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MEWA and common control

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There was a 1992 DOL Publication entitled "MEWAs Multiple Employer Welfare Arrangements Under ERUSA: A Guide to Federal and State Regulations." On pages 26 and 27 its discusses "common control" and then refers to 25% or more ownership and then 50% and 80%. Does anyone have the definitive answer (with a cite - e.g. DOL Opinion LTR) as to how much ownership you need to be under "common control" and thus not a MEWA.

Thank you.

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  • 3 weeks later...

This issue has not been finally resolved. However, you may wish to contact the DOL and ask for guidance. (This issue came up this past weekend at the meetings of the Tax Section of the American Bar Assoc. without an answer.) Try 202-622-6080 or 202-219-7006 (Ofc of Healthcare Compliance & Standards Administration). However, the easiest approach would be to file form M-1 (Annual Report for MEWAs) and attach a request for clarification of status based upon the information provided. If you don't have DOL Form M-1, go to the PWBA website, www.dol.gov/dol/pwba.

[This message has been edited by vebaguru (edited 05-15-2000).]

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FOR WHAT IT'S WORTH: The reference to 25% comes from ERISA Sec. 3(40)(B)(iii). Sec. 3(40)(B)(i) excludes from the definition of the term "multiple welfare benefit arrangement" plans established or maintained by two or more trades forming a "control group." Subparagraph (ii) defines "control group" as a group of trades or businesses under "common control" and subparagraph (iii) grants the Secretary regulatory authority to determine the meaning of "common control" applying principles similar to the those applied by the PBGC in determining a "controlled group" under ERISA's plan termination provisions. See Section 4001(B) and PBGC Reg. 4001.3, which incorporates the meaning of controlled group as defined in the regulations under IRC Section 414(B) and ©.

HOWEVER, the Secretary's authority to issue regulations defining the term "control group" for MEWA determination purposes is subject to a special limitation. It cannot use an ownership threshold of less than 25%.

We know that if we apply Section 414(B) and © analysis, 80% is the applicable percentage in determining a parent-subsidiary "controlled group," and 80% (controlling interest) and 50% (effective control) are used in determining a brother-sister form of "controlled group." The Secretary clearly has the authority to lower these threshholds down to 25%. If two or more trades or businesses form a "controlled group" as defined above, it's reasonable to conclude that they also form a "control group" for MEWA purposes. What if the relevant ownership percentages are less than the applicable thresholds pursuant to Code Sections 414(B) or ©, but at least 25%?

You probably guessed it: The Secretary hasn't issued so much as proposed regulations and my quick scan of Advisory Opinions doesn't reveal any guidance either. My guess is the Department is not issuing any formal guidance on this question. You'll be lucky to obtain an informal comment that gives you any direction. If you do, perhaps you'd share it on this board. Good Luck.

[This message has been edited by PJK (edited 05-16-2000).]

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  • 2 weeks later...
Guest EB Mac

I placed a call in to the DOL. According to the agent I spoke with, it is the DOL's position that common control is based on the 80% ownership interest provided in Section 4001(B), which incorporates the meaning of controlled group as defined in the regulations under IRC Section 414 ©. She even acknowledged that it can appear unclear in looking at 3(40)(B)(iii) ... however, despite that - until the DOL issues the "common control" regulations for MEWAs, the 80% provided in IRC section 4001(B), controls.

If anyone else hears anything to the contrary or that agrees with this, let us know.

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