Multiple Employer Welfare Arrangements (MEWA)

Scope

By avoiding state insurance reserve, contribution, and other requirements applicable to insurance companies, MEWAs are often able to market insurance coverage at rates substantially below those of regulated insurance companies. This concept makes the MEWA an attractive alternative for those small businesses finding it difficult to obtain affordable health care coverage for their employees.

Regulatory citations

• ERISA Section 3(1) and 3(2)

Key definitions

• None

Summary of requirements

ERISA’s provisions governing employee benefit plans. Under current law, a MEWA that constitutes an ERISA-covered plan must comply with the provisions of Title I of ERISA applicable to employee welfare benefit plans, in addition to any state insurance laws that may apply to the MEWA. If a MEWA is determined not to be an ERISA-covered plan, the persons who operate or manage the MEWA may nonetheless be subject to ERISA’s fiduciary responsibility provisions if such persons are responsible for, or exercise control over, the assets of ERISA-covered plans. In both situations, the Department of Labor (DOL) would have concurrent jurisdiction with the state(s) over the MEWA.

Promoters of MEWAs have typically represented to employers and state regulators that the MEWA is an employee benefit plan covered by the Employee Retirement Income Security Act (ERISA) and, therefore, exempt from state insurance regulation under ERISA’s broad preemption provisions.

ERISA amendments. Recognizing that it was both appropriate and necessary for states to be able to establish, apply, and enforce state insurance laws with respect to MEWAs, the U.S. Congress amended ERISA in 1983 to provide an exception to ERISA’s broad preemption provisions for the regulation of MEWAs under state insurance laws.

While the 1983 ERISA amendments were intended to remove federal preemption as an impediment to state regulation of MEWAs, it is clear that MEWA promoters and others have continued to create confusion and uncertainty as to the ability of states to regulate MEWAs by claiming ERISA coverage and protection from state regulation under ERISA’s preemption provisions. Obviously, to the extent that such claims have the effect of discouraging or delaying the application and enforcement of state insurance laws, the MEWA promoters benefit and those dependent on the MEWA for their health care coverage bear the risk.

Regulation under ERISA. ERISA covers only those plans, funds or arrangements that constitute an “employee welfare benefit plan,” as defined in ERISA Section 3(1), or an “employee pension benefit plan,” as defined in ERISA Section 3(2). By definition, MEWAs do not provide pension benefits; therefore, only those MEWAs that constitute “employee welfare benefit plans” are subject to ERISA’s provisions governing employee benefit plans.