DOL Advisory Opinion Addresses ERISA Bona Fide Association and MEWA Status

The DOL has issued an Advisory Opinion addressing whether the health plan of a hardware retailer’s cooperative would qualify as an employee welfare benefit plan maintained by a bona fide group or association of employers, and whether the plan would be a fully insured multiple employer welfare arrangement (MEWA). Through the cooperative, members (hardware store owners) purchase products for retail sale and obtain marketing, technology, and other services. In this advisory opinion, the retailer proposed to amend its existing health plan for its corporate employees (and employees of certain wholly owned corporate stores) to add coverage for the cooperative’s employer members and their employees. According to the cooperative, members without any common-law employees could not participate in the plan.

The DOL first evaluated whether the plan would be established and maintained by a bona fide group or association of employers for purposes of ERISA’s employee welfare benefit plan definition. It considered existing sub-regulatory guidance on association health plans (AHPs) (i.e., Pathway 1), which requires participating employers to have a genuine organizational relationship and the ability to control the plan. (The DOL noted that the advisory opinion does not address the status of the arrangement under “Pathway 2,” the partially vacated AHP regulations; see our Checkpoint article.) Cooperative members have the authority—through voting—to elect, nominate, and remove board members, and employer members would have such authority with respect to the plan administrative committee overseeing day-to-day plan operations. The DOL determined that the cooperative members are engaged in the same industry and have a genuine organizational relationship independent of the provision of benefits. It concluded that, in form, the employer members would constitute a bona fide employer group or association, and the plan would constitute an AHP that is an employee welfare benefit plan. The DOL noted that it does not opine on factual issues such as whether employers actually exercise adequate control.

The DOL further concluded that, as an arrangement established and maintained to provide welfare benefits to employees of two or more employers, the plan would be a MEWA. Because the opinion was sought on a prospective basis, and there were no insurance contracts in place to review, the DOL declined to opine on the arrangement’s insured status. Lastly, noting fiduciary and prohibited transaction issues raised by the situation, the DOL referred the cooperative to an earlier Advisory Opinion.

EBIA Comment: Status as an ERISA plan is significant for several reasons. If a MEWA is not an ERISA plan, each participating employer is treated as maintaining a separate plan potentially subject to ERISA compliance obligations, such as furnishing summary plan descriptions and filing Form 5500s, rather than those requirements applying at the MEWA level. Also, due to ERISA preemption, a MEWA that is an ERISA plan is somewhat less encumbered by state regulation than one that is not an ERISA plan. Keep in mind that advisory opinions may be relied upon only by the parties identified in them, although they do provide valuable insight into the DOL’s interpretation of ERISA and DOL regulations. For more information, see EBIA’s ERISA Compliance manual at Sections XIX.C (“ERISA Definition of MEWA”), XIX.D (“Does ERISA Apply at the MEWA Level or at the Participating Employer Level?”), and XIX.H (“Disclosure Obligations for MEWAs and Participating Employers”). See also EBIA’s Cafeteria Plans manual at Section IX.G (“Issues Raised by Employer’s Participation in an Association Health Plan (AHP) or Other Multiple Employer Welfare Arrangement (MEWA)”).

Contributing Editors: EBIA Staff.