Who's the Employer?

Answer: Remember that the presence of a prior organizational nexus between plan sponsors is just one of the factors the DOL looks at, but it certainly appears to be a major player. Control of the plan is also a crucial issue. And in any case, we are dealing with a facts and circumstances test. So I cannot answer questions similar to "Is 5% enough?" Just so we are clear, here are the standards the DOL uses (taken from the text of Advisory Opinion 2012-04A (the "Opinion"):

[R]elevant factors in determining whether a purported plan sponsor is a bona fide group or association of employers include the following: how members are solicited; who is entitled to participate and who actually participates in the association; the process by which the association was formed, the purposes for which it was formed, and what, if any, were the preexisting relationships of its members; the powers, rights, and privileges of employer members that exist by reason of their status as employers; and who actually controls and directs the activities and operations of the benefit program. The employers that participate in a benefit program must, either directly or indirectly, exercise control over the program, both in form and in substance, in order to act as a bona fide employer group or association with respect to the program.

• Controlled groups. The DOL absolutely treats a controlled group plan as a single ERISA plan. The Opinion cites Advisory Opinion 89-06A to that effect. There is every reason to suppose the DOL would apply the same reasoning to groups under common control and to affiliated service groups.
• Shared employees. As I discuss in Chapter 7 of my book, Who's the Employer (now in its 6th Edition), a shared employee situation arises when an employee works for several unrelated companies at the same time. A good example would be the receptionist working for a suite of doctors, each of whom has a separate practice. If the doctors choose to set up a MEP, the doctors would control the arrangement and their rental accommodations give them a preexisting business nexus independent of the plan. I have no doubt that this would be a single ERISA plan.
• "Kissing cousins." This is a catch-all category that includes overlapping ownership (but not enough to constitute a controlled group), business relationships, etc. It also includes the situation in which a controlled group jointly sponsors a plan, but then a change in ownership breaks up the controlled group. There have been several opinion letters where the DOL ruled that a group of businesses had sufficient connection and control to have a single ERISA plan, but this area is heavily fact-dependent. For an example, see my discussion of the Dunkin' Donuts opinion in Q&A 312. The Opinion differentiates this type of plan from an open MEP: "This letter also does not address the circumstance where an employee pension plan is maintained by more than one employer as a result of a corporate merger, acquisition or divestiture transaction or other circumstance that involves a substantial economic, business, or representational purpose unrelated to provision of benefits to the employees of separate employers.
• Professional employer organizations. I discuss PEO plans at length in Q&A 329.
• Trade association MEPs. I marvel every time I read of some professional who believes a single ERISA plan exists when a trade association or chamber of commerce has adopted a plan or offers it to its members to adopt. As my article, Multiple Employer Plans: An ERISA Enigma, in the Winter 2012 issue of the Journal of Pension Benefits (Vol. 19, No. 2, p. 6) demonstrates, it has long been settled, at least as far as the DOL is concerned, that this creates a series of separate plans, rather than a single ERISA plan. The DOL first ruled in this arena three decades ago, and has yet to vary from that stance.
• Open MEPs. That, of course, is the subject of the Opinion. Open MEPs are not single ERISA plans. I was surprised to read one attorney focusing on the fact that this was an opinion issued to a single MEP. I cannot think of the situation of any open MEP which would produce a different result. It's like saying a Supreme Court decision has no precedential value because it is limited to the facts of one case.

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