D. Is Plaintiffs' plan an ERISA covered Employee Benefit Plan?
ERISA covers three types of employee benefit plans: (1) employee welfare benefit plans -- providing health, hospitalization, and disability benefits, (2) employee pension benefit plans -- providing retirement or deferred income, or (3) plans which provide both. 29 U.S.C. § 1002. Plaintiffs claim that its plan falls within the first category -- an employee welfare benefit plan. Defendants vigorously refute this claim.
Section 1002 defines an employee welfare benefit plan as:
any plan, fund, or program which was heretofore or is hereafter established or maintained by an employer or by an employee organization, or by both, to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits, apprenticeship or other training programs, or day care centers, scholarship funds, or prepaid legal services. . . .
29 U.S.C. § 1002(1) (emphasis added). Thus, an ERISA employee welfare benefit plan must be:
(1) a 'plan or fund or program'
(2) established or maintained
(3) by an employer or by an employee organization, or by both,
(4) for the purpose of providing medical, surgical, hospital care, sickness, accident, disability, death [and other benefits not relevant here]
(5) to participants or their beneficiaries.
Donovan, 688 F.2d at 1371.
The parties do not appear to dispute that Plaintiffs' plan meets three of the criteria: (1) it is a fund, (2) it does provide benefits, (3) to employees of participating employers. The remaining two criteria -- whether an employer or employer organization established or maintained the plan at issue -- is the focus of the disagreement between the two parties.
ERISA is applicable to:
any employee benefit plan if it is established or maintained -
(1) by any employer engaged in commerce or in any industry or activity affecting commerce . . . .
29 U.S.C. § 1003(a) (emphasis added). Moreover, ERISA provides the following definition of employer as:
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.
29 U.S.C. § 1002(5) (emphasis added). Thus, to fall within ERISA, Plaintiffs' plan must either be established or maintained by either an employer or an association acting in the interests of employers.
The record contains no indication that Atlantic acted as an employer to the employees who benefitted from the plan. Nor are there any facts to demonstrate that employers established the plan.
Thus, for ERISA to apply, Atlantic must be maintained by an employer group acting in the interest of the employers. In analyzing this issue, it is important to distinguish between two different types of plans: (1) individual employers' plans which obtain benefits from a MEWA, and (2) the MEWA itself. The former is not at issue in the captioned action, as there is no apparent dispute between the Commonwealth and any of the individual employers who participate in Plaintiffs' plan. Thus, the court must determine whether the MEWA itself is an employee benefit plan.
Courts have tended to examine two important characteristics in determining whether a particular organization is acting in the interests of the employer so as to bring its plan within the scope of ERISA.
First, involvement of the individual participating employers in the administration of the plan helps to demonstrate that the plan administration is acting in the best interests of the employers. As one court has explained, "To allow an entrepreneurial venture to qualify as an 'employer' by establishing and maintaining a multiple employer welfare arrangement without input by the employers who subscribe to the plan would twist the language of the statute and defeat the purposes of Congress." MDPhysicians & Assoc., Inc. v. State Bd. of Ins., 957 F.2d 178, 185 (5th Cir. 1992), cert. denied, U.S. , 113 S. Ct. 179, 121 L. Ed. 2d 125 (1992). Moreover, an employer association "cannot possibly act in the interest of employers when such employers have no voice in the management or operation of the plan because no basis for an agency relationship exist." MDPhysicians, Inc. v. Wrotenbery, 762 F. Supp. 695, 698 (N.D. Tex. 1991), aff'd, 957 F.2d 178 (5th Cir. 1992), cert. denied, U.S. , 113 S. Ct. 179, 121 L. Ed. 2d 125 (1992) (citations omitted).
