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The Honorable John W. Oxendine
Insurance and Safety Fire Commissioner
Georgia Department of Insurance
Two Martin Luther King, Jr., Drive
West Tower, Seventh Floor
Atlanta, Georgia 30334
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Dear Commissioner Oxendine:
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This is in response to a request from Mr. Steven Sprouse, on behalf of the
Georgia Department of Insurance (GDI), for information regarding the
applicability of Title I of the Employee Retirement Income Security Act of 1974,
as amended (ERISA). Specifically, Mr.Sprouse asked for the view of
the Department of Labor (Department) on whether section 514 of Title I of ERISA
precludes the GDI from regulating the International Union of Industrial and
Independent Workers Benefit Fund (IUIIW Fund). The following summary is
based on information we received from the GDI; it should not be treated as
factual findings of the Department.
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The International Union of Industrial and Independent Workers (IUIIW) was formed
in September of 1997. The IUIIW was established for the purpose, “in
whole or in part, of dealing with employers concerning grievances, labor
disputes, wages, rates of pay, hours of employment, and conditions of work for
IUIIW members.” Membership of the IUIIW consists of “members,”
defined as individuals working in bargaining units represented by the IUIIW in
collective bargaining, and “beneficial members,” defined as individuals not
currently part of an organized bargaining unit and with respect to whom the
IUIIW has no obligation to collectively bargain. “Beneficial
membership” is open to any person who is interested in advancing the cause of
organized labor but who is not eligible for membership as a member of a
bargaining unit represented by the IUIIW in collective bargaining.
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The IUIIW Fund was established on June 1, 2000, to provide health care and other
welfare benefits to participating IUIIW members and beneficial members.
The information we received indicates that the IUIIW Fund enters into
“participation agreements” with employers. The employers agree to make
contributions to the IUIIW Fund for the IUIIW Fund to provide health and other
welfare benefits to the employer’s participating employees who are IUIIW
members or beneficial members. The overwhelming majority of participants
in the IUIIW Fund are beneficial members, rather than members in bargaining
units represented by the IUIIW in collective bargaining. The IUIIW Fund
offers a variety of benefit options, including medical, prescription, dental,
vision, and life insurance coverage. Some of these benefits are fully
insured, e.g., life insurance through U.S. Life and prescription coverage
through MIM-Scrip, and some are self-insured or partially self-insured, e.g.,
medical, dental, and vision. You represent that employees of more than two
employers receive benefits from the IUIIW Fund. In this regard, the
information you provided indicates that employees of as many as 352 or more
employers in Georgia have been covered by the IUIIW Fund.
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Pursuant to the IUIIW Fund’s Agreement and Declaration of
Trust, there are four trustees responsible for managing the IUIIW Fund.
These trustees are charged with the duties necessary to operate and maintain the
IUIIW Fund, including receiving, holding, investing, and distributing the assets
of the IUIIW Fund, and selecting service providers to assist them with their
duties. In this regard, the trustees have engaged Oak Tree Administrators,
Inc., to handle day-to-day administrative matters, such as assisting enrollees
with enrollment applications, processing and paying benefit claims, and
furnishing plan related documents to enrollees. Two trustees are appointed
by the IUIIW. The materials we received indicates that an entity referred
to as the “Contributing Employers Association” (CEA) appoints the other two
trustees. We did not see evidence of any bylaws, constitution, articles of
incorporation, or other similar documents for the CEA, but some of the materials
we received suggest that the CEA’s membership consists of only employers of
beneficial members.
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Section 514(a) of Title I of ERISA generally preempts state law purporting to
regulate an employee benefit plan covered under that title. There are,
however, exceptions to this general preemption provision. The relevant
exception for purposes of your inquiry is in subsection 514(b)(6)(A), which
allows state insurance regulation of MEWAs and MEWA trusts without regard to
whether they are employee benefit plans covered by Title I of ERISA.
Section 3(40)(A) of ERISA defines the term MEWA, in relevant part, to mean:
“[A]n employee welfare benefit plan, or any other arrangement (other than an
employee welfare benefit plan), which is established or maintained for the
purpose of offering or providing any benefit described in [section 3(1) of ERISA]
to the employees of two or more employers (including one or more self-employed
individuals), or to their beneficiaries, except that such term does not include
any such plan or other arrangement which is established or maintained -- (i)
under or pursuant to one or more agreements which the Secretary [of Labor] finds
to be collective bargaining agreements, (ii)by a rural electric
cooperative, or (iii) by a rural telephone cooperative association.”
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A review of our files indicates that the Department has not made any finding as
to whether the IUIIW Fund is established or maintained pursuant to one or more
collective bargaining agreements for purposes of section 3(40)(A). It has
been the Department’s position that, in the absence of such a finding, a plan
or other arrangement that provides welfare benefits to the employees of two or
more employers, and not otherwise excepted from the MEWA definition, is a MEWA.
Further, nothing in the material we received suggested that the IUIIW Fund is
established or maintained by a rural electric cooperative or rural telephone
cooperative association as defined in section 3(40) of ERISA.
