:: New Federal Rules Target MEWA’s

The health reform legislation contains several provisions directed at Multiple Employer Welfare Arrangements (”MEWA’s”). A new criminal enforcement section contains broad language prohibiting false statements.

Sec. 6601(a) of the PPACA addes ERISA Sec. 519 which prohibits false statements about a MEWA as to:

the MEWA’s financial condition or solvency, the benefits provided, or the regulatory status of the MEWA under state or federal law, including specifically the exemption of the MEWA from state regulatory authorities.

Any person that violates section 519 shall upon conviction be imprisoned not more than 10 years or fined under Title 18, United States Code or both.

Preemption

In addition, the Sec. 6604 of the PPACA authorizes the Secretary of Labor to issue “standards” or “orders” “relating to a specific person” establishing that a MEWA is subject to state regulatory jurisdiction notwithstanding ERISA Section 514(b)(6) or the Liability Retention Act of 1986, regardless of whether state law is otherwise preempted under those provisions.

This regulatory grant appears quite broad – perhaps too broad. I’m no fan of MEWA’s as a general rule, but a grant of discretion to the DOL to determine when federal law does or does not apply regardless of other federal statutes is pretty sloppy work in my opinion.

Summary Seizure Orders

Sec. 6605 of the PPACA authorizes ex parte cease and desist orders as well as summary seizure if a MEWA appears to be financially distressed.

Registration

MEWA’s will be required to file registration and annual reports which will be designed to ensure financial solvency.

Note: Given the new requirements, understanding when a benefit plan is a MEWA or not takes on new significance.