In FAQs about Affordable Care Act Implementation Part XI, the Employee Benefits Security Administration (the “EBSA”) provides guidance on the payment of self-insured health plan fees by multiemployer plans.
The FAQs say that section 4376 of the Internal Revenue Code (the “Code”), as added by the Affordable Care Act, imposes a temporary annual fee on the sponsor of an applicable self-insured health plan for plan years ending on or after October 1, 2012, and before October 1, 2019. The fee is equal to the applicable dollar amount in effect for the plan year ($1 for plan years ending on or after October 1, 2012, and before October 1, 2013) multiplied by the average number of lives covered under the applicable self-insured health plan during the plan year. In the case of (i) a plan established or maintained by 2 or more employers or jointly by 1 or more employers and 1 or more employee organizations, (ii) a multiple employer welfare arrangement, or (iii) a voluntary employees’ beneficiary association (a “VEBA”) described in Code section 501(c)(9), the plan sponsor is defined in Code section 4376(b)(2)(C) as the association, committee, joint board of trustees, or other similar group of representatives of the parties who establish or maintain the plan.
In the case of a multiemployer plan defined in ERISA section 3(37), the plan sponsor liable for the fee would generally be the independent joint board of trustees appointed by the participating employers and employee organization, and directed pursuant to a collective bargaining agreement to establish the employee benefit plan. This board exists solely for the purpose of sponsoring and administering the plan and has no source of funding independent of plan assets. It would be unreasonable to construe the fiduciary provisions of ERISA as prohibiting the use of plan assets to pay the fee imposed by section 4376 to the Federal government. Thus, unless the plan document specifies a source other than plan assets for payment of this fee, such a payment from plan assets would be permissible under ERISA.
There may be rare circumstances where sponsors of employee benefit plans that are not multiemployer plans would also be able to use plan assets to pay the Code section 4376 fee, such as a VEBA that provides retiree-only health benefits where the sponsor is a trustee or board of trustees that exists solely for the purpose of sponsoring and administering the plan and has no source of funding independent of plan assets. The same conclusion would not necessarily apply, however, to other plan sponsors required to pay the fee under Code section 4376. For example, a group or association of employers that act as a plan sponsor but that also exist for reasons other than solely to sponsor and administer a plan may not use plan assets to pay the fee even if the plan uses a VEBA trust to pay benefits under the plan. The Department of Labor would expect that such an entity or association, like employers that sponsor single employer plans, would have to identify and use some other source of funding to pay the Code section 4376 fee.