ERISA-Governed Life Insurance Plan

[Guest tdambrosia]

I would like to know if the ERISA Plan Asset Regulations requiring timely deposits to a participants account would also apply to timely transmittal of insurance premiums to the carrier for my Universal Life Plan.

Thanks in advance.

[GBurns]

Shouldn't your state payroll deduction laws be also of concern?

[Effen]

What is the issue? Did the policies lapse due to lack of payment?

What does the Plan document say related to the death benefit? Often the death benefit is defined in the plan document as a specifc amount. The Plan owes this benefit regardless of the plan's choice to insure it. Therefore, if the premium is unpaid, it may not have any impact on the benefit which the participant is entitled.

[Guest tdambrosia]

Shouldn't your state payroll deduction laws be also of concern?

Yes, they should...thanks for bringing that into the overall picture.

[Guest tdambrosia]

What is the issue? Did the policies lapse due to lack of payment?

What does the Plan document say related to the death benefit? Often the death benefit is defined in the plan document as a specifc amount. The Plan owes this benefit regardless of the plan's choice to insure it. Therefore, if the premium is unpaid, it may not have any impact on the benefit which the participant is entitled.

Well, the issue is not so much the death benefit as it is the fact that Universal Life insurance has an interest-bearing component in addition to the death benefit. I'm wondering if the ERISA Plan regulations that require payroll deductions for pension plans to be deposited within 15 business days would also be applicable to submitting premiums to the Universal Life carrier. In other words, would the 15 business day rule that applies to timely transmittal of pension plan deposits also apply to a defined benefit plan governed by ERISA? Thanks.

[Guest b2kates]

I am having a problem following your issue. You keep saying that it is death benefit plan funded with universal life insurance. That would be a health and welfare plan, which is different than a defined benefit pension plan.

Is the death benefit plan funded with employee contributions?

[Guest tdambrosia]

I am having a problem following your issue. You keep saying that it is death benefit plan funded with universal life insurance. That would be a health and welfare plan, which is different than a defined benefit pension plan.

Is the death benefit plan funded with employee contributions?

Sorry to confuse anyone...yes, it is funded with employee contributions.

[GBurns]

You still have not really cleared the issue.

Is this a stand alone Voluntary insurance program that happens to use UL policies paid for by employee salary reductions or deductions?

Or is this part of a Pension/Retirement Plan which has a Death Benefit or Benefit Completion feature which is provided through this UL policy which is paid for by employee salary reductions or deductions?

Or is this some other type of program using this UL policy which is paid for by employee salary deduction or reduction?

Is it part of a Qualified Plan or is it stand alone insurance?

[Guest tdambrosia]

You still have not really cleared the issue.

Is this a stand alone Voluntary insurance program that happens to use UL policies paid for by employee salary reductions or deductions?

Or is this part of a Pension/Retirement Plan which has a Death Benefit or Benefit Completion feature which is provided through this UL policy which is paid for by employee salary reductions or deductions?

Or is this some other type of program using this UL policy which is paid for by employee salary deduction or reduction?

Is it part of a Qualified Plan or is it stand alone insurance?

Thanks for your patience and help as I work my way through this question. I hope the following helps to clarify things:

1. The type of plan (from SPD) is 'Group Employee Welfare Benefits' The plan is offered through a business association (MEWA) in my state and is offered through employers' membership in the association.

Employees participate voluntarily through salary reduction/deduction.

2. The SPD describes the plan as follows: The plan provides eligible employees with group insurance benefits such as health, dental, vision, life and disability income benefits. Benefits are enforced in accordance with the terms of the specific insurance contracts issued to the association.

[GBurns]

Sometimes it is necessary to ask more questions just to make sure that we understand and are on the same page.

A salary reduction is an amount that is deducted on a pre-tax basis (such as Cafeteria Plan employee contributions) whereas salary deductions are after taxes are deducted from your paycheck. Only certain types of plans can use salary reuctions. It makes a difference and it helps in trying to understand. I will assume that you pay the premiums after tax and they are therefore salary deductions.

