Executive Summary: The Department of Labor ("DOL") recently released a series of final rules affecting health benefits provided through multiple employer welfare arrangements ("MEWAs"). Notably, the 2012 Form M-1 filing deadline has been extended to May 1. In addition, new guidance implementing portions of the Affordable Care Act ("ACA") applicable to MEWAs has been released.
Overview: Generally, a MEWA is an arrangement that offers medical benefits to employees or their beneficiaries of two or more employers. MEWAs must comply with certain disclosure and annual filing requirements, as well as certain state-based insurance regulations.
Some employee welfare benefit plans and other arrangements claim they are not MEWAs because they are established or maintained under, or pursuant to, one or more collective bargaining agreements. These entities are referred to as "entities claiming exception" or "ECEs." If an entity claims this exception, the entity must file the Form M-1 for a limited time only.
MEWAs arise in several contexts. Health and welfare coverage provided to leased employees by a Professional Employer Organization ("PEO") might be considered a MEWA if the PEO provides coverage to multiple recipient organizations, and the recipient organizations are determined to be the common law employer of the leased employees. Additionally, an employer might inadvertently create a MEWA following a corporate transaction if it continues to provide health and welfare coverage to employees who are transferred to an unrelated buyer.
Filing Deadline Extended. Most MEWAs must annually file a Form M-1 usually in March. This year, the filing deadline for the 2012 Form M-1 has been extended until May 1, 2013. An additional 60-day, one-time extension to file will automatically be granted if the administrator of the MEWA requests an extension in accordance with the Form M-1 instructions.
In accordance with the ACA, a MEWA plan administrator is required to file the Form M-1 30 days before beginning operations in any state. A MEWA plan administrator must also make a special Form M-1 filing within 30 days of any of the following: (1) knowingly operating in any additional state or states that were not indicated on a previous Form M-1 filing; (2) 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; (3) the date on which the number of employees receiving coverage for medical care under the MEWA is at least 50% greater than the number of these employees on the last day of the previous calendar year; or (4) experiencing a material change (as described in the instructions to the Form M-1).
For registration, origination, and special filings, the 2012 Form M-1 is due for events beginning on or after July 1, 2013, with a one-time, additional 60-day extension available on request.
Form M-1, Revised. The 2012 Form M-1 is substantively different from the 2011 Form M-1. The revised Form M-1 includes additional fields for filers to indicate the type of entity and the type of filing, and it expands the amount of custodial and other financial information collected.
MEWAs are still required to certify compliance with part 7 of ERISA by using the 36-page checklist/questionnaire that needs to be completed as part of the form. As with previous years, there are penalties associated with incomplete or incorrect forms. Additionally, all plan administrators must now file the Form M-1 electronically using the online filing system.
In addition, the final rules contain the following components:
Cease and Desist Orders. The ACA authorizes the DOL to issue a cease and desist order, without prior notice or hearing, when it appears that the conduct of a MEWA is fraudulent, creates an immediate danger to the public safety or welfare, or is causing or can be reasonably expected to cause significant, imminent, and irreparable public injury.Persons who are the subject of a cease and desist order may request an administrative hearing to show cause why the order should be modified or set aside. The final rules describe the procedures for a hearing before a DOL administrative law judge.
"Summary Seizure" Orders. The ACA provides that the DOL may issue a "summary seizure" order to preserve plan assets when the DOL has probable cause to believe that a MEWA is in a financially hazardous condition. The DOL will normally obtain judicial authorization, and appointment of an independent fiduciary or receiver, before issuing the order. However, the new regulations allow the DOL to issue the order first, and then promptly seek authorization when it reasonably believes any delay will result in loss or concealment of assets.
MEWA Reporting and Registration. Under the final rules, all ERISA-covered MEWAs and ECEs subject to the Form M-1 reporting requirements must file a Form 5500 Annual Return/Report, regardless of the plan size or type of funding, and include information regarding compliance with the Form M-1 filing requirements.
Changes to the Form 5500. The revisions to the Form 5500 enhance the Department's ability to enforce the Form M-1 reporting requirements by requiring all ERISA-covered MEWAs subject to the Form M-1filing requirements to indicate whether they are currently in compliance with the Form M-1 requirements and include proof of Form M-1 filings as part of the Form 5500.
FordHarrison's Employee Benefits team has extensive experience with MEWAs, and we can assist you in the preparation of Form M-1 Filings, and compliance with the new rules and regulations.
If you have any questions regarding this legal alert please contact Tiffany Downs, firstname.lastname@example.org, Isabella Lee, email@example.com, Scott Wagner, firstname.lastname@example.org, any member of FordHarrison's Employee Benefits Practice Group, Gordon Berger, email@example.com, or the FordHarrison attorney with whom you usually work.