MEWAs and Statutory Employees

[Chaz]

I have a deep in the weeds question with a narrow application that I wonder if anyone has come across:

Background

The Code has a concept of a "statutory employee," which  makes an otherwise non-common law employee an employee for employment tax (but not for income tax) purposes.  These employees receive a W-2 with box 13 checked.  A common type of statutory employees are full-time life insurance salespersons. The Code also provides that a full-time life insurance salesperson is treated as an "employee" for purposes of participating in a qualified retirement plan and for Code Sections 104, 105, 106, 125, and certain other sections (which generally provide that an employer can provide welfare benefits on a tax-favored basis).

ERISA generally subjects welfare plans that cover employees of two or more unrelated employers to state insurance law (among other things) because the plan is a MEWA.  If an entity provides benefits to independent contractors, for example, it risks creating a MEWA.

Question

Can a life insurance company offer welfare benefits to its full-time life insurance salespersons (i.e., ones who are statutory employees) without creating a MEWA?

While the Code provides for favorable tax treatment on providing these benefits, it does not appear as if ERISA will permit this type of arrangement without invoking the dreaded MEWA rules because these salespersons are not common law employees.  (The Code is not ERISA and ERISA is not the Code.)   At least, I have not found any DOL guidance that addresses this issue.

Has anyone come across this admittedly obscure situation?

Thanks

[AKowalski]

I would be wary.  The question of whether the employer or the employee is eligible for a tax benefit under Title 26 is very different from the question of whether state laws are preempted under Title 29.

MEWA is defined in 29 USC Section 1002(40):

The term “multiple employer welfare arrangement” means an employee welfare benefit plan, or any other arrangement (other than an employee welfare benefit plan), which is established or maintained for the purpose of offering or providing any benefit described in paragraph (1) to the employees of two or more employers (including one or more self-employed individuals), or to their beneficiaries, except . . .

The Supreme Court has addressed the definition of "employee" for ERISA purposes, and said that we generally look to common law (and, as far as I know, has never said that we look to specific definitions of "employee" or "statutory employee" that only apply for limited purposes in specific statutes within the IRC).  You might be able to argue that this federal statute in the tax code, which relates to whether an individual is treated as an employee for certain employee benefits issues, is relevant to the interpretation of federal common law of employee status under ERISA. 

I would suggest reviewing the main Supreme Court case that announced a definition of "employee" and searching the citing references (on Westlaw or Lexis, if you have access) to see if there are any subsequent cases which mention the statute you are concerned about, or that mention the term "statutory employee" (or "stat!" /4 "employ!").  If you don't otherwise have access, I note that premium legal research services may be available to the public at the library of your local courthouse or law school.  If you have access, you could also try searching Checkpoint for regulatory or subregulatory guidance with:  ("statutory employee" or "stat!" /4 "employ!") /30 ("mewa" or "multiple employer welfare arrangement" or "1002(40)")

Let me know if you find a clear answer!