Plans Established or Maintained Pursuant to Collective Bargaining
Agreements Under Section 3(40)(A)
[04/15/1998]
Volume 63, Number 72, Page
18345-18349=======================================================================
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DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
29 CFR Part 2510
RIN 1210-AA48
Plans Established or Maintained Pursuant to Collective Bargaining
Agreements Under Section 3(40)(A)
AGENCY: Pension and Welfare Benefits Administration, Department of
Labor.
ACTION: Notice of intent to form a negotiated rulemaking advisory
committee.
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SUMMARY: The Department of Labor (Department) intends to form a
Negotiated Rulemaking Advisory Committee (Committee) in accordance with
the Negotiated Rulemaking Act of 1990 and the Federal Advisory
Committee Act. The Committee will negotiate the development of a
proposed rule implementing the Employee Retirement Income Security Act
of 1974, as amended, 29 U.S.C. 1001-1461 (ERISA). The purpose of the
proposed rule is to establish a process and criteria for a finding by
the Secretary of Labor that an agreement is a collective bargaining
agreement for purposes of section 3(40) of ERISA. The proposed rule
will also provide guidance for determining when an employee benefit
plan is established or maintained under or pursuant to such an
agreement. Employee benefit plans that are established or maintained
for the purpose of providing benefits to the employees of more than one
employer
[[Page 18346]]
are ``multiple employer welfare arrangements'' under section 3(40) of
ERISA, and therefore are subject to certain state regulations, unless
they meet one of the exceptions set forth in section 3(40)(A). At issue
in this regulation is the exception for plans or arrangements that are
established or maintained under one or more agreements which the
Secretary finds to be collective bargaining agreements. If adopted, the
proposed rule would affect employee welfare benefit plans, their
sponsors, participants and beneficiaries, as well as service providers
to plans. It may also affect plan fiduciaries, unions, employer
organizations, the insurance industry, and state insurance regulators.
DATES: Written comments, applications for membership and nominations
for membership on the negotiated rulemaking committee must be received
at the address provided below on or before May 15, 1998.
The first meeting of the Committee will be held after the Committee
has been established under the Federal Advisory Committee Act (FACA).
The date, location and time for Committee meetings will be announced in
advance in the Federal Register.
ADDRESSES: Comments, applications for membership and nominations for
membership may be mailed to the following address: Office of the
Solicitor, Plan Benefits Security Division, Room N-4611, U.S.
Department of Labor, 200 Constitution Avenue, NW, Washington, DC 20210.
Attention: Negotiated Rulemaking Advisory Committee for ERISA Section
3(40). In the alternative, comments may be hand-delivered between the
hours of 9 a.m. to 5 p.m. to the same address.
All submissions will be open to public inspection and copying in
the Public Documents Room, Pension and Welfare Benefits Administration,
U.S. Department of Labor, Room N-5638, 200 Constitution Avenue, NW,
Washington, DC from 8:30 a.m. to 5:30 p.m.
The Committee meetings will be held at U.S. Department of Labor,
200 Constitution Avenue, NW, Washington, DC 20210 at the convenience of
the Committee. The date, location and time for Committee meetings will
be announced in advance in the Federal Register.
FOR FURTHER INFORMATION CONTACT: Patricia Arzuaga, Office of the
Solicitor, Plan Benefits Security Division, U.S. Department of Labor,
Room N-4611, 200 Constitution Avenue, NW, Washington, DC 20210
(telephone (202) 219-4600). This is not a toll-free number.
SUPPLEMENTARY INFORMATION:
I. Regulatory Negotiation
The Department intends to use the negotiated rulemaking procedure
in accordance with the Negotiated Rulemaking Act of 1990, P.L. 101-648
(5 U.S.C. 561-569)(NRA). The Department will form an advisory committee
consisting of representatives of the affected interests and the
Department for the purpose of reaching consensus on the proposed rule.
The NRA establishes a framework for the conduct of a negotiated
rulemaking and encourages agencies to use negotiated rulemaking to
enhance the informal rulemaking process. Under the NRA, the head of an
agency must consider whether:
<bullet> There is a need for the rule;
<bullet> There are a limited number of identifiable interests that
will be significantly affected by the rule;
<bullet> There is a reasonable likelihood that a Committee can be
convened with a balanced representation of persons who (1) can
adequately represent the interests identified; and (2) are willing to
negotiate in good faith to reach a consensus on the rulemaking;
<bullet> There is a reasonable likelihood that a Committee will
reach a consensus on the rulemaking within a fixed period of time;
<bullet> The negotiated rulemaking process will not unreasonably
delay the development and issuance of a final rule;
<bullet> The agency has adequate resources and is willing to commit
such resources, including technical assistance, to the Committee; and
<bullet> The agency, to the maximum extent possible consistent with
its legal obligations, will use the consensus of the Committee with
respect to developing the rule proposed by the agency for public notice
and comment.
