than one origination event). Therefore, the Form 5500 rules relating to plans required to file the Form M-1 apply to ECEs only during the periods in which ECEs are required to file the Form M-1.

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5.  Neither this Notice nor the companion final regulations on “Filings Required of Multiple Employer Welfare Arrangements and Certain Other Related Entities” change the eligibility requirements for the limited exemption under 29 CFR 2520.104-44. The Department expects that many plan MEWAs and ECEs will not satisfy the unfunded and insured eligibility requirements in the limited exemption and will continue to be ineligible for the reporting relief under 29 CFR 2520.104-44.

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[FR Doc. 2013-04864 Filed 2-28-13; 8:45 am]

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