MEWA Trust

[Guest ptpnthr]

Is there any good reason for a MEWA to adopt a trust if all underlying benefits are fully insured and all premiums are employer- and/or employee-paid?

[GBurns]

How do you run a MEWA without a Trust in the first place. Who negotiates the insurance contracts, who selects the service providers etc?

[Guest ptpnthr]

The MEWA sponsor, an entity that is unrelated to the MEWA's other employers, does it all.

[IRC401]

Do the premium payments go directly from the employers to the insurance company or do they flow through an intermediary? If they flow through an intermediary, why wouldn't you need a trust?

[Guest ptpnthr]

Right now the premiums go directly to the broker. If there is a good reason to set up the trust, e.g., to meet 2520.104-21 and 43, then we'll do it, but I want to make sure I understand all the implications. FYI, I called the state DOI (and read the statutes and regs) and we're OK there. Arguably, we don't have a MEWA but instead have several mirror plans sponsored by different employers that all happen to use the same plan document, but I'm starting with the proposition that we do have a MEWA. By meeting 104-21, do we gain anything other than relieving each employer of the duty to distribute a SPD, etc. as provided in 104-21? Moreover, are we expanding our 5500 reporting requirements because we have a trust? Am I correct in reading that if the MEWA properly files the 5500 then each plan in the MEWA does not have to file (e.g., we meet 104-43?), regardless of the number of participants in each plan?

[GBurns]

You say that "Arguably,we don't have a MEWA" then you say that you all use the same Plan Document. If you all use the same PD, you have a MEWA.

If the MEWA files 1 Form 5500 you have a MEWA.

I think that you should decide whether or not you have a MEWA. I suspect that the response that you got from the DOI was based on how you phrased your statements and not on the facts. In this post you have swung back and forth.

Why would premiums go to the broker and not the insurer or service providers?

[Guest ptpnthr]

It is actually a third party administrator who is an agent of the insurance company and who handles the premiums and other administrative matters. We call him the broker for shorthand.

I feel we do have a MEWA, though I don't believe it is due to using the same plan document - e.g., if an employer in CA adopts a plan and an unrelated employer in NY magically adopts the same plan with the same words, you don't have a MEWA just because they happen to use the same plan document.

In any event, assume we have a MEWA. I'm trying determine the pros and cons of adopting a trust to run the premiums through the trust. I was looking to see if anyone had any thoughts on this.

[GBurns]

A MEWA is not something that you should "feel" that you have, it is something that you should know. The consequences of using a MEWA can very severe in many states.

Calling things or positions something that they are not is also dangerous. A Broker is a Broker, a TPA is a TPA, a MEWA is a MEWA. To use terms as "shorthand" might lead to misstating and misinterpretations. That is probably what happened with your DOI. If your language and terminology is different to that of the person to whom your are communicating, theie response or answer will most likely be incorrect.

To "use" the same PD, as you previously said, is not the same as "adopting" the same PD.

It makes it a MEWA in most cases if the unrelated employers are in the same "arrangement" and "pooled" together.

[IRC401]

Isn't it possible for a group of unrelated employers to band together to purchase insurance together (to get a better rate) without having a MEWA?

BTW I agree that you should know whether or not you have a MEWA and leave the feelings out of it.

[GBurns]

It is very difficult to do and impossible in most states.

The usual thing is to form a "coalition" or "alliance" and negotiate as one large group. Examples are Pacific Business Group or any of the large alliances.

However, the employers within these groups ALL purchase separately under separate contracts but based on the rates negotiated from the strength of the "alliance". The rates are calculated separately and the underwriting etc is also separate for each employer.

The "power" of the group and the "promise" of the business is what gets them a "discount".

[GBurns]

It is very difficult to do and impossible in most states.

The usual thing is to form a "coalition" or "alliance" and negotiate as one large group. Examples are Pacific Business Group or any of the large alliances.

However, they ALL purchase separately under separate contracts.