Not a MEWA simply because we share common BOD members?

[Guest Diana Prewitt]

Self-insured med/dental plan where my organization serves as sponsor, administrator, and fiduciary. Other smaller organization has been in the plan for several years. We have the same outside council and some of the same companies are represented on both boards. We are being told that having these common board member companies puts us under "common control" and therefore not a MEWA. I don't read the PWBA booklet this way. I have just read the third installment of Q's and A's and note that Q 20 does address "a common control interest of at least 25 percent at any time during the plan year." Any clarification or further source of info would be much appreciated.

[pjkoehler]

Diane, if you drill down through the statutory definition of a MEWA at ERISA Sec. 3(40), you'll end up looking at Code Sec. 414© regs to determine whether there is sufficient common ownership, except that the 25% threshhold applies. You haven't mentioned any facts that establish common ownership. Now there are some PLRs where the IRS has taken the position with respect to applying these rules to tax-exempt organizations that the power to appoint and remove directors is tantamount of an ownership interest in proportion to the number of board seats under control. But arguing that the mere coincidence that two companies have the same outside counsel and an overlapping board of directors establishes any level of common ownership, let alone enough to constitute "common control," seems like a real stretch.

[This message has been edited by PJK (edited 06-30-2000).]