Quasi-Governmental Plans and ERISA

[vebaguru]

A state teachers association has created a self-funded health plan. Almost all teachers in the association are employees of school districts, governmental entities. The plan is funded through a VEBA and permits all who share an employment-related common bond with teachers in the state to participate with the approval of the state teachers association. About 7.5% of participants are non-teacher working for schools or school districts. Approximately 2% of the teacher/participants work for private schools. About 92% of participants are as a result of collective bargaining agreements. The balance are employees of schools/districts that have a policy of matching benefits for non-union employees.

Because of their concerns about liability for negligent claim payment or review or for refusing benefits through their gatekeeper cost containment program, the association desires the plan to be an ERISA plan, thus limiting damage claims against them to those provided under ERISA rather than state law. A state court held several years ago (based on plan documentation) that the plan was an ERISA plan. However, it appears that under ERISA, to the extent that governmental employees participate in an otherwise ERISA plan, the plan as it applies to those governmental employees may not be an ERISA plan.

It appears that to the extent that the plan has private schools and non-union employees participating it may also be a MEWA. This could result in the result that with respect to the governmental employees the plan does provide ERISA protections and for the non-governmental employees the plan, although subject to ERISA, will need to be filed with and approved by the state's insurance department.

Is there any way to make sure that ERISA applies to such a group (and pre-empts state laws with respect to damages)? Will the DOL rule on ERISA applicability? Is there a flaw in my analysis or concerns?

[mbozek]

V: Your client needs to hire counsel and pay for an opinion- no one can give a competent opinion on this web site. I once had a private non profit client that participated in a state retirement plan. The ee made salary reduction contributions to a 403(B) plan and the state made the employer contributions to the qualified state retirement plan on the employer's behalf. There are a number of DOL opinion letters on the application of ERISA to govt plans.

[vebaguru]

They hired an ERISA attorney and he came to me for additional guidance. What I posted above is what we came up with. I have not reviewed DOL letters, but we found a few cases on point.

I don't expect someone on this site to act as free counsel and I wouldn't trust it if they did. However, I am willing to entertain ideas and suggestions from practitioners who may have faced similar situations previously.

[IRC401]

I thought that a plan had to be maintained by a governmental entity in order to be a governamental plan. You described a plan maintained by a union, not by a government.

If the issue is important enough, couldn't they apply for an advisory opinion?