Plan with VEBA and MEWA Status Required to Pay ACA’s Annual Health Insurance Provider Fee

Voluntary Employees’ Beneficiary Associations (VEBAs) and Multiple Employer Welfare Arrangements (MEWAs) have been determined to be covered entities by the Court of Federal Claims. The Affordable Care Act (ACA) subjects “covered entities” to an annual health insurance provider fee, meaning that these two types of plans are not exempt from the fee.

 

Iowa Bankers Benefit Plan

Iowa Bankers Insurance and Services, Inc. established a benefit plan to provide a variety of benefits to financial employers located in Iowa. These benefits ranged from life and health insurance to vision benefits, accident insurance, and more. The plan qualified as both a VEBA and a MEWA.

Because of the ACA’s annual health insurance provider fee requirement, the plan over the course of three years paid over $3.5 million in fees. Believing its plan qualified as exempt from those fees, the organization requested refunds from the IRS. When the IRS did not respond, the plan filed suit, claiming that it was not a covered entity because a VEBA is not established by an employer. Instead, the plan claimed that it represents a single employer that is self-insured against its employees’ health risks.

In response, the U.S. Court claimed that the ACA language cited, specifically, that a plan “established by an entity (other than by an employer or employers)” is ambiguous and that the court was required to defer to IRS regulations and the IRS’s interpretation of the statute.

Court of Federal Claims Ruling Favors Government’s Arguments

IRS regulations state that, while VEBAs fall under a “covered entity” exclusion, MEWAs do not qualify for this exception. Furthermore, based on the way the plan was constructed, it waived the argument that it was a self-insured employer because it was insuring the employees of participating businesses, not its own employees. The court agreed that the language was ambiguous, and it ruled that the plan was a covered entity subject to the annual fees under ACA. Finally, the court ruled that the plan’s arguments would continue to fail because their interpretation of ERISA’s definition of “employer” was incorrect. The plan and participants did not constitute a single employer under ERISA.

This ruling directly impacts businesses that are taking advantage of VEBA and MEWA plans. The legal team at Hall Benefits Law pays close attention to these rulings so we can guide clients, plans, and policies. To learn more, or to get help making changes to your plans today, call 678-439-6236, or visit the Hall Benefits Law website.

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Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.

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