ERISA DOL Advises An Independent Dairy Cooperative On Whether It’s Plan Is An Employee Welfare Benefit Plan Or A MEWA For Purposes of ERISA

In DOL Advisory Opinion 2017-02AC (May 16, 2017) (the “Opinion”), the United States Department of Labor (the “DOL”) provides advice to a cooperative on whether its plan is an employee welfare benefit plan or a multiple employer welfare arrangement (that is, a “MEWA”) for purposes of ERISA.  Here is a summary what the Opinion says:

The Opinion is in response to a request on behalf of the First District Association for an advisory opinion regarding applicability of Title I of the ERISA to the Dairy Consortium Health Plan (the “Plan”).  Specifically, it is asked whether the Plan would constitute an “employee welfare benefit plan” within the meaning of section 3(1) of ERISA that is maintained by a “group or association of employers” within the meaning of section 3(5) of ERISA (which defines “employer”).  It is also asked whether the Plan would constitute a MEWA within the meaning of section 3(40) of ERISA.

The First District Association (the “FDA”) has been operating as an independent dairy cooperative organized under Minnesota Chapter 308A since 1921.  A group of dairy farm employers in Minnesota and Wisconsin who are FDA members propose to establish the Dairy Consortium (the “Consortium”) for the purpose of establishing the Plan to provide group health benefits to their employees.  The Consortium intends to establish a trust as described in section 501(c)(9) of the Code as a funding vehicle for the Plan.

The Plan is to provide benefits among those described in section 3(1) of ERISA.  However, to be an employee welfare benefit plan under that section, the Plan must also, among other criteria, be established or maintained by an employer, an employee organization, or both.  There is no indication that an employee organization is involved. Therefore, the issue is whether the Consortium may act as a bona fide employer group or association for the purpose of establishing the Plan within the meaning of section 3(5) of ERISA.

A determination of whether there is a bona fide employer group or association must be made on the basis of all the facts and circumstances involved.  In this case, based on the facts presented, the DOL concludes that the participating employer members of the Consortium could exercise control over the Consortium and the Plan, and therefore would, at least in form, constitute a bona fide employer group or association for purposes of ERISA section 3(5).  As such, the Plan would, at least in form, constitute an employee welfare benefit plan that is a multiple employer plan for purposes of Title I of ERISA.  Whether the participating employer members of the Consortium actually exercise control in substance over the Consortium and the Plan and its trust is an inherently factual issue on which the DOL will not rule in an advisory opinion.

It is noted that, without regard to whether the Plan constitutes an employee welfare benefit plan, the Plan would be a MEWA within the meaning of section 3(40) of ERISA.  Section 3(40) defines the term MEWA, subject to certain exceptions not relevant here, to mean an employee welfare benefit plan, or any other arrangement, which is established or maintained for the purpose of offering or providing any benefits described in section 3(1) of ERISA to the employees of two or more employers.

 

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