Ace Hardware Company is a retailer cooperative that serves over 2,700 retail store owners operating over 4,400 stores as well as 120 corporate stores. Recently, they requested an opinion from the Department of Labor (DOL) regarding whether its health plan qualified as an association health plan (AHP) and a multiple employer welfare arrangement (MEWA).

ACE: Retail and Healthcare Cooperative?

The hardware cooperative is owned by the retail owners who have signed onto the ACE Membership Agreement. Each owner owns one share of voting stock and accumulates non-voting stock annually based on the volume of supplies they purchase from ACE. The ACE healthcare plan is maintained by the corporation and covers over 4,000 ACE employees and beneficiaries. ACE wanted to amend the cooperative’s health plan to offer group health benefits to members (store owners) and their employees in addition to ACE employees currently covered. The Plan would be funded through contributions by ACE members and employees and would hold that funding in trust. Benefits would be guaranteed from an insurer licensed in Vermont.

In order to make this change, ACE asked the DOL for an opinion as to whether the new plan would be considered an AHP and a MEWA under ERISA. An AHP, under ERISA, is maintained by a group or association while a MEWA is a way to market health benefits to employers and occurs when a group of employers combine their contributions into a benefit plan.

DOL’s Response to ACE

In their response to ACE, the DOL advised that the plan as constructed would be an AHP. To determine this, the DOL focused on reviewing the plan according to the old rules on AHPs, not the new rules under scrutiny by courts. They considered the fact that the plan is offered to a bona fide employer group, including looking at how the group solicits members, who is entitled to participate, the process by which the group was formed, the purpose of the group, the preexisting relationships of the members, the rights of employer members, and who controls and directs the operations of the benefits program. In the case of ACE, a group was formed of members to direct the benefit plan.

Further, the DOL determined that the plan would be considered a MEWA within ERISA. DOL noted that the plan would be arranged and maintained for the benefit of employers who had two or more employees as ACE stores without a common law employee were not considered eligible to participate in the health plan. However, since there was not an insurance contract currently in place, the DOL was unable to conclude that the plan was fully ensured, a detail ACE has likely already remedied.