A multi-employer plan is not within the ambit of ERISA if employers have no day-to-day involvement in its administration, Taggart Corp. v. Life Health Benefits Admin. Inc., 617 F.2d 1208, 1210 (5th Cir. 1980), cert. denied, 450 U.S. 1030, 101 S. Ct. 1739, 68 L. Ed. 2d 225 (1981);
if the employer group has but a "minimal, ministerial" role, Otto v. Variable Annuity Life Ins. Co., 814 F.2d 1127, 1135 (7th Cir. 1986), cert. denied, 486 U.S. 1026, 100 L. Ed. 2d 235, 108 S. Ct. 2004 (1988); if the employer merely advertises the plan and collects contributions, id.; or if a multiple employer trust acts as "mere conduit" for subscribers, Taggart at 1210. See also Bell v. Employee Sec. Ben. Ass'n, 437 F. Supp. 382, 392-93 (D.C. Kan. 1977) (not ERISA plan since insufficient involvement by employee group); Hamberlin v. VIP Ins. Trust, 434 F. Supp. 1196, 1198 (D. Ariz. 1977) (not ERISA plan since employers did not participate in administration of plan nor contribute to it); Matthew 25 Ministries, Inc. v. Corcoran, 771 F.2d 21, 22 (2d Cir. 1985) (the employers played "no role in the management of the trust,"); Baucom v. Pilot Life Ins. Co., 674 F. Supp. 1175, 1181 (M.D.N.C. 1987) (no active involvement of employers in plan's founding or administration").
Note, however, that a mere ministerial involvement may be sufficient to bring an employer's individual plan within the scope of ERISA although the same conduct will not bring a multi-employer trust into the scope of ERISA. See, e.g., Credit Managers Ass'n, 809 F.2d at 625; Memorial Hosp. System v. Northbrook Life Ins. Co., 904 F.2d 236, 242-43 (5th Cir. 1990) (employer's role minimal but sufficient to demonstrate that its purchase of benefits from a multi-employer trust was covered by ERISA; the issue was not, however, whether the trust was covered by ERISA).
Second, many cases have required some cohesive bond between the employers, other than their common participation in the disputed plan, to help ensure that the plan administration is acting in the best interest of the employers. As one court has explained:
The definition of an employee welfare benefit plan is grounded on the premise that the entity that maintains the plan and the individuals that benefit from the plan are tied by a common economic or representation interest, unrelated to the provisions of benefits. . . . [A] relationship [without such ties] is similar to the relationship between a private insurance company, which is subject to myriad state insurance regulations, and the beneficiaries of a group insurance plan.
Wisconsin Educ. Ass'n Ins. Trust v. Iowa State Bd. of Public Instruction, 804 F.2d 1059, 1063 (8th Cir. 1986) (emphasis added). Participating employers should not be "disparate and unaffiliated," Matthew 25 Ministries, Inc., 771 F.2d at 22, but should be linked by some common interest. As the court in MDPhysicians & Associates, Inc. v. State Bd. of Ins. has stated:
The most common example is the economic relationship between employees and a person acting directly as their employer. See Hansen [v. Continental Ins. Co.], 940 F.2d 971, 978 [(5th Cir. 1991)]. The representational link between employees and an association of employers in the same industry who establish a trust for the benefit of those employees also supplies the requisite connection. See National Business Ass'n Trust v. Morgan, 770 F. Supp. 1169, 1174-75 (W.D. Ky. 1991) . . . This special relationship protects the employee, who can rely on the 'person acting directly as an employer' or the person 'acting indirectly in the interests of' that employer to represent the employee's interest relating to the provision of benefits. Cf. Wisconsin Educ. Ass'n, 804 F.2d at 1063.
MDPhysicans & Associates, Inc. v. State Bd. of Ins., 957 F.2d at 186. See also Bell, 437 F. Supp. at 392-93 (not ERISA plan since insufficient commonality of employees); Baucom, 674 F. Supp. at 1179-1180 (same); Nat'l Business Conf. Employee Benefits Ass'n v. Anderson, 451 F. Supp. 458, 461 (S.D. Iowa 1977) (employees must have common interest in employment relationship for ERISA plan).
In the captioned case, there is no indication that Atlantic is characterized by either of these two elements. There is no evidence that the employers who comprise defendant United Healthcare Association have participated in either the establishment or the administration of the Atlantic trust in any way but in merely submitting the monthly payments due. Moreover, it does not appear that the members of United Health Care Association are related in any way other than similarly subscribing to Atlantic's benefit plan.
Nonetheless, as the motion before this court is one to dismiss, not one for summary judgment, and since there are few to no facts before this court on which to determine the exact characteristics of the Atlantic plan, the court is unable to determine whether Atlantic constitutes an employee benefit plan within the ambit of ERISA. However, this obstacle does not preclude disposition of the motion at issue.
