DOL Issues Affordable Care Act Rules Related to Multiple Employer Welfare Arrangements

The DOL’s Employee Benefits Security Administration (EBSA) has issued final rules governing new anti-fraud enforcement and reporting requirements for multiple employer welfare arrangements (MEWAs) that were instituted by the Affordable Care Act (ACA). Specifically, the new rules establish the Labor Secretary’s authority to issue cease and desist orders when fraud is suspected as well as seize MEWA assets when the arrangement is in financial jeopardy, and set forth revised reporting requirements for MEWAs and entities claiming exception (ECEs).

Anti-Fraud Enforcement Authority

A MEWA is generally considered an arrangement that offers medical benefits to the employees of two or more employers or to their beneficiaries. According to a DOL press release, the following fraud potential exists with these arrangements:

Employers are often told that MEWAs are more affordable than traditional forms of coverage, but unscrupulous promoters, marketers and operators of certain MEWAs have taken advantage of gaps in the law to avoid state insurance regulations, putting enrollees at financial risk. These actions include the requirement to maintain sufficient funding and adequate reserves to pay health care claims of workers and their families. EBSA has been involved in many cases where MEWAs have been operated by individuals who drained them of their assets through excessive administrative fees or outright embezzlement, leaving participants and their families with unexpected, unpaid health care bills.

To avoid this possible outcome, the ACA included provisions authorizing the Labor Secretary to issue a cease and desist order when a MEWA “engages in conduct that is fraudulent, creates an immediate danger to the public safety or welfare, or causes or can be reasonably expected to cause significant, immediate, and irreparable injury.” In addition, the ACA allows the Secretary to seize the assets of a MEWA if it is in a “financially hazardous condition.” The new final rules set forth the criteria the Secretary will consider before issuing a cease and desist order or summary seizure order. The rules also explain to whom the orders will apply, including those having custody or control of a MEWA’s assets or any authority over the management of a MEWA.

Reporting Requirements

Another set of rules establish the general registration and reporting requirements for MEWAs and Entities Claiming Exemption (ECEs). MEWAs are required to register with the Labor Department prior to operating in a state. Under the new rules, all employee welfare benefit plans that are MEWAs or ECEs subject to the Form M-1 annual report requirement must file the Form 5500 Annual Return/Report, including information on compliance with Form M-1 filing requirements, regardless of the plan size or funding type. According to the agency, the Form 5500, which is filed by administrators of employee benefit plans, is “the principal source of information and data concerning the operations, funding and investments of pension and welfare benefit plans,” and serves as “the primary means by which the operations of plans can be monitored by participants, beneficiaries, and the general public.” The DOL is making available a searchable online filing system to facilitate this process.

Among other provisions, the revised regulations explain the civil and criminal penalties that may result from a failure to comply with these reporting requirements and/or knowingly submitting false information.

Revised Forms 5500, M-1

In conjunction with the final rules, the EBSA has adopted revisions to the Form 5500 Annual Return/Report and to Form M-1.

These forms revisions will be applicable for all Form 5500 Annual Return/Report filings beginning with the 2013 Form 5500.

A fact sheet on these new regulations can be found here.

Photo credit: Feverpitch Photography

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.