In 2019, the Department of Labor (DOL) continued its trend of providing limited advance guidance under the Employee Retirement Income Security Act of 1974, as amended (ERISA). By volume, the amount of 2019 guidance approximated that in 2018.
- DOL issued one Advisory Opinion (the same as in 2018) and one Field Assistance Bulletin (as compared to two in 2018).
- As has been its recent practice, DOL did not issue any technical releases or interpretive bulletins.
- DOL issued eight exemptions (including Expro authorizations) from the ERISA prohibited transaction rules, down from nine in 2018.
- As in 2018, DOL did not issue any new class exemptions.
This trend of limited guidance dates back to at least 2013 and thus cannot be wholly attributed to the regulatory proclivities (or lack thereof) of the current Administration or the appointment of a new Labor Secretary. For a variety of reasons, DOL has simply become less engaged in delivering advance guidance to the regulated community. Also, the fiduciary rule project continues into 2020 and disproportionately demands DOL’s resources.
DOL issued just one Advisory Opinion in 2019, to Ace Hardware Corporation (Ace), regarding whether its Cooperative Group Health Plan (the Plan) would be (i) an association health plan that is an ERISA “employee welfare benefit plan” and (ii) a multiple employer welfare arrangement (MEWA) under Section 3(40) of ERISA, and if so, a fully-insured MEWA for purposes of ERISA preemption. This Advisory Opinion follows on DOL’s guidance on association health plans released in 2018, which made it easier for association-sponsored MEWAs to be treated as a single employer for ERISA purposes. For more on the 2018 guidance, please see our legal alert on that subject.
Ace offers a corporate health plan to its direct employees, but many Ace Hardware stores are separate, privately owned businesses, and their employees were ineligible to participate in the Ace corporate plan. To remedy that ineligibility, Ace requested that DOL recognize the new Plan as an association health plan. DOL found that under the facts, the employers owning Ace Hardware stores had a “commonality of economic interest and a genuine organizational relationship unrelated to the provision of benefits under the Plan” and that the Plan was an association health plan under Section 3(5) of ERISA.
DOL also found that the Plan would be a MEWA because it was an arrangement that provided welfare benefits to the employees of two or more employers. DOL could not conclude whether or not it would be a fully-insured MEWA for purposes of ERISA preemption absent review the insurance contract, which was not yet in place. DOL did say that if the insurance contract was “consistent with [Ace’s] representations” then there was no reason to think it would not be considered fully-insured.
Field Assistance Bulletin
DOL issued one new Field Assistance Bulletin (FAB) in 2019. FAB 2019-01 provided guidance on Form 5500 reporting for multiple employer plans (MEPs). DOL had learned that many MEPs misunderstood the requirement that they provide a full and accurate list of all participating employers, and under the FAB, DOL gave MEP sponsors additional time to file their 2018 Form 5500s. DOL also stated that they would not seek penalties from or mark as incomplete Form 5500s for 2017 and earlier “solely on the basis that the plan administrator failed to include complete and accurate participating employer information,” provided that the 2018 and later Form 5500s were accurate with regards to participating employer information.
Prohibited Transaction Exemptions
DOL is authorized to grant a conditional or unconditional exemption for an otherwise prohibited transaction if it determines that the exemption is: (1) administratively feasible; (2) in the interests of the plan and of its participants and beneficiaries; and (3) protective of the rights of plan participants and beneficiaries. DOL issued seven individual prohibited transaction exemptions (PTEs) in 2019, an output comparable to that in recent years—nine in 2018, seven in 2017, ten in 2016, and nine in 2015. The 2019 PTEs largely followed familiar fact patterns:
- PTE 2019-01 and PTE 2019-07 permitted firms to continue to rely on PTE 84-14, notwithstanding criminal convictions of affiliates unrelated to QPAM activities.
- PTE 2019-03 allowed the sale of real estate from a plan to the plan sponsor.
- PTE 2019-04 permitted index- and model-driven funds managed by an affiliate of Principal Financial to invest in its stock.
- PTE 2019-05 and PTE 2019-06 authorized participation by plan participants in warrant programs for employer stock.
One exemption broke new ground. PTE 2019-02 granted relief for RCH’s auto-portability program, with respect to certain fees charged in connection with the transfer of accounts to the plan of a participant’s new employer.
Finally, in 2019, DOL returned to authorizing prohibited transactions under its Expedited Exemption Procedure (Expro) after not authorizing any in 2018. It finalized an authorization, permitting the sale of unimproved real estate by a multi-employer plan to the union local in January 2019.
As the number of exemptions continues to decline – Expro applications must be based on (i) two Expro authorizations in the last five years, or (ii) a PTE in the last ten years and an Expro authorization in the last five years – and coupled with the manner in which DOL is exercising its discretion to allow applicants to proceed under Expro, it seems probable that Expro will remain of limited utility.