I have not yet come up with an answer regarding ERISA since there were issues that I did not yet understand.

The state payroll law issue seemed to be of more immediate importance.

From what you posted, I think a greater concern is whether or not this MEWA is legal in your state. In general, MEWAs are mainly state regulated. Many states do not even allow new MEWAs and those that do severely regulate them. As a result there are not many MEWAs in most states. Most of those that I see involve large groups and are therefore not available to smaller employers etc. From what you posted I get the feeling that your employer is fairly small.

I suggest that you immediately contact your state Dept of Insurance to verify that this MEWA is legal.

Then I would contact my state office that regulates payroll or labor issues to see what the law states about the payroll deductions.

I am also curious as to what the documents that you were given state about who regulates this MEWA. Do a Google search on MEWAs and you will see why I have concerns.

What state are you in and the name of the MEWA?

[Guest tdambrosia]

Sometimes it is necessary to ask more questions just to make sure that we understand and are on the same page.

A salary reduction is an amount that is deducted on a pre-tax basis (such as Cafeteria Plan employee contributions) whereas salary deductions are after taxes are deducted from your paycheck. Only certain types of plans can use salary reuctions. It makes a difference and it helps in trying to understand. I will assume that you pay the premiums after tax and they are therefore salary deductions.

I have not yet come up with an answer regarding ERISA since there were issues that I did not yet understand.

The state payroll law issue seemed to be of more immediate importance.

From what you posted, I think a greater concern is whether or not this MEWA is legal in your state. In general, MEWAs are mainly state regulated. Many states do not even allow new MEWAs and those that do severely regulate them. As a result there are not many MEWAs in most states. Most of those that I see involve large groups and are therefore not available to smaller employers etc. From what you posted I get the feeling that your employer is fairly small.

I suggest that you immediately contact your state Dept of Insurance to verify that this MEWA is legal.

Then I would contact my state office that regulates payroll or labor issues to see what the law states about the payroll deductions.

I am also curious as to what the documents that you were given state about who regulates this MEWA. Do a Google search on MEWAs and you will see why I have concerns.

What state are you in and the name of the MEWA?

Pennsylvania-I forwarded the plan document to you via PM. In this case, the plan is through a state-wide business organization, with thousands of small employers.

[GBurns]

I see many problems in your approach.

If you call your DOI as you did you will of course be referred to Dol/EBSA as did happen. The reason that you were referred there was probably because you asked about ERISA governed Life Insurance. There is no such thing. ERISA governs the plan NOT the life insurance policy.

Your state DOI governs the life insurance policy.

Did you find out if the Association is authorized as such in your state? Did you find out if it was a MEWA or MET and was it authorized to operate in your state?

I suggest that you call your state DOI division that handles such items. Probably the person to speak to is Victor Dicicco at 717 787 4372.

Telephone Customer Service Reps will not be able to tell you much especially if you keep giving them your interpreatations instead of just giving the facts and letting them make the decision as to what is applicable.

I also suggest that you separate the issues both in your mind and in your correspondence, especially with the DOI and regulators. ERISA and it rules might or might not apply. If you keep assuming that ERISA applies and is the only way to find the solution, you will be severely limiting yourself. If the answer or easiest solution is in your state labor laws, state insurance regulation or in the employer agreement, but you were pursuing the ERISA angle you will never resolve the issue. Who knows, you might have an ERISA plan but no insurance coverage because your state does not allow it in the first place.

By the way, How do you know that the association is state wide and has thousands of employers? Because a brochure or website says so does not make it so. Nor does a name make it statewide.

In any case your premiums are paid after tax and the policy is portable. Have you asked the insurance company to deduct from your bank account or credit card instead of through payroll? This way you would not have an employer holding up the remmittance of your premiums.

[Guest tdambrosia]

Thanks for all of the fine info/help with this.

I spoke with Victor at the DOI. He tells me that our state does not regulate or register any MEWA's or MET's

The only involvement from the DOI is to make certain that if the plan is using insurance carriers, that they (the carriers) are properly licensed to conduct business in the state...which they are.

