HRB 68 - Final Rules Relating to Multiple Employer Welfare Arrangements and Form M-1
Released March 8, 2013I Download as a PDF March 8, 2013 --
The Affordable Care Act (ACA) strengthens the regulation of multiple employer welfare arrangements (MEWAs), primarily by increasing reporting and disclosure requirements and creating a cross-reference between the Form M-1 required to be filed by MEWAs, and the Form 5500 required of plans subject to ERISA. In addition, the law gives the Secretary of Labor the right to police MEWAs by granting authority to the Secretary to issue an ex parte cease and desist order (without prior notice or hearing) in the event there is concern that the MEWA may be at risk of harming the public. On March 1, 2013, the Department of Labor’s Employee Benefits Security Administration (EBSA) issued final rules
, along with a fact sheet
regarding these requirements.
Modifications to the Form M-1 filing requirement
As background, a MEWA is a plan covering two or more unrelated employers, including self-employed individuals. A MEWA can be established in a number of ways:
- By business leagues or associations, such as chambers of commerce or other independent promoters. The MEWA is open to a diverse group of employers. In this instance, each participating employer is responsible for its ERISA compliance (non-plan MEWA); or
- In a more, rare instance the MEWA, in effect, is the plan sponsor. This occurs in situations in which there is a commonality of interest among all participating employers and the employers control the activity of the MEWA (plan MEWA). In this instance, ERISA applies at the MEWA level.
It is primarily unscrupulous promoters the first category of MEWA that has created concern, in that a number of MEWAs have resulted in loss to the participating plans and plan participants. For this reason, the rules and compliance obligations applicable to MEWAs have been strengthened.
Several years ago, a reporting requirement (by way of the Form M-1) was imposed upon MEWAs to insure that the MEWA complies with the Health Insurance Portability and Accountability Act (HIPAA) rules and subsequent laws, including the ACA. Generally, the Form M-1 must be filed annually and is due by March 1 of the following year. These new regulations require that the Form M-1 must be filed electronically. To accommodate the change to electronic filing, the Form M-1 filing date, due for the 2012 year, is moved from March 1, 2013 to May 1, 2013, with the ability to extend the filing date to July 1, 2013. The Department of Labor has provided a Form M-1 online filing system and FAQs on its website.
Also of note, the Form M-1 has undergone significant revisions primarily relating to administration of the MEWA and reporting on its financial condition.
These regulations apply to administrators of both non-plan and plan MEWAs and Entities Claiming Exception (ECEs). An ECE is an entity claiming to be exempt from the MEWA rules in that it is established pursuant to one or more collective bargaining agreements.
These regulations do not apply to:
- A MEWA or ECE licensed or authorized to operate as a health insurance insurer in every state which it offers or provides coverage for medical care to employees;
- A MEWA or ECE that provides coverage that consists solely of HIPAA excepted benefits, including but not limited to non-health benefits;
- A MEWA or ECE that is a group health plan not subject to ERISA (i.e. Governmental plan, church plan);
- An entity that provides coverage to the employees of two or more trades or businesses that share a common control interest of at least 25%;
- An entity that provides coverage to the employees of two or more employers due to a change in control of business (such as a merger or acquisition); and
- An entity that provides coverage to persons (excluding spouses and dependents) who are not employees of the plan sponsor (such as board of directors or independent contractors) and the number of such persons does not exceed 1% of the total number of employees.
According to these regulations, the administrator of a MEWA is required to file the Form M-1 30 days prior to operating in any state. In addition, the administrator must file the Form M-1 30 days prior to:
- Knowingly operating in any additional State or States that were not indicated on a previous Form M-1 filing;
- Operating with regard to the employees of an additional employer (or employers, including one or more self-employed individuals) after a merger with another MEWA;
- The date the number of employees receiving coverage for medical care under the MEWA is at least 50 percent greater than the number of such employees on the last day of the previous calendar year; or
- Experiencing a material change.
The administrator of an ECE is required to file the Form M-1:
- During the three year period following an origination event,
- 30 days before it begins operating with regard to the employees of two or more employers (including one or more self-employed individuals),
- Within 30 days of:
- When the ECE begins operating following a merger with another ECE (unless all of the ECEs that participate in the merger previously were last originated three years prior to the merger);
- When the number of employees receiving coverage for medical care under the ECE is at least 50 percent greater than the number of such employees on the last day of the previous calendar year (unless the increase is due to a merger with another ECE, as stated above);
- Knowingly operating in any additional state or states that were not indicated on a previously required form m-1 filing; or
- Experiencing a material change.
Modifications to the Form 5500 filing requirement
All MEWAs subject to the M-1 filing requirement are obligated to file a Form 5500, without regard to size or funding. A new section (Part III) will be added to the Form 5500 for years 2014 and later, requiring that the entity report on its compliance with the M-1 filing requirement. Failure to answer these questions will result in the Form 5500 filing being rejected. For the 2013 Form 5500, the new section will need to be included as an attachment to the annual report. The final rules and the new Part III can be found here.
Ex parte cease and desist order requirements
The Department of Labor has also issued regulations granting the Secretary of Labor the right to issue a cease and desist order and a summary seizure order, giving the Secretary the right to seize assets of the MEWA, if the Secretary believes the MEWA is engaging in fraudulent conduct, including but not limited to, misrepresentation of benefits or misrepresentation of the financial condition of the MEWA. This regulation is intended to protect the insured from any malfeasance on the part of the MEWA promoters.
In conclusion, all plans covering two or more unrelated employers should review their status as a MEWA and make sure that all Form M-1 and Form 5500 filing requirements are accomplished. Again, just for the 2013 Form M-1 filing (reporting the 2012 year), the due date has been delayed from March 1 to May 1, 2013.
About the Author: Karen R. McLeese is Vice President of Employee Benefit Regulatory Affairs for CBIZ Benefits & Insurance Services, Inc., a division of CBIZ, Inc. She serves as in-house counsel, with particular emphasis on monitoring and interpreting state and federal employee benefits law. Ms. McLeese is based in the CBIZ Leawood, Kansas office.
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