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If a MEWA is not itself an ERISA covered plan, which is
very often the case, ERISA’s preemption provisions do not prohibit States from
regulating the MEWA in accordance with applicable state insurance law. In
such cases, the Department would view each employer member that uses the MEWA to
provide welfare benefits to its employees as having established a separate
welfare benefit plan subject to ERISA. In effect, the MEWA would be merely
a vehicle for funding and administering the provision of benefits (like an
insurance company) to a number of separate ERISA-covered plans. The
Department has concurrent jurisdiction with the States to regulate persons who
operate such MEWAs to the extent those persons have responsibility for, or
control over, the assets of ERISA plans that participate in the MEWA. When
the sponsor of an ERISA-covered plan uses a MEWA to provide health care coverage
for its employees, the assets of the MEWA generally are considered to include
the assets of the plan, unless the MEWA is a state licensed insurance company.
In exercising discretionary authority or control over plan assets, such as
paying administrative expenses and making benefit claim determinations, the
person or persons operating the MEWA would be performing fiduciary acts governed
by ERISA’s fiduciary provisions.
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If the MEWA is itself an ERISA-covered plan, it would be subject to the
provisions of ERISA governing employee welfare benefit plans, and would also be
subject to a broad range of state insurance laws.
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Section 514(b)(6)(A)(i) of ERISA provides that, in the case of a MEWA that is
itself a plan and is fully insured, states may apply to and enforce against the
MEWA any state insurance law requiring the maintenance of specific reserves or
contributions designed to ensure that the MEWA will be able to satisfy its
benefit obligations in a timely fashion. In the Department’s view,
section 514(b)(6)(A)(i) enables states to subject such MEWAs to licensing,
registration, certification, financial reporting, examination, audit and any
other requirement of state insurance law necessary to ensure compliance with
state insurance reserve, contribution and funding requirements. Section
514(b)(6)(D) provides that a MEWA is “fully insured” for this purpose,
“only if the terms of the arrangement provide for benefits the amount of all
of which the Secretary determines are guaranteed under a contract, or policy of
insurance, issued by an insurance company, insurance service or insurance
organization, qualified to conduct business in a State.”
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In the case of a MEWA that is itself a plan but is not fully insured, section
514(b)(6)(A)(ii) allows any state insurance laws to be applied to the MEWA
subject only to the limitation that the law is “not inconsistent” with Title
I of ERISA. The Department has expressed the view that a state insurance
law would not be inconsistent with Title I if it requires a MEWA to meet more
stringent standards of conduct, or to provide greater protection to plan
participants and beneficiaries than required by ERISA. The Department has
also expressed the view that a state law regulating insurance would not, in and
of itself, be inconsistent with the provisions of Title I if it requires a
license or certificate of authority as a condition to transacting business,
requires maintenance of specific reserves or contributions designed to ensure
that the MEWA will be able to satisfy its benefit obligations in a timely
fashion, requires financial reporting, examination or audit, or subjects persons
who fail to comply with such requirements to taxation, fines, civil penalties,
and injunctive relief.
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On the basis of the information we received, it appears that the IUIIW Fund is
being operated for the purpose of providing health and other welfare benefits
described in section 3(1) of ERISA to employees of two or more employers.
As noted above, the IUIIW Fund is not established or maintained under or
pursuant to one or more agreements that the Secretary of Labor has found under
ERISA section 3(40)(A)(i) to be collective bargaining agreements, or by a rural
electric cooperative or rural telephone cooperative association as defined in
section 3(40) of ERISA. Accordingly, in the Department’s view, Title
I of ERISA does not preclude Georgia from applying its insurance law to the
IUIIW Fund as a MEWA in accordance with section 514(b)(6)(A) of ERISA, as
described above.(1)
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We understand the IUIIW contends the Department’s Advisory Opinion (AO) 91-06A
(Jan. 15, 1991) compels the conclusion that the IUIIW Fund is not a MEWA.
The Department’s ERISA advisory opinions are issued under ERISA Procedure 76-1
(41 Fed. Reg. 36281) and, accordingly, are subject to the provisions of that
procedure, including section 10 thereof concerning the effect of advisory
opinions. Section 10 of ERISA Procedure 76-1 states, in pertinent part,
that advisory opinions apply “only to the situation described therein,” and
further states that “[o]nly the parties described in the request for opinion
may rely on the opinion ....” The IUIIW Fund and the
IUIIW were not the parties described in AO 91-06A, and the IUIIW Fund and the
IUIIW arrangement are not the situation described in that opinion.
Furthermore, subsequent to the issuance of AO 91-06A, the Department proposed a
regulation to facilitate determinations as to whether a plan or other
arrangement would be treated as established or maintained under or pursuant to
one or more collective bargaining agreements for purposes of the exception under
ERISA section3(40)(A)(i). See 65 Fed. Reg. 64482 (Oct. 27, 2000).
Although the Department is in the process of finalizing the regulation, we note,
based on the information we have received, that the IUIIW arrangement would not
appear to meet the conditions in the proposal.
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We hope this is of assistance to you. Should you have any questions
concerning this letter, please contact me at 202.693.8523.
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Sincerely,
John J. Canary
Chief, Division of Coverage, Reporting and Disclosure
Office of Regulations and Interpretations
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We note that the IUIIW Fund appears to allow plans to participate that are not
subject to Title I of ERISA (e.g., governmental plans and certain plans
covering only self-employed individuals and their spouses).
Participation by such entities does not change the Title I conclusion
regarding the States’ ability to regulate the MEWA.
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