Fully Insured MEWA Question

[KJohnson]

Employer with a fully insured group health plan wants to add a 50% subsidiary on to its policy. Since there is no controlled group, this would appear to create a MEWA. All employees are in one state and the insurance company is licensed in that state. The instructions to the M-1 state that if the MEWA is licensed or authorized to operate as a health insurance issuer in every State in which it offers or provides coverage for medical care to employees (or to their beneficiaries)" it does not need to file the M-1. Would that apply in this situation?

[Don Levit]

If the plan is fully insured, then the insurer, if licensed to operate in that state, has the license. If self insured (or partially self insured), the MEWA itself would need to be licensed. Regardless, the M-1 must be filed, if it is a MEWA.

Don Levit

[KJohnson]

Thanks Don. I had assumed that the M-1 would have to filed, but when I read that language in the instructions it seemed strange. What is this exception in the instructions meant to cover?

[Don Levit]

The ECE stands for Entities Claiming Exceptions. These are organizations that are not sure if thy would be MEWAs. They must file the form M-1 for 3 years. At that point, I believe, they need not file the M-1, unless contacted by the DOL.

Don Levit

[Guest terryh123]

Also, see section 1.2 of the instructions to M-1. One of the exceptions to having to file the M-1 is if there is at least 25% common ownership using principles similar to 414(b) and © controlled group rules. So, since you have 50% ownership, you may not have to file M-1.

[KJohnson]

Thanks terryh123. You are right that exception would appearl to apply. That is interesting because they appear to diavow the 25% standard in the MEWA book because they have not yet adopted regulations decreasing common control from the 80/50 test. This is from the MEWA book.

n determining whether trades or businesses are within

the “same control group,” Section 3(40)(B)(ii) provides that

the term “control group” means a group of trades or busi-nesses

under “common control.” Pursuant to Section

3(40)(B)(iii), whether a trade or business is under “common

control” is to be determined under regulations issued by the

Secretary applying principles similar to those applied in

determining whether there is “common control” under section

4001(b) of Title IV of ERISA, except that common control

shall not be based on an interest of less than 25 percent.

Accordingly, trades or businesses with less than a 25 percent

ownership interest will not be considered under “common

control” and, therefore, will not be viewed as a single em-ployer

for purposes of determining whether their plan provides

benefits to the employees of two or more employers under

Section 3(40).

With regard to situations where there is a 25 percent or

more ownership interest, it should be noted that, the Depart-ment

of Labor has not adopted regulations under Section

3(40)(B)(iii). However, regulations issued under Section

4001(b) of Title IV and Section 414© of the Internal Revenue

Code (See: 29 CFR §2612.2 and 26 CFR §1.414©-2, respec-tively)

provided that “common control” generally means, in

the case of a parent-subsidiary group of trades or businesses,

an 80 percent ownership interest, or, in the case of organiza-tions

controlled by five or fewer persons, which are the same

persons with respect to each organization, at least a 50 percent

ownership interest by such persons in each organization.

[Guest terryh123]

I agree. It is strange. I think you have a MEWA, but just do not have to file an M-1. Since you have an insured plan, don't have to worry about state insurance regulation. If it was a self-insured plan, would then have to sort through state insurance regulations in states in which MEWA exists.

See my other post this morning on issue I have.