Municipal employers and ERISA

[jeanine]

I would really appreciate some guidance in this area. We were told by an ERISA attorney that self-funded health benefits plans maintained by a division of a municipality (in this case a school board, but question applies to city maintaining a plan as well) were exempt from the disclosure requirements of ERISA section 1. Because of this, they did not have to issue SPD's to their enrollees. What I don't know is this: are they also exempt from other ERISA requirements?? If so, are they regulated under any state insurance laws such as mandatory benefits, or as in Ohio, a law that sets up a mandated review process? Any insights or leads to where I might find additional information would be greatly appreciated.

[david rigby]

Governmental Employers are exempt from many ERISA and Internal Revenue Code requirements. The primary ones are:

· ERISA Title I, Section 4(B)(1)

· ERISA Title IV, Section 4021(B)(2)

· Minimum Participation Standards IRC § 410©(1)

· Minimum Vesting Standards IRC § 411(e)(1)

· Minimum Funding Standards IRC § 412(h)(3)

· Top-Heavy Plans IRC § 401(a)(10)(B)(iii)

There is also an exemption under IRC 417, but the reference is more difficult to list (it's from the explanatory notes in ERISA) so I have omitted it here.

Of course, the absence of such regulation means that state laws still apply, not that I am an attorney, but this is exactly what several attorneys have told me.

Also, Carol Calhoun, a frequent contributor to this site, maintains an excellent reference: http://benefitsattorney.com/

[This message has been edited by pax (edited 03-22-2000).]

[JWK]

You need to review state law on this question. Note that a self-funded governmental health plan is likely to fit the technical definition of an "insurance policy" under the state insurance code, which makes the sponsoring employer an entity transacting insurance. This problem doesn't arise if a plan is subject to ERISA because of the "deemer" clause (the ERISA provision that says a self-funded plan isn't deemed to be an insurance company under state law). But, as you point out, a governmental plan isn't subject to ERISA so isn't shielded by the deemer clause.

The state insurance code should have a section that states what sorts of entities are exempt from regulation by the state insurance commissioner. Sometimes the exemptions will include governmental plans, but the plan may have to satisfy certain requirements to qualify for the exemption. In Oregon, one of those requirements is distribution of a summary plan description. Oregon also requires self-funded governmental plans to meet all mandated benefits requirements applicable to insured plans and specifies a claims procedure.

You should definitely look at your state's insurance laws and see what the comparable requirements are.