A recent Advisory Opinion from the Department of Labor (DOL) provides additional insight on the question posed by ACE hardware of whether their multiple employer welfare arrangement (MEWA) would qualify as an employee welfare benefit plan maintained by a “bona fide association” of employers.
ACE Hardware Corporation is a cooperative formed of members who are the owners of hardware stores across the country. Each member purchases products from the cooperative, is provided marketing support, and has access to many other services. The corporation maintained a health plan for its corporate employees and wanted to extend that plan to offer a healthcare option to member stores so that they could, in turn, offer it to their employees. Member owners who did not have employees were not eligible for access to the health plan.
A “Bona Fide Association”
The first question the DOL addressed is whether ACE Hardware Corporation and the member stores would count as a bona fide group or association of employers under ERISA. Considering Pathway 1 eligibility, the DOL focused on existing regulatory guidance for association health plans (AHPs). This path requires employers to have both a genuine organizational relationship and the ability to control the healthcare plan. The DOL did not consider Pathway 2 eligibility, the validity of which has been put into question by a recent court ruling.
The DOL found that cooperative members had control of the plan through their ability to vote, elect, nominate, and remove board members. Further, the DOL found that the businesses that were members of the cooperative were all engaged in the same industry and that the organization had benefits and functions that were independent of providing healthcare options to members.
Based on these findings, the DOL concluded that the member-employers of ACE Hardware Corporation were a bona fide association and that their plan qualified as an AHP and an employee welfare benefit plan. Furthermore, because the healthcare plan offered benefits to the employees of two or more employers, it would qualify as a MEWA.
No Findings of Fact Regarding MEWA Compliance
Because ACE asked this question on a prospective basis and there were no insurance contracts in place to review and no existing processes to control the healthcare plan, the DOL was careful to note that they were making no finding of fact as to whether ACE’s plan and program actually complied with applicable MEWA legal requirements. Further, they made no note on the insured status of the company and raised a flag to ensure ACE complied with fiduciary and prohibited transaction concerns.
Complying with ERISA regulations is important for a MEWA, as without doing so each participating employer is viewed as maintaining a separate healthcare plan that is subject to ERISA compliance and its associated requirements, which leads to significant complications for small employers not expecting to run a health plan.
While this advisory opinion is specific to ACE, it does provide other employers guidance on how the DOL is looking at the questions posed. Specifically, it gives additional guidance on how the agency will be looking at “bona fide groups or associations” to determine whether they’re eligible to offer an AHP.
The experienced, responsive benefits attorneys at Hall Benefits Law pay attention to regulatory guidance so they can better give clients proactive legal advice regarding benefit plans, patient rights, processes, and procedures. Call our office today at 678-439-6236 or visit the Hall Benefits Law website to learn more about our services.
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