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Eric Taylor

VEBA / MEWA Design Issue

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This may be more a MEWA question but the arrangement involves a VEBA too and I'm as worried about the VEBA rules as anything so thought I'd post here.

MEWA has been set up by local professional association to provide group health coverage and is viewed / treated as a single plan sponsored by an association for ERISA purposes--the plan is sponsored by an association of industry-specific employers in a particular city and generally exerts strict control and management over the plan / arrangement so please assume for arguments sake here that the group generally constitutes a bona fide group for purposes of establishing a single ERISA employee welfare benefit plan. The arrangement is funded through a VEBA. Individual employers sign up for the plan and sign participation agreements, etc. to participate in the plan. Some groups for 2013 wish to exclude coverage for dependents under age 26 with other health coverage from participating in the plan. (Plan is grandfathered so could presumably do this until 2014.) Other employer groups do not want to do this. Association doesn't really care--wants to provide flexibility to make each participating employer happy--so long as permissible. Question is whether it is possible to give each participating employer the ability to set specific eligibility / coverage terms under this single plan so that some can cover all dependents without restriction and others can elect to cover only those dependents without other group health coverage for 2013? Would having different eligibility / coverage rules for different employers potentially cause nondiscrimination concerns for VEBA and 105(h) purposes, destroy the ability to treat the arrangement as a single plan for ERISA purposes or otherwise cause other problems?

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Guest Alonzo Church III
This may be more a MEWA question but the arrangement involves a VEBA too and I'm as worried about the VEBA rules as anything so thought I'd post here.

MEWA has been set up by local professional association to provide group health coverage and is viewed / treated as a single plan sponsored by an association for ERISA purposes--the plan is sponsored by an association of industry-specific employers in a particular city and generally exerts strict control and management over the plan / arrangement so please assume for arguments sake here that the group generally constitutes a bona fide group for purposes of establishing a single ERISA employee welfare benefit plan. The arrangement is funded through a VEBA. Individual employers sign up for the plan and sign participation agreements, etc. to participate in the plan. Some groups for 2013 wish to exclude coverage for dependents under age 26 with other health coverage from participating in the plan. (Plan is grandfathered so could presumably do this until 2014.) Other employer groups do not want to do this. Association doesn't really care--wants to provide flexibility to make each participating employer happy--so long as permissible. Question is whether it is possible to give each participating employer the ability to set specific eligibility / coverage terms under this single plan so that some can cover all dependents without restriction and others can elect to cover only those dependents without other group health coverage for 2013? Would having different eligibility / coverage rules for different employers potentially cause nondiscrimination concerns for VEBA and 105(h) purposes, destroy the ability to treat the arrangement as a single plan for ERISA purposes or otherwise cause other problems?

Generally, nondiscrimination rules are applied on an employer by employer basis, and if the participating employers are not a part of the same controlled group/ under common control, etc, the IRS will apply 505 and 105(h) on an employer by employer basis. I am a little dubious about your approach to allowing an employer to adopt a grandfather plan, but do not have a cite. It would seem that the act of an employer adopting a this arrangement for employees would make it not be grandfathering.

I think your premise -- that the DoL will think this a single employer plan rather than a MEWA -- is dubious, as I have never seen the DoL opine that way on any arrangement where the employers are not linked by ownership. But, under your question, the IRS and DoL definitions of employer are not the same.

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Thanks, Alonzo. Sorry for the confusion. The plan is a multiple employer plan / MEWA and classifies itself that way for regulatory purposes. My reference to a single plan here was meant to reference not that they classified it as a single-employer plan sponsored by a single controlled group but that the association views the arrangement as generally being one "plan" with one plan document, one SPD, one Form 5500 filed, etc. but with multiple employers participating in the MEWA. In other words, each participating employer does not have its own plan document, SPD, Form 5500, etc. but is considered to be participating in one multiple-employer plan. I hope that makes sense.

In this case, the participating employer has been participating in the plan for some time--prior to health reform and grandfathering rules--but wants to change the coverage for dependents with other coverage for next year. That seems to raise obvious grandfathering issues to my mind but the plan has some flexibility built in to try and permit each participating employer to determine who their group's eligible participants are. This particular employer wants to use that "flexibiility" to not just determine say which employees are regular full time employees versus part-time or temporary employees, etc. but to impose restrictions on dependents with other health coverage.

Again, that seems problematic to me from a grandfathering perspective but my real question is broader than that and has to do with how much flexibility, if any, a MEWA might build in for different participating employers apart from grandfathering considerations, etc. For example, let's assume we are beyond grandfathering, could the plan permit participating employers to select from a range of waiting period / entry requirements--e.g., a choice of (1) a zero waiting period, (2) a 30-day waiting period, or (3) a 60-day waiting period such that one employer could permit immediate entry upon employment, another employer could require a 30-day waiting period, and yet another employer could select a 60-day waiting period?

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