Greenberg Traurig Alert
New MEWA Reporting Requirement May Apply to Some Single Employer and Multiemployer
By Jack B. Helitzer and David B. Spanier, Greenberg Traurig, New York
View or download the PDF version of this Alert here.
On February 11, 2000, the Department of Labor (DOL) published a new interim rule
requiring Multiple Employee Welfare Arrangements (MEWAs) and certain other entities to
comply with reporting requirements established under the Health Insurance Portability and
Accountability Act of 1996 ("HIPAA"). With some limited exceptions, a MEWA is an
arrangement that offers ERISA employee welfare plan benefits to the employees of two or
Under the new interim rule, MEWAs providing medical care coverage are required
to file a report on a DOL Form M-1 by May 1, 2000 (a date that has obviously come and
gone). The new interim rule provides for a penalty of $1,000 per day for every day
the required filing is late, but it also provides for an automatic extension of the time
to file to July 1, 2000 which could have been obtained simply by filing a request for the
extension prior to May 1st. However, it may still be
possible to avoid late filing penalties.
It appears that the DOL has recognized that its new requirement was not publicized
widely enough for there to be reasonable compliance by all plans that fall within the
definition of a MEWA. The DOL has also indicated that it will work with plan sponsors of
MEWAs to achieve compliance and waive all penalties when good faith compliance is
demonstrated. Accordingly, plans that are required to file the new Form M-1 and have not
yet done so should complete parts I and II of the form to request an extension to July 1,
2000, sign the form and file it immediately accompanied by a written explanation as to why
the May 1st deadline was not met. If this is done, it is
unlikely that the DOL will impose late filing penalties.
With slight variations, failure to comply with one or more of the federal laws (about
which the DOL Form M-1 inquires) can result in a $100 per day per participant penalty
imposed on the employer for each day of noncompliance, with mandatory minimums of
$2,500 (if noncompliance is de minimis) or $15,000 (if noncompliance is not de minimis),
and, if the violation is due to reasonable cause and not willful neglect, a maximum
of the lesser of 10% of the aggregate amount paid or incurred by the employer during
the preceding taxable years for group health plans, directly or through insurance, or
$500,000.00. There is no limit on the maximum penalty if noncompliance is due to
This Alert explains:
What a MEWA Is
- what it takes for a plan to fall within the definition of a MEWA;
- how MEWAs are regulated;
- what information is required to be filed on Form M-1;
- how clients can obtain guidance on compliance with the filing requirements;
- how good faith compliance with the filing requirements can be demonstrated;
- and what consequences may flow from filing Form M-1.
As stated, a MEWA is an arrangement that offers welfare benefit coverage
(specifically medical, surgical, hospital care, or benefits and other welfare programs
such as long term or short term disability benefits and group-term life insurance) to
employees of two or more employers. The most obvious arrangement that constitutes a MEWA
is a trade association that offers coverage to employees of its member employers.
Most, but not all, plans sponsored by single employers are clearly not MEWAs and thus
their plan sponsors should not be concerned about or affected by these new requirements.
However, the DOL currently takes the position that a single employer medical plan does
fall within the definition of a MEWA if it:
- provides coverage to outside directors and/or independent contractors (because those
individuals are not employees and are considered self-employed and thus
"employees" of another employer); or
- provides coverage to employees of a subsidiary where the parent company sponsoring the
plan owns less than 80% of the stock of the subsidiary (usually a joint venture situation
where the plan of one of the joint venturers covers the employees of the corporate entity
that is owned by the joint venturers).
In addition, when an employer enters into an arrangement with an employee leasing
organization that provides medical coverage to its employees, the arrangement is probably
a MEWA if the lessee rather than the leasing company (the lessor) has actual control of
the employees (for example, hiring, firing, setting hours, compensation, working
conditions, etc., and exercises practical control of the employment relationship). The
determination of the employer-employee relationship is based on the actual facts and
circumstances of each case, but most often the lessee and not the leasing company would be
the employer under common law rules. The DOL would apply those common law rules, making
the arrangement a MEWA.
Thus, an employer is a MEWA if it sponsors a medical plan that covers outside
directors, independent contractors or employees of any corporate entity that it controls
or is related to where it owns less than 80% of that corporate entity, or if it is a
leasing company when the lessee actually controls the employment relationship. To avoid
penalties, it should take immediate steps to comply with the filing of DOL Form M-1.
Not all multiple employer arrangements are MEWAs. Plans maintained pursuant to
good-faith collective bargaining agreements in accordance with the Labor Management
Relations Act, with employer contributions held in trust and which are jointly
administered by labor and management trustees (commonly known as Multiemployer plans, and
less commonly known as Taft-Hartley plans) are excluded from the definition of a MEWA.
However, if such a Multiemployer plan has been in existence for less than 3 years, it must
file Form M-1 now and for the next two years after it has been established.
Multiemployer plans that have been in existence more than three years do not have to
file Form M-1. Certain other events, such as mergers (if one of the merging MEWAs has been
in existence less than 3 years, or if the MEWAs experienced a coverage expansion that is
greater than 50%), require filing the Form M-1 for the next 3 years.
