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Court Allows Expansive Interpretation of ERISA Employee Welfare Benefit Plan, Effectively Overruling DOL’s Analysis



Data Marketing Partnership, LP v. U.S. Dep’t of Labor, 2020 WL 5759966 (N.D. Tex. 2020)

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This case involved the ERISA status of health coverage offered by a partnership’s general partner to thousands of individual limited partners. The partnership specialized in the production and sale of electronic data collected from individual limited partners, through software installed on their personal electronic devices, as they used the internet. The individuals could purchase health coverage through a plan sponsored by the general partner. The DOL issued an Advisory Opinion concluding that the arrangement involved no employment or services-based relationship and thus there was no ERISA plan (see our Checkpoint article). The partnership asked a court to declare the plan subject to ERISA. The court has agreed with the partnership, ruling that the plan is a single-employer ERISA plan.

At issue was whether the individual limited partners were “working owners” or “bona fide partners” for purposes of ERISA provisions allowing those categories of non-employees to participate in ERISA plans alongside employees. (The partnership plan apparently covered at least one common-law employee.) According to the DOL, permitting the software to capture data while they used their personal electronic devices did not constitute “work” by the individual partners. Moreover, because each individual had only nominal ownership in the partnership, the DOL determined that the facts did not support a working owner relationship. The court, however, concluded that the partners were actively engaged in the partnership’s business by providing personal services consisting of contributing their data and collectively deciding what to do with it. And it held that the DOL’s imposition of a materiality standard for ownership was arbitrary and capricious. An ownership interest “of any nature,” combined with active involvement, made the partners working owners. (The court noted that the bona-fide partner standard presents a lower threshold than the working owner standard, therefore it was also met.) Concluding that “so long as one common-law employee is covered by the plan, it is an ERISA plan in which an unlimited number of working owners may participate,” the court enjoined the DOL, preventing it from refusing to acknowledge the ERISA status of the plan.

EBIA Comment: The DOL’s Advisory Opinion noted that HHS and Treasury had advised it that the arrangement would not be a group health plan for purposes of the Affordable Care Act individual market reforms—that is, that it would generally be subject to the individual market rules. However, being treated as an ERISA group health plan allows the arrangement to avoid those requirements. For more information, see EBIA’s ERISA Compliance manual at Section VI.E (“Are Plan Benefits Provided to Participants or Beneficiaries?”). See also EBIA’s Health Care Reform manual at Section XIV.A (“Introduction and Understanding Small and Large Group Markets”), and EBIA’s Self-Insured Health Plans manual at Section III.D (“Who Can Sponsor a Self-Insured Health Plan?”).

Contributing Editors: EBIA Staff.

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