So, with the DOL and DOI both saying they have no involvement, I think we're back to the question about whether or not payroll deductions for Universal Life coverage fall under the ERISA regulation regarding timely transmittal. I guess another way to put it would be to simply ask if my employer is violating any ERISA regulations by waiting nearly 60 days to transmit my Universal Life premiums to the carrier. Regards.

[GBurns]

You missed his point. If PA allows no MEWAs or METs therefore under what license or Certificate of Authority is this Association operating?

There have been others before this Association that he has shut down for being Unlicensed Entities. Do a Google search on "Pennsylvania Unlicensed Entities" and you will see some of these statewide associations who mainly sold to employer groups and which he took action against. Some were fully insured even by some of the same insurers involved with this association. NJ also took many actions that negated the need for PA action. As in most of those cases people did call in to the DOI but their questions did not get them the answers that would have protected them even though the answers were correct. It was the questions that were wrong.

I suspect that his responses were conditioned by what you told him, which might have steered him in the direction of answering that which you asked and not that which would be related to the actual facts of the situation.

But whether you have valid coverage is still a separate issue from your premium remittance issue.

What does it natter and what would you be able to do anyhow, if your employer has/is violating ERISA or state law? You cannot fire your employer. You cannot fine your employer. BUT your employer can fire you possibly even for just being a nuisance and creating an issue on the worksite. So I wonder why you are even pursuing this, when there is nothing that you can do about it?

The simple solution is to change your method of paying the premium.

[Ron Snyder]

I have followed this thread from the inception and agree with Mr. Burns. I have seen dozens of MEWAs closed down over the past few years, as insurance departments become aware of them. If a state has now MEWA law, MEWAs are required to register as a full-blown insurance company to be able to write business in that state. In the alternative, a MEWA may have all of its benefits guaranteed by a licensed insurance company and the MEWA policy submitted and approved by the state insurance department. The legitimacy of the sponsoring association is irrelevant to compliance with state insurance laws.

You might be interested in:

http://www.ins.state.pa.us/ins/cwp/view.as...1&Q=525731&tx=0

http://www.naic.org/Releases/2004_docs/12-..._december_5.pdf

[Guest tdambrosia]

Thank you to both you and Mr. Burns for your insight. I did check the last 5500 form filing (2002), which shows well over 20,000 insureds in the program.

While I don't seem to yet have a handle on the questions that I should ask of the DOI, I do have genuine concern regarding legitimacy and operation of this MEWA. Perhaps I should just simply ask them that question.

Again, sorry if I'm not making myself clear.

[GBurns]

What does the filing of a Form 5500 have to do with any of the issues?

You are off on another tangent that has no relevance.

[Guest tdambrosia]

Actually, I was just attempting to answer one of your previous questions:

By the way, How do you know that the association is state wide and has thousands of employers?

[GBurns]

A Form 5500 does not state not imply any geographical coverage area nor is it necessarily an accurate reflection on number of lives covered at any particular date, especially by coverage type. Also the Number of insureds does not mean the number of employers.

[Guest tdambrosia]

Again...you asked a question, and I simply tried to answer.

Why so snarky and argumentative? I thought that this was a place for information and friendly interaction...am I wrong?

[GBurns]

I asked about statewide and about number of employers in response to your use of both terms. You responded about number of insureds and nothing about statewide.

I was not being argumentative, I was pointing out that you were looking at the wrong thing again and that you did not answer the question that was asked.

[Don Levit]

I have had extensive conversations with Tery Keating, who is the chief MEWA litigator in PA.

You are correct, Vebaguru, that PA has no laws regulating MEWAs.

I assume that would mean that a self funded MEWA would have to meet similar requirements of a full-blown commercial insurer. This is not legally binding, however, but we can save that discussion for another time.

This situation seems to have a fully insured MEWA, which is allowed in PA.

Yes, you must still be licensed thru the PA DOI, and you must file the appropriate forms with the DOL.

Does your MEWA, for example, file an M-1 annually with the DOL?

What is the actual name of the MEWA?

There are quite a few MEWAs which are licensed to operate in PA, self funded as well as fully insured.

Don Levit