Multiple Employer Plans

[Belgarath]

Can you have Multiple Employer Plans in the Section 125 plan arena, similar to qualified plans? In other words, could an Association (of some sort) sponsor their own plan, and have unrelated (and by that, I mean not part of a controlled group or ASG) member businesses adopt the plan as Participating Employers, and have all testing, administration, 5500's if required, etc., done separately for each business,  but there is no "MEWA" where contributions, etc. are being pooled?

I'd have said not - and any "unrelated" business would just adopt a plan on their own. But perhaps this is a normal and common arrangement?

[leevena]

The 125 regulations state a cafeteria plan is defined as a separate written plan that is maintained by an employer for the benefit of its employees and that all participants in a cafeteria plan must be employees.  That said, aside from Taft-Harley plans, it is by definition not legal.  I say this because to my knowledge, the IRS has never issued any opinion on the issue of a MEWA sponsoring a 125.  

But your question is very confusing.  Did I answer it?

[Belgarath]

Yes, and thanks. But to try to simplify - suppose the local Chamber of Commerce or some similar organization sponsors a Section 125 plan for its employees. Can member businesses simply adopt that plan as "participating employers" when those employers are not part of a controlled group or affiliated services group? I think your answer is no?

 

[leevena]

Correct, the COC cannot extend its plan to other companies that are not controlled by the COC.  By the way, I cannot imagine why anyone would want to do this.

 

[Chaz]

Proposed Treasury Regulation 125-1(a) states that "The term cafeteria plan means a separate written plan that complies with the requirements of section 125 and the regulations, that is maintained by an employer for the benefit of its employees and that is operated in compliance with the requirements of section 125 and the regulations."

I think in the absence of definitive guidance from the IRS (which I agree with Lee doesn't currently exist), the conservative approach would be to adopt separate plans for each employer.

[Belgarath]

Thank you both. I happened to see a proposal to an association that presented this as an option, and I was rather taken aback - not my problem, but for my own information, I did want to see if such a thing was even possible/feasible.

[leevena]

Did your original post/question change?  It appears to be different.

[Belgarath]

No. And your answers were very helpful.

[jashendorf]

Even if you managed to have unrelated employers "adopt" a single 125 plan, it wouldn't work.

The 125 plan is the "payroll" side of things -- not the benefits. The underlying benefits are not the 125 plan -- they are separate plans that are being offered as benefits that may be elected pursuant to the cafeteria plan. (Most are welfare benefits, but not all of them.) Those underlying plans may or may not be permitted to be offered by unrelated employers, and that has nothing to do with the 125 plan. The only connection to the 125 plan is that the employer's employees are given the ability to opt in/out of that benefit (which could include a MEWA in which the employer participates, or even a Taft-Hartley welfare plan for which the employee is eligible). But, it goes without saying that you cannot have, e.g., A's employees being given the option to participate in B's plans (which is what you'd have if A and B were actually "sharing" a 125 plan).

Some providers say that they are using a single plan, but what they're actually doing is just using a "prototype" document (for lack of a better term), so everyone has an identical 125 plan document (except for filled-in blanks) but everyone has a separate plan.

[Belgarath]

16 hours ago, jashendorf said:

but what they're actually doing is just using a "prototype" document (for lack of a better term), so everyone has an identical 125 plan document (except for filled-in blanks) but everyone has a separate plan.

Yes, and this is precisely what I envision as being acceptable. I have seen a couple of other opinions that the "multiple employer" option is viable, but I wouldn't do it...

The situation I describe above is very definitely a situation where unrelated employers (related only by belonging to an association of some sort) can sign on to the lead employer's document as a "participating employer."

Thanks for the input.

[KimberlyC]

The IRS did request comments on the use of multiple employer cafeteria plans in 2007, but to my knowledge they didn't include it in the cafeteria plan regulations.