Multiple employer plans (MEPs) and multiple employer welfare arrangements (“MEWAs”) allow workers greater access to retirement programs. However, the Department of Labor recently proposed a revised definition of the term “employer” that may bring about changes to MEPs and MEWAs. Companies that currently participate in MEPs or MEWAs, or who wish to participate in such a plan, need to learn more about the revised employer definition for MEPs and MEWAs.

Current Employer Definition

ERISA Section 3(5), 29 U.S.C. 1002(5) states:

“The term ‘employer’ means 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.”

Vague and ambiguous terms like “acting directly as an employer” or “group or association of employers” have given rise to litigation. Because of the confusion, the Department of Labor (DOL) proposed new regulations on October 23, 2018.

Proposed Revised Employer Definition

This new proposed regulation may change the interpretation of the term “employer.” The new definition could create flexible criteria for MEP sponsorship, which will increase the number of workers who can participate in a MEP or MEWA.

In addition, the proposed rule would allow working owners – sole proprietors and self-employed workers – to be treated as employers. This, in turn, would allow them to participate in a bona fide employer group or association. However, this type of worker/employer could also participate in a MEP as an employee. A working owner would have to maintain at least one employee to become a member of a professional employer organization (PEO)’s MEP. The proposed change will not affect MEPs sponsored by PEOs.

How Will the Proposed Change Affect Your Plan?

In addition to the confusing, limited definition of employer noted above, the new, broader definition of employer is expected to expand workers’ access to employer-provided health care coverage.