DOL Issues Final Rule for Multiple-Employer Health Plans

By IIyse Schuman © Littler Mendelson Mar 8, 2013

The U.S. Department of Labor (DOL) has issueda final rulegoverning the Patient Protection and Affordable Care Act's (PPACA) new anti-fraud enforcement and reporting requirements for multiple employer welfare arrangements (MEWAs). The rule was published in the Federal Register on March 1, 2013.

A MEWA is generally considered an arrangement that offers medical benefits to the employees of two or more employers. They are required to register with the Labor Department prior to operating in a state.

Anti-Fraud Enforcement Authority

The final rule establishes the Labor Secretary’s authority to issue cease and desist orders when fraud is suspected as well as seize MEWA assets when the arrangement is in financial jeopardy, and sets forth revised reporting requirements for MEWAs and related entities.

According to a DOL news release, employers are often told that MEWAs are more affordable than traditional forms of coverage, but unscrupulous promoters, marketers and operators of certain MEWAs have taken advantage of gaps in the law to avoid state insurance regulations, putting enrollees at financial risk. These actions include the requirement to maintain sufficient funding and adequate reserves to pay health care claims of workers and their families.

The DOL's Employee Benefits Security Administration (EBSA) has been involved in many cases where MEWAs have been operated by individuals who drained them of their assets through excessive administrative fees or outright embezzlement, leaving participants and their families with unexpected, unpaid health care bills.

To avoid this possible outcome, the PPACA included provisions authorizing the Labor Secretary to issue a cease and desist order when a MEWA “engages in conduct that is fraudulent, creates an immediate danger to the public safety or welfare, or causes or can be reasonably expected to cause significant, immediate, and irreparable injury.” In addition, the PPACA allows the Labor Secretary to seize the assets of a MEWA if it is in a “financially hazardous condition.” The new final rule sets forth the criteria the Secretary will consider before issuing a cease and desist order or summary seizure order. The rule also explains to whom the orders will apply, including those having custody or control of a MEWA’s assets or any authority over the management of a MEWA.

Reporting Requirements

Another final rule, also published on March 1, 2013, establishes the general registration and reporting requirements for MEWAs and for certain entities that claim not to be a MEWA solely due to the exception in section 3(40)(A)(i) of ERISA, referred to as entities claiming exception (ECEs). Under the new rules, all employee welfare benefit plans that are MEWAs or ECEs subject to the Form M-1 annual report requirement must file the Form 5500 Annual Return/Report with the DOL, including information on compliance with Form M-1 filing requirements, regardless of the plan size or funding type. According to the DOL, Form 5500, which is filed by administrators of employee benefit plans, is “the principal source of information and data concerning the operations, funding and investments of pension and welfare benefit plans,” and serves as “the primary means by which the operations of plans can be monitored by participants, beneficiaries, and the general public.” The DOL is making available asearchable online filing systemto facilitate this process.

Among other provisions, the revised regulations explain the civil and criminal penalties that may result from a failure to comply with these reporting requirements and/or knowingly submitting false information.

Revised Forms 5500, M-1

In conjunction with the final rules, the EBSA has adopted revisions to the Form 5500 Annual Return/Reportand to Form M-1.

These forms revisions will be applicable for all Form 5500 Annual Return/Report filings beginning with the 2013 Form 5500.

The DOL has posted a fact sheeton these new regulations.

Ilyse Schuman is a shareholder in the Washington, D.C., office of Littler Mendelson. She provides strategic counsel and representation to clients on a broad array of workplace issues and developments in Congress and executive branch federal agencies. © 2013 Littler Mendelson. All rights reserved. Republished with permission.​

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