Dear Mr. Opsal:
This responds to your request on behalf of the Wisconsin Association of
Independent Colleges and Universities Benefits Consortium, Inc. (WAICU Benefits
Consortium or Consortium) for an advisory opinion concerning the applicability
of Title I of the Employee Retirement Income Security Act of 1974 (ERISA) to the
WAICU Benefits Consortium Health Plan (Plan). Specifically, you ask whether the
Plan is 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.
You provided the following facts and representations with your request. The
Wisconsin Association of Independent Colleges and Universities (WAICU) is an
organization of twenty independent institutions of higher learning in Wisconsin.
WAICU’s articles of incorporation provide that membership in the association
is open to private regionally accredited four year colleges and universities in
Wisconsin which offer a baccalaureate degree program. WAICU’s bylaws provide
that, among other higher-education related purposes, WAICU’s purposes and
activities include representing its members at state and national forums,
encouraging cooperation among its members to utilize resources effectively, and
encouraging collaboration with other institutions of higher learning for the
benefit of Wisconsin citizens. WAICU’s services to its members include
professional development for officers, research, public relations, marketing,
admissions support, and managing collaborative ventures among the members (e.g.,
WAICU Study Abroad Collaboration).
WAICU established the WAICU Benefits Consortium in 2003 as a collaborative
venture available to WAICU members for the purposes of providing life, sickness,
accident and similar benefits to their employees. The Consortium is controlled
and managed by a Board of Directors. The Consortium’s articles of
incorporation and bylaws indicate that it is intended to constitute a “voluntary
employees’ beneficiary association” within the meaning of section 501(c)(9)
of the Internal Revenue Code (Code). The Consortium Board of Directors
established the Plan, effective January 1, 2003, with coverage for employees
commencing on October 1, 2003. The Board of Directors controls and manages the
property, business, and affairs of the Plan, including entering into contracts
with service providers, such as insurance companies and claims processors.
Membership in the Consortium is limited to members of WAICU who elect to
participate in the Plan and execute a Membership Agreement. The Membership
Agreement, among other things, designates the employer as participating in the
Plan. Employees of Consortium employer members (and their dependents) who meet
the Plan’s eligibility requirements may be enrolled and receive Plan benefits.
The Consortium bylaws provide that the President of each employer member of the
Consortium appoints one representative to the Board of Directors and may change
such appointment at will. The bylaws also provide that at least annually the
Board of Directors shall call a meeting where each employer member is entitled
to one vote on each matter submitted to a vote at the meeting. To date, nine of
the twenty WAICU members have become employer members of the WAICU Benefits
Consortium and utilize the Plan to provide health benefits to their employees.
The term “employee welfare benefit plan” is defined in section 3(1) of
Title I of ERISA to include, among others, “any plan, fund, or program . . .
established or maintained by an employer or by an employee organization, or by
both, to the extent that such plan, fund, or program was established or is
maintained for the purpose of providing for its participants or their
beneficiaries, through the purchase of insurance or otherwise . . . medical,
surgical, or hospital care or benefits, or benefits in the event of sickness,
accident, disability, death or unemployment . . . .”
Although the Plan provides benefits among those described in ERISA section
3(1), to be an employee welfare benefit plan 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 within the meaning
of section 3(4) of ERISA is in any way involved in the Plan.(1) Therefore, this
letter will focus on whether the Plan sponsored by the WAICU Benefits Consortium
is established or maintained by an “employer” within the meaning of section
3(5) of ERISA.
Section 3(5) of ERISA defines employer as “. . . any person acting directly
as an employer, or indirectly in the interest of an employer, in relation to an
employee benefit plan; and includes a group or association of employers acting
for an employer in such capacity.” The Department has taken the view, on the
basis of the definitional provisions of ERISA as well as the overall statutory
scheme, that, in the absence of the involvement of an employee organization, a
single “employee welfare benefit plan” may, nevertheless, exist where a
cognizable, bona fide group or association of employers acts in the interests of
its employer members to establish a benefit program for the employees of member
employers. See, e.g., Advisory Opinion 94-07A, Advisory Opinion 2001-04A.
A determination whether there is a bona fide employer group or association
must be made on the basis of all the facts and circumstances involved. Among the
factors considered are the following: how members are solicited; who is entitled
to participate and who actually participates in the association; the process by
which the association was formed, the purposes for which it was formed, and
what, if any, were the preexisting relationships of its members; the powers,
rights, and privileges of employer members that exist by reason of their status
as employers; and who actually controls and directs the activities and
operations of the benefit program. The employers that participate in a benefit
program must, either directly or indirectly, exercise control over the program,
both in form and in substance, in order to act as a bona fide employer group or
association with respect to the program.
The Department has expressed the view that where several unrelated employers
merely execute identically worded trust agreements or similar documents as a
means to fund or provide benefits, in the absence of any genuine organizational
relationship between the employers, no employer group or association exists for
purposes of ERISA section 3(5). See, e.g., Advisory Opinion 96-25A. Similarly,
where membership in a group or association is open to anyone engaged in a
particular trade or profession regardless of their status as employer, and where
control of the group or association is not vested solely in employer members,
the group or association is not a bona fide group or association of employers
for purposes of ERISA section 3(5). See, e.g., id.; Advisory Opinion 2003-13A.
In this case, you represented that participation in the Plan is limited to
employers who are members of the Consortium and their employees. Employers
eligible to become members of the WAICU Benefits Consortium are limited to WAICU
members. WAICU membership is restricted to private regionally accredited four
year colleges and universities in Wisconsin that meet certain accreditation
standards. WAICU members have a history of organized cooperation on educational
and administrative matters unrelated to the provision of welfare benefits to
member employees, such as performing research, developing public relations
programs, developing marketing strategies, providing admissions support services
and managing collaborative ventures among the members. It thus appears the
employer members of the Consortium have a commonality of interest and genuine
organizational relationship beyond participation in the Consortium as a means to
provide welfare benefits to their employees. The employer members also appear to
control the WAICU Benefits Consortium and the Plan through their right to each
appoint one member of the WAICU Benefits Consortium Board of Directors and their
power to vote at member meetings of the Consortium.
Based on the information submitted and your representations, it is the view
of the Department that the employer members of the WAICU Benefits Consortium
would, at least in form, constitute a bona fide group or association of
employers, and the Plan would, at least in form, constitute an employee welfare
benefit plan for purposes of Title I of ERISA. Whether the employer members
exercise control over the benefit program in substance as well as in form is an
inherently factual issue on which the Department generally will not rule in an
advisory opinion.
We note that, without regard to whether the Plan constitutes an employee
welfare benefit plan, the Plan would be a multiple employer welfare arrangement
(MEWA) within the meaning of ERISA section 3(40). 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 benefit described in
section 3(1) of ERISA to the employees of two or more employers.
This letter constitutes an advisory opinion under ERISA Procedure 76-1.
Accordingly, it is issued subject to the provisions of that procedure, including
section 10 thereof, relating to the effect of advisory opinions. This letter
relates solely to the application of the provisions of Title I of ERISA
addressed in the letter. It is not determinative of any particular tax treatment
under the Internal Revenue Code and does not address any issues arising under
any other federal or state laws.
Sincerely,
John J. Canary
Chief, Division of Coverage, Reporting & Disclosure
Office of Regulations and Interpretations
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The Department has previously stated
that whether an entity has or has not been recognized as a VEBA for
the purposes of Code section 501(c)(9) is not indicative of whether
the entity is an employee organization for the purposes of section
3(4) of ERISA. See, e.g., Advisory Opinion 96-25A.
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