April 20, 2006
Department of Labor Advisory Letter Received
The Kansas City office of HitesmanLaw, P.A. successfully assisted its client, the TICUA Benefit Consortium, a multiple employer welfare arrangement (“MEWA”), in receiving a favorable Advisory Opinion from the United States Department of Labor.
In the Advisory Opinion the Department of Labor determined that the TICUA Benefit Consortium is a single employee welfare benefit plan as defined under ERISA. A single employee welfare benefit plan is recognized by the Department of Labor when there is a cognizable, bona fide group or association of employers that act in the interest of its employer members to establish a benefit program for the members’ employees.
In determining whether or not the TICUA Benefit Consortium is a single employee welfare benefit plan the Department of Labor analyzed the following six factors:
- how the members are solicited;
- who is entitled to participate and who actually participates in the association;
- the process by which the association was formed;
- the purposes for which it was formed;
- the powers, rights, and privileges of employer members that exist by reason of their status as employers; and
- who actually controls and directs the activities and operations of the benefit program.
Based on these factors, and the information that the TICUA Benefit Consortium provided, the Department of Labor affirmed, “it is the view of the Department that the employer members of the Consortium would, at least in form, constitute a bona fide group or association of employers, and the Plan would, at least in form, constitute an employee welfare benefit plan for purposes of Title I of ERISA.”
With the Department of Labor’s determination that the TICUA Benefit Consortium is a single employee welfare benefit plan, the consortium receives increased ERISA preemption protection. MEWAs which are not single employee welfare benefit plans are not covered under ERISA and are subject to complete state regulation. However, if a MEWA is designated by the Department of Labor to be a single employee welfare benefit plan, then ERISA provides preemption and the state may regulate the MEWA to a more limited degree.
Please contact us if you have any questions.