E. Is Plaintiffs' plan an ERISA covered Multiple Employer Welfare Arrangement?
Since there are insufficient facts to determine whether Atlantic is an ERISA plan, the court will assume for purposes of this motion that Atlantic is an employee benefit plan covered by ERISA. Moreover, the court has already determined at "III(C)" that Atlantic is not "just" a trust but is a MEWA. Thus, the final question is whether Atlantic is a non-fully insured multiple employer welfare arrangement thereby permitting state regulation which is not inconsistent with ERISA requirements.
Congress amended the preemption language of ERISA to permit limited state regulation of MEWA's under state insurance law:
Notwithstanding any other provision of this section --
. . .
(ii) in the case of any other employee welfare benefit plan which is a multiple employer welfare arrangement, in addition to this title, any law of any State which regulates insurance may apply to the extent not inconsistent with the preceding sections of this subchapter.9
29 U.S.C. § 1144(b)(6)(A) (emphasis added).
Thus, state regulation of MEWA's is permitted as long as the regulations are not inconsistent with ERISA. Plaintiffs assert that the challenged regulations are inconsistent with ERISA, or, in the alternative that permissible state regulations must explicity mention application to MEWAs. Neither of these arguments are persuasive.
1. Are Defendants' proposed regulations to Plaintiffs' plan inconsistent with those provided by ERISA?
Plaintiffs assert that the laws which Defendants seek to apply to them are inconsistent with ERISA. However, requiring a plan to obtain a state license has been held not to be inconsistent with the provisions of ERISA. The court in MDPhysicians, Inc. v. Wrotenbery determined that Texas licensing provisions applied to a MEWA, finding that:
The Texas requirement that the MDP Plan apply for a certificate of authority to conduct business in the state of Texas is not inconsistent with ERISA's requirement that an ERISA plan file with the Secretary of Labor, a plan description, modifications, annual reports and supplemental reports, as required in 29 U.S.C. § 1021(b)
Wrotenbery, 762 F. Supp. at 699. See also National Business Ass'n Trust, 770 F. Supp. at 1169 (MEWA not exempt from the state's licensure requirements since consistent with 29 U.S.C. § 1144(b)(6)(A)(ii)).
2. MEWA-specific legislation
Plaintiffs assert that due process requires that the ERISA exception allowing state regulation of MEWAs only applies to state laws that specifically address MEWAs.
Title 29 U.S.C. § 1144(b)(6)(A)(ii) specifically provides that MEWAs are subject to "any law of any State which regulates insurance." The MEWA exception nowhere limits the state to MEWA-specific laws. See Wrotenbery, 762 F. Supp. at 699 (MEWA subject to Texas' general (not MEWA-specific) insurance licensing law).
The record before the court is inadequate to determine whether or not the Atlantic plan is an employee welfare benefit plan. It appears (1) that employers did not establish the plan; (2) that they only minimally participate in the administration of the plan; and (3) that they are not linked by any common interest other than participation in the plan. However, insufficient evidence has been submitted to satisfactorily resolve the issue of whether ERISA is applicable to Atlantic.
However, even if Plaintiffs provide a covered employee benefit plan, it is a MEWA which may be regulated by state laws not inconsistent with ERISA; a state licensing scheme is not inconsistent with ERISA. Obviously, if Atlantic is not covered by ERISA, it may be regulated by the Commonwealth.
Therefore, whether or not Atlantic is an employee benefit plan, the state's requirement that it obtain a license is not precluded by ERISA. Defendants' motion to dismiss Plaintiffs' complaint will be granted. An appropriate order will follow.
SYLVIA H. RAMBO, Chief Judge
Middle District of Pennsylvania
Dated: December 23, 1992.
EDITOR'S NOTE: The following court-provided text does not appear at this cite in 809 F. Supp. 365.
ORDER - December 23, 1992, Filed
In accordance with the accompanying memorandum, IT IS HEREBY ORDERED that:
(1) The Pennsylvania Insurance Department is DISMISSED because of its 11th Amendment immunity to the captioned suit.
(2) Defendants' motion to dismiss Plaintiffs' complaint is GRANTED.
(3) The Clerk of Court is directed to close this file.
SYLVIA H. RAMBO, Chief Judge
Middle District of Pennsylvania
Dated: December 23, 1992