Dear Attorney General Masto:
This responds to your request for an advisory opinion from the
Department of Labor (Department) regarding the applicability of Title I of
the Employee Retirement Income Security Act of 1974 (ERISA) to an employee
benefit arrangement sponsored by Payroll Solutions Group Limited (Payroll
Solutions). Specifically, you asked whether the arrangement constitutes a
“multiple employer welfare arrangement” within the meaning of section
3(40) of ERISA subject to regulation under the insurance laws of the State
of Nevada pursuant to section 514(b)(6) of ERISA.
Your inquiry arises from an order issued by the Division of Insurance
of the Nevada Department of Business and Industry directing Payroll
Solutions, a professional employer organization doing business in Nevada,
to cease and desist offering unlicensed insurance through a multiple
employer welfare arrangement (MEWA), the PSG Employee Medical Plan (Plan),
to its client employers in the State of Nevada. Payroll Solutions has
resisted the order, claiming that the Plan is a single employer plan, not
a MEWA, and that section 514(a) of ERISA preempts the application of
Nevada state insurance regulation.
Your office previously asked the Department to address Payroll
Solutions’ contention that the Plan cannot be a MEWA because Nevada
state law provided that “an employee leasing company shall be deemed to
be the employer of its leased employees for the purposes of sponsoring and
maintaining any benefit plans.” Nev. Rev. Stat. § 616B.691(2) (2005).
The Department issued a letter in May 2006 to Attorney General George J.
Chanos, Nevada Department of Justice (copy enclosed), in which we
confirmed, based on the information set forth in the letter, that even if
the PSG Employee Medical Plan were found to be an employee benefit plan
within the meaning of ERISA section 3(1), it would be a multiple employer
plan, not a single employer plan, and it would be a MEWA subject to state
insurance regulation at least to the extent permitted under section
514(b)(6)(A) of ERISA.(1) We also confirmed the Department’s view that
whether any given welfare benefit arrangement is a MEWA within the meaning
of section 3(40) is a question of federal law. See, e.g., Nationwide
Mutual Insurance Company v. Darden, 503 U.S. 318, n. 5 (1992) (Court
construed the term employee under ERISA to incorporate “the general
common law of agency, rather than ... the law of any particular State.”);
see also Serapion v. Martinez, 119 F3d 982, 988 (1st Cir. 1997) (court
rejected arguments regarding employee status of partners under Title VII
of the Human Rights Act of 1964 based on Puerto Rico law; absent plain
indication of contrary intent, “courts ought to presume that the
interpretation of a federal statute is not dependent upon state law”).
Thus, we explained that a state statute addressing a leasing company’s
relationship to leased employees would not govern the determination of
whether a welfare benefit arrangement sponsored by the leasing company is
a MEWA by reason of providing benefits to the “employees of two or more
employers” within the meaning of ERISA section 3(40).
You provided us with a recent amendment to Nev. Rev. Stat. §
616B.691(2) which states, in pertinent part, that an “employee leasing
company . . . shall be deemed to be the employer of its leased employees
for the purposes of sponsoring and maintaining any benefit plans,
including, without limitation, for the purposes of the Employee Retirement
Income Security Act of 1974.” You indicated that Payroll Solutions is
citing this amendment in a Request for Judicial Notice (Relating to
Petition for Judicial Review) filed in the Nevada state court proceeding
where it is challenging Nevada’s cease and desist order to bolster its
claim that the PSG Employee Medical Plan is not a MEWA, and that the
Company “is the only employer insofar as ERISA health benefits are
concerned.”
The amendment to Nev. Rev. Stat. § 616B.691(2) does not alter the
Department’s view that whether an arrangement is a MEWA within the
meaning of section 3(40) of ERISA is a question of federal law. Thus, the
Department continues to believe that a state statute addressing an
employee leasing company’s relationship to leased employees would not
govern the determination of whether any particular benefit arrangement
sponsored by the employee leasing company is a MEWA for purposes of ERISA.
Whether the Plan is a single employer plan for purposes of ERISA is also a
question of federal law. To the extent that Nevada state law purports to
govern the determination of whether a particular arrangement is a MEWA for
purposes of ERISA, it is preempted by section 514 of ERISA.
Although section 514(b)(6) of ERISA allows state insurance regulation
of employee benefit plans that are MEWAs, subject to certain limits, it
does not require states to do so. A state may decide not to regulate MEWAs
to the full extent permitted under ERISA. Therefore, the Department expresses no opinion regarding the
effect of this state law on the authority of the state to regulate the
arrangement at issue within the scope allowed by ERISA.
This letter constitutes an advisory opinion under ERISA procedure 76-1.
Accordingly, this letter is issued subject to the provisions of such
procedure including section 10 relating to the effect of advisory
opinions. This letter relates solely to the application of the provisions
of Title I of ERISA and should not be read as an interpretation of Nev.
Rev. Stat. § 616B.691(2) or any other federal or state law.
Sincerely,
Lisa M. Alexander
Chief, Division of Coverage, Reporting and Disclosure
Office of Regulations and Interpretations
Enclosure
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This letter should not be read as expressing the view
that the PSG Employee Medical Plan is an “employee welfare benefit
plan” within the meaning of section 3(1) of ERISA. If a MEWA is not
itself an ERISA covered plan, which is 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 using the MEWA to provide welfare
benefits to its employees as having established a separate welfare
benefit plan subject to ERISA. 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.
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