Negotiations are conducted by a Committee chartered under the
Federal Advisory Committee Act (FACA) (5 U.S.C. App. 2). The Committee
includes a Department representative and is assisted by a neutral
facilitator. The goal of the Committee is to reach consensus on the
language or issues involved in the rule. If consensus is reached, the
Department undertakes to use the consensus as the basis of the proposed
rule, to the extent consistent with its legal obligations. The
negotiated rulemaking process does not otherwise affect the
Department's obligations under FACA, the Administrative Procedures Act
and other statutes, including all economic, paperwork and other
required regulatory analyses.
The Department invites comments on the appropriateness of
regulatory negotiation for this proposed rule.
II. Subject and Scope of the Rule
A. Need for the Rule
The Department believes that regulatory guidance on the scope of
the ERISA 3(40) exception for plans or other arrangements established
or maintained pursuant to collective bargaining agreements is necessary
to ensure that (1) the Department and state insurance regulators can
identify and regulate MEWAs operating in their jurisdiction, and (2)
sponsors of employee health benefit programs may determine whether
their plans are established or maintained pursuant to collective
bargaining agreements for purposes of section 3(40)(A).
Section 3(40)(A) of ERISA defines the term multiple employer
welfare arrangement (MEWA) in pertinent part as follows:
The term ``multiple employer welfare arrangement'' means an
employee welfare benefit plan, or any other arrangement (other than
an employee welfare benefit plan), which is established or
maintained for the purpose of offering or providing any benefit
described in paragraph (1) [of section 3 of the Act] to the
employees of two or more employers (including one or more self-
employed individuals), or to their beneficiaries, except that such
term does not include any such plan or other arrangement which is
established or maintained--
(i) Under or pursuant to one or more agreements which the
Secretary finds to be collective bargaining agreements * * *.
This provision was added to ERISA by the Multiple Employer Welfare
Arrangement Act of 1983, Sec. 302(b), Pub. L. 97-473, 96 Stat. 2611,
2612 (29 U.S.C. 1002(40)), which also amended section 514(b) of ERISA.
Section 514(a) of the Act provides that state laws which relate to
employee benefit plans are generally preempted by ERISA. Section 514(b)
sets forth exceptions to the general rule of section 514(a) and
subjects employee benefit plans that are MEWAs to various levels of
state regulation depending on whether or not the MEWA is fully insured.
Sec. 302(b), Pub. L. 97-473, 96 Stat. 2611, 2613 (29 U.S.C.
1144(b)(6)).<SUP>1</SUP>
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\1\ The Multiple Employer Welfare Arrangement Act of 1983 added
section 514(b)(6), which provides a limited exception to ERISA's
preemption of state insurance laws. This exception allows states to
exercise regulatory authority over employee welfare benefit plans
that are MEWAs. Section 514(b) provides, in relevant part, that:
(6)(A) Notwithstanding any other provision of this section--
(i) in the case of an employee welfare benefit plan which is a
multiple employer welfare arrangement and is fully insured (or which
is a multiple employer welfare arrangement subject to an exemption
under subparagraph (B)), any law of any State which regulates
insurance may apply to such arrangement to the extent that such law
provides--
(I) standards, requiring the maintenance of specified levels of
reserves and specified levels of contributions, which any such plan,
or any trust established under such a plan, must meet in order to be
considered under such law able to pay benefits in full when due, and
(II) provisions to enforce such standards, and
(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
title.
Thus, an employee welfare benefit plan that is a MEWA remains
subject to state regulation to the extent provided in section
514(b)(6)(A). MEWAs which are not employee benefit plans are
unconditionally subject to state law.
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[[Page 18347]]
The Multiple Employer Welfare Arrangement Act was enacted to
counter abuse by the operators of bogus ``insurance trusts.'' Congress
was concerned that certain MEWA operators were successfully thwarting
timely investigations and enforcement activities of state agencies by
asserting that such entities were ERISA plans exempt from state
regulation by the terms of section 514 of ERISA. The goal of the law
was to remove legal obstacles which could hinder the ability of the
States to regulate multiple employer welfare arrangements to assure the
financial soundness and timely payment of benefits under these
arrangements. 128 Cong. Rec. E2407 (1982)(Statement of Congressman
Erlenborn).
As a result of the addition of section 514(b)(6) to ERISA, certain
state laws regulating insurance apply to employee benefit plans that
are MEWAs. However, the definition of a MEWA in section 3(40) provides
that an employee benefit plan is not a MEWA if it is established or
maintained pursuant to an agreement which the Secretary of Labor finds
to be a collective bargaining agreement. Such a plan is therefore not
subject to regulation under state insurance law under section
514(b)(6).
While the Multiple Employer Welfare Arrangement Act of 1983
significantly enhanced the states' ability to regulate MEWAs, problems
in this area continue to exist as a result of the exception for
collectively bargained plans contained in the 1983 amendments. This
exception is now being exploited by some MEWA operators who, through
the use of sham unions and collective bargaining agreements, market
fraudulent insurance schemes under the guise of collectively bargained
welfare plans exempt from state insurance regulation. Another issue in
this area involves the use of collectively bargained arrangements as
vehicles for marketing health care coverage nationwide to employees and
employers with no relationship to the bargaining process or the
underlying agreement. In addition, the Department has received requests
to make individual determinations concerning the status of particular
plans under section 3(40) of ERISA.
