Attorneys for the Business Health Trust (BHT) have filed a motion for summary judgment against the Washington Insurance Commissioner (OIC). The Seattle federal court case has plodded on since early January when the court denied the BHT request for a temporary restraining order against the OIC. These and related federal proceedings have been covered here and here.
Although the federal case originally challenged a variety of actions by the OIC, the case has been whittled down to a single question: Are the various association plans consolidated under BHT, bona fide associations under ERISA? The OIC has said no, they are not. BHT argues that the court should find each association to be bona fide and the OIC actions to be “arbitrary and capricious.”
While most of the arguments by BHT follow the usual course in these types of cases, a few of the arguments are worth mention. The first relates to characterizations of an association plan as a “multiple employer trust” (MET). I haven’t seen Multiple Employer Welfare Arrangements (MEWA) referred to as a MET in quite a while. As the Department of Labor (DOL) notes a MEWA is the same as a MET. These employer characterization issues were covered in an earlier article here.
Attorneys for BHT argue that each of the associations constitute a single employer plan under EIRSA (“bona fide” associations) and that the associations are not METS.
“Where membership in a group or association is open to anyone engaged in a trade or profession regardless of their status as employer, the group or association is not a bona fide group or association for purposes of ERISA Section 3(5) and is instead characterized as a MET.” [Motion at 17]
Remember that a MET is a MEWA. I don’t know why the attorneys would try to differentiate bona fide associations from MEWAs when they are the same thing unless exempt under the federal MEWA definition. In the same advisory opinion cited by attorneys to make the point above, DOL advises:
“Based on the information submitted and your representations, it is the view of the Department that the employer members of the WAICU Benefits Consortium would, at least in form, constitute a bona fide group or association of employers, and the Plan would, at least in form, constitute an employee welfare benefit plan for purposes of Title I of ERISA. Whether the employer members exercise control over the benefit program in substance as well as in form is an inherently factual issue on which the Department generally will not rule in an advisory opinion.”
We note that, without regard to whether the Plan constitutes an employee welfare benefit plan, the Plan would be a multiple employer welfare arrangement (MEWA) within the meaning of ERISA section 3(40). Section 3(40) defines the term MEWA, subject to certain exceptions not relevant here, to mean an employee welfare benefit plan, or any other arrangement, which is established or maintained for the purpose of offering or providing any benefit described in section 3(1) of ERISA to the employees of two or more employers.” [Emphasis added, DOL advisory opinion]
In other words, a MEWA can still be a bona fide association. Whether BHT associations are a “MET” or not, they can still be bona fide associations.
In another argument, attorneys argue that the often cited Bend Chamber Advisory Opinion no longer has significance because the Chamber broke the big plan into small pieces of “distinct” employer types. DOL had ruled that Bend Chamber was not bona fide; but, DOL has not given an opinion on the new version of the Bend plans.
BHT lawyers asked the judge to follow the lead of the Oregon Insurance Commissioner in permitting the various Bend Chamber trusts to each file as large group plans. Not a bad argument; but, no one knows whether DOL would find that breaking a non-bona fide plan into several distinct industry plans would fix the problem. The land mine that BHT wants to avoid is a finding by DOL like the one expressed in the Bend opinion:
“The Department has expressed the view that where several unrelated employers merely execute identically worded trust agreements or similar documents as a means to fund or provide benefits, no employer group or association exists for purposes of ERISA section 3(5).”
Of course, the judge could decide to make his own determination that the BHT associations are each bona fide. If that happens, every association plan that closed because of similar rulings by OIC will scream bloody murder. No matter what happens now, lots of folks will be unhappy.
BHT lawyers threw a couple of other “bona fide” associations under the bus to help their cause. They argued that the OIC acted arbitrarily against BHT because the OIC declared other associations just like BHT to be “bona fide.” Attorneys argue that the Microsoft Alumni Network Benefits was declared bona fide “where there is no ongoing employment or industry nexus.”
They also hit the teacher’s bona fide plan status by noting that the OIC, “approved the Washington Education Association, as the state’s largest association with 113,000 members, without any review of ERISA Section 3(5) status.”
All of the legal wrangling over an association’s bona fide status could have been avoided if the OIC had simply expected the lawyers and carriers certifying an association as bona fide to fall on their swords if they proved wrong. This is essentially the Oregon approach.
Instead, the OIC has engaged in an undisciplined selection of AHP winners and losers. These determinations can be difficult, the DOL takes years to review and decide a single case. You could sympathize with the OIC’s problem in making many complex determinations in such a short time. On the other hand, you could ask the OIC why it ever tried.
