In the field of employee benefit plans, programs may be similar except for a few key factors. Multiple employer welfare arrangements (MEWAs) and Association Health Plans (AHPs), for example, differ in the areas of development, maintenance, and compliance.
When forming a MEWA or an AHP it is important to consider the following:
- ERISA. Not all plans are subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). Both MEWAs and AHPs may be considered ERISA plans but it is not a given.
- Bona Fide Group or Association. On June 21, 2018, the Department of Labor (DOL) set forth its Final Rule on AHPs. Under the new legal standards, AHPs must be formed by bona fide groups or associations. Though the primary purpose of an AHP can be providing health care coverage, the AHP must also have a viable business purpose. MEWAs are not held to the same group/association standard.
- Commonality of Interest. A MEWA is also not held to any commonality of interest standards. While AHP members do need to have someone in common, the new DOL regulations offer more flexibility.
Other concerns may become significant once MEWAs and AHPs are operational.
In a comparison of MEWAs and AHPs, a few interesting differences appear:
- Employer-Member Control. Members of a MEWA do not have to manage and control the plan. By contrast, AHP employer-members control the operations of the AHP.
- Managed by an Employer. MEWAs are not required to be managed by an employer or group acting as an employer. However, AHPs are. In fact, AHPs generally are more structured than MEWAs. In addition, managers of an AHP must meet commonality and control tests.
MEWAs and AHP requirements also vary when complying with government regulations.
Adhering to federal and state law and regulations is an important part of managing any employee benefit plan.
- Nondiscrimination Requirements. In general, MEWAs are not held to the same nondiscrimination standards as AHPs. Of course, any ERISA plans must satisfy ERISA standards.
- State Laws. In some circumstances, both MEWAs and AHPs may be regulated by state laws. These may vary from state to state. One benefit to working with a firm with a national practice like Hall Benefits Law is a greater awareness of individual state laws that may apply to MEWAs and AHPs.
- ERISA Fiduciary Duty. Whether a MEWA or AHP is held to ERISA fiduciary rules may depend on whether the plan is subject to ERISA. Since violations of ERISA rules may lead to stiff penalties, businesses participating in a MEWA or AHP should engage ERISA counsel.