Also excluded are rural electric cooperatives and rural telephone cooperative
associations, neither of which are common in the northeastern United States, as well as
state licensed or authorized health insurance issuers, and governmental plans.
How MEWAs Are Regulated
Prior to 1983, MEWAs were virtually unregulated. ERISA effectively preempted state
regulation of MEWAs, and the regulations of ERISA were ineffective to control several
serious abuses that arose with respect to many MEWA plans (primarily because many MEWAs
were not properly funded or because their principals engaged in ERISA prohibited
transactions). In 1983, Congress amended the ERISA preemption provision to permit the
states to regulate MEWAs.
Under current law, if a MEWA is fully insured it is subject to any state laws
which regulate insurance to the extent those laws provide "standards, requiring
the maintenance of specified levels of reserves and specified levels of
contributions." A MEWA is fully insured if all the benefits it provides are
guaranteed under a contract or policy of insurance issued by an insurer qualified to
conduct business in a state.
If a MEWA is not fully insured, it is subject to any state laws which
regulate insurance. Thus, in addition to meeting the reserve and contribution
requirements of state law, the medical plan provided by the MEWA must also comply with all
mandated benefit laws applicable in the state in which it does business.
State laws that regulate MEWAs vary. New York State does not regulate all
only regulates those MEWAs that market health care coverage contrary to the requirements
of New Yorks insurance Law. If a plan that comes within the definition of a MEWA
covers people in other states, it may be subject to more significant regulation.
Information to be Disclosed on DOL Form M-1
Form M-1 is a simple two-page form that only asks for:
- identification information;
- registration information (the states in which coverage is offered and if the coverage is
insured or self-insured);
- and information regarding compliance with the following federal laws and regulations:
- Mental Health Parity Act;
- Newborns and Mothers Health Protection Act; and
- Womens Health and Cancer Rights Act.
The Form M-1 is accompanied by a 13-page set of instructions that includes a set of
four worksheets (one for each of the four laws for which information is requested) that
list the specific compliance requirements of each law so that the person who completes the
form can know if the plan indeed complies with all of those requirements.
Guidance on Compliance with the Filing Requirements
In February and April the DOL released Qs and As on Filing the Form
M-1. The DOL is also providing information to employers as part of its Form 5500 Education
Outreach Programs, offering workshops through the end of June. It also provided a phone
number (202-219-8818) to the Pension and Welfare Benefits Administration Help Desk
where an analyst will help anyone complete the report. In answer to the question,
"What if I still make a mistake?" the DOL stated:
"The Department of Labors Pension and Welfare Benefits Administration is
committed to working together with administrators to help them comply with this filing
requirement. In this regard, with respect to filings due in the Year 2000, the Department
does not intend to assess penalties in cases where there has been a good faith effort to
comply with the filing requirement."
Guidance is also available on the internet at
Demonstrating a Good Faith Effort to Comply
It appears that the DOL has recognized that many plans that are MEWAs have not met
the May 1 deadline for filing Form M-1. On April 20, it also issued a press release
reemphasizing that it will not assess penalties where there has been a good faith effort
to comply with the filing requirements. Immediate filing of a request for an extension
coupled with a letter explaining the reason for missing the May 1st
deadline should demonstrate that good faith effort.
Completion of the form should be very simple, even where consultation with legal
counsel is necessary to determine whether or not the plan is in compliance with the laws
for which information is requested. But what if a plan determines that it is a MEWA as the
DOL defines a MEWA and:
Consequences That Flow From Completion of the Form
- The plan is not registered with and/or may not be in compliance with applicable state
- The plan is not in full compliance with any or all of the laws for which information is
If the MEWA is known to the state or states in which it provides coverage and is in
compliance with the applicable state laws, and if the MEWAs medical plan complies
with the four federal laws for which information is requested, the completion of Form M-1
will be nothing more than a minor inconvenience. Even if the form has not been filed on
time, it seems likely that no negative consequences will occur.
On the other hand, if the MEWA is not in compliance with applicable state laws (for
example, it is not in compliance with applicable reserve or contribution requirements
applicable to insured plans, and/or does not provide all benefits mandated in the state(s)
in which it operates that are required to be provided by insurers), or if the plan is not
in compliance with the applicable federal laws, the plan will, at the very least, have to
bring itself into compliance with all applicable laws as soon as possible.
At Greenberg Traurig we are available to assist our clients in preparing an appropriate
request for an extension to file Form M-1, and in completing the form itself. We are also
available to assist our clients in bringing their plans into full compliance with all
applicable state and federal laws and to work with them and both state and federal
government agencies to mitigate or eliminate any potential penalties that may be
© 2000 Greenberg Traurig
This GT ALERT is issued for informational purposes only and is not intended
to be construed or used as general legal advice. Greenberg Traurig attorneys provide
practical, result-oriented strategies and solutions tailored to meet our clients’
individual legal needs.