MEWA as a Group Insurance Arrangement

[Guest Benefits1234]

A MEWA that is not an ERISA welfare benefit plan can file one Form 5500 on behalf of all employers who purchase benefits from the MEWA if the MEWA is a group insurance arrangement ("GIA"). A GIA is an arrangement that:

1. provides benefits to the employees of two or more unaffiliated employers;

2. fully insures one or more welfare plans of each participating employer;

3. uses a trust or other entity as the holder of the insurance contracts; and

4. uses a trust as the conduit for payment of premiums to the insurance company.

See DOL Reg. 2520.104-43 and 2520.104-21.

I'm trying to figure out what kind of trust must be used (numbered paragraph 4 above) in order for an arrangement to qualify as a GIA. Can the trust be a taxable trust, or must it be a tax-exempt trust? For what purpose must the trust be established? It is only for accounting purposes?

Any insight or thoughts are greatly appreciated!

[GBurns]

Aren't you jumping ahead? Have you yet determined what regulations you would fall under if the MEWA is a GIA and is not an ERISA welfare benefit plan? It is most likely that each employer would be deemed to have a separate single employer ERISA covered plan.

Have you yet determined the extent of state jurisdiction?

[vebaguru]

GBurns is correct, the trust arrangement is secondary. GIAs are not exempt from state regulation: each employer is potentially subject to regulation by the state where coverage is offered. (And most states require that such coverages be offered by insurers licensed as such in their jurisdiction.)

The type of trust is irrelevant, whether it is a grantor trust, a common-law trust, a statutory trust, a section 115 trust (for governmental groups) or a VEBA trust. Even tax-exempt VEBA trusts are actually subject to income taxes for unrelated business taxable income and IRS has aggressively gone after such arrangements.

[401 Chaos]

I think I have some related questions / issues that I'm not seeming to have much luck with elsewhere. I'm helping my local Ronald McDonald House try and get their benefit plans in order, etc. The participate in something called the McDonald's Licensee / Ronald McDonald House Charities Health and Welfare Plan which appears to provide fully-insured health, dental, vision, group life, and disability coverage to participating entities.

The "plan" files a Form 5500 on behalf of all the participating entities identifying itself as a DFE (item G) and a group insurance arrangement (GIA) but does not seem to identify itself as an ERISA multiple employer plan, etc. While there is a single Form 5500 that appears to cover all entities (18,000+ participants) and there is a SAR prepared / distributed, the GIA / trust / "plan" (whatever we want to call it) does not provide or help prepare summary plan descriptions (SPDs) for the local entities.

Does anyone have thoughts on how best to think of this arrangement for SPD purposes. Should each participating employer think of itself as sponsoring their own single-employer ERISA plan and thus responsible for preparing their own SPD identifying the local entity as the plan sponsor and have their own plan name, plan number, etc. and just think of the bigger GIA / trust as basically the plan administrator and funding mechanism, etc. As I understand it, the local entities do not get involved in plan administration decisions, etc.--they basically are told what coverage is available and the rates, etc. and covered employees deal directly with the insurance company / GIA with actual coverage items, etc. so the local group wants to be clear that all actual coverage terms / decisions / administration, etc. is at the bigger group level. Seems too that they would likely need some type of wrap plan to specify specific employer-specific provisions to wrap around the group insurance contracts?

Welcome any thoughts or experience anyone may have with this.

[smokeyclimber]

I know this is several years late, but you need to determine if the group is an employer association or an employee organization. To be an employer association, the group needs to have a non-benefit commonality and the individual employers need to have unique employer powers to change the plan document (this can be accomplished by casting votes to elect the trustee). Specifically, look to DOL AO 80-42A and 81-44A. If the employer association is "bona fide" then there is one "employer". If it is not "bona fide" then each plan is likely its own employee welfare benefit plan and obtaining its benefits from a MEWA.