The purpose of the negotiated rulemaking is to develop a proposed
rule that would facilitate determinations by the Department, employee
benefit plans and state insurance regulatory agencies as to whether a
particular agreement is a collective bargaining agreement, and whether
a particular plan is established or maintained under or pursuant to one
or more collective bargaining agreements.
Earlier Proposed Rule: In 1995, the Department published a Notice
of Proposed Rulemaking on Plans Established or Maintained Pursuant to
Collective Bargaining Agreements in the Federal Register. 60 FR 39209
(August 1, 1995) (NPRM). The Department proposed criteria and a process
for determining whether an employee benefit plan is established or
maintained under or pursuant to one or more agreements that the
Secretary finds to be collective bargaining agreements for purposes of
section 3(40) of ERISA. The proposed approach would not have required
individual findings by the Department. The Department received numerous
comments on the NPRM. Commenters expressed concerns about their ability
to comply with the standards set forth in the NPRM, or to obtain data
necessary to establish compliance with the criteria proposed by the
Department. Commenters also objected to having states determine whether
a particular agreement was a collective bargaining agreement.
B. Issues and Questions to be Resolved
The major issues the Department intends to address in this proposed
rule are the criteria and the process for determining whether an
employee benefit plan is established or maintained under or pursuant to
one or more agreements that the Secretary finds to be collective
bargaining agreements for purposes of section 3(40)(A) of ERISA.
A number of interests (including employers, service providers, and
participants) are likely to be affected by the new rule on the
definition of collective bargaining agreements under ERISA 3(40). The
effect of the rule is likely to vary, depending primarily on the size
of the multiemployer plans and the size and financial condition of the
employers contributing to these plans, and the extent to which plan
coverage encompasses non-bargaining unit employees.
III. Affected Interests and Potential Committee Membership
The following organizations have expressed an interest in
participating in this negotiated rulemaking. The Department believes
that these organizations, directly or through joint representation with
other organizations, reflect an appropriate mix of the interests
significantly affected by the proposed rulemaking. Committee membership
may change from the organizations listed below based on applications
for membership or nominations for membership that may be received in
response to this Notice.
Labor (employees covered by or seeking to be covered by CBAs)
AFL-CIO
Multiemployer Plans
National Coordinating Committee for Multiemployer Plans
Entertainment Industry Multiemployer Health Plans
States
National Association of Insurance Commissioners
Federal Government
Department of Labor:
Pension Welfare Benefits Administration: Elizabeth Goodman, DOL
Negotiator, Office of Regulations and Interpretations
The Department nominates Peter Swanson of the Federal Mediation and
Conciliation Service as facilitator. Mr. Swanson has extensive
experience in facilitating negotiating rulemaking meetings and in
mediating disputes.
The intent in establishing the Committee is that all significantly
affected interests are represented, not necessarily all parties. While
the Department believes the above participants represent the principal
interests associated with the rule to be negotiated, we invite comment
on this list of negotiation participants.
IV. Formation of the Negotiating Committee
A. Procedure for Establishing an Advisory Committee
As a general rule, an agency of the Federal Government is required
to comply with the requirements of FACA when it establishes or uses a
group that includes nonfederal members as a source of advice. Under
FACA, an advisory committee is established once a charter has been
approved by the
[[Page 18348]]
Secretary of Labor. Negotiations will not begin until the charter has
been approved.
B. Participants
Under the NRA, the number of participants on the Committee should
not exceed 25. A number larger than this could make it difficult to
conduct effective negotiations. One purpose of this notice is to help
determine whether the proposed rule would significantly affect
interests not adequately represented by the proposed participants. The
NRA does not require that each potentially affected organization or
individual must necessarily have its own representative. However, each
interest must be adequately represented. Moreover, the Department must
be satisfied that the group as a whole reflects a proper balance and
mix of interests.
C. Requests for Representation
Persons who will be affected significantly by the planned proposed
rule on the definition of a collective bargaining agreement and who
believe that their interests will not be adequately represented by the
persons identified above may apply, or nominate another person, for
membership on the Committee to represent their interests. Each
application or nomination must include: (1) The name of the applicant
or nominee and a description of the interests the person will
represent; (2) evidence that the applicant or nominee is authorized to
represent parties related to the interests the person proposes to
represent; (3) a written commitment that the applicant or nominee will
actively participate in good faith in the development of the proposed
rule; and (4) the reasons the persons identified above do not
adequately represent the interests of the person submitting the
application or nomination.
The Department will decide whether the applicant or nominee should
be permitted to represent an interest or member of the Committee. The
decision is based on whether the individual or interest (1) would be
significantly affected by the rule; and (2) is already adequately
represented on the Committee.
D. Notice of Establishment of Committee
After reviewing any comments on this Notice of Intent and any
requests for representation, the Department will issue a notice
announcing the establishment of a negotiated rulemaking advisory
committee, unless the Department decides, based on comments and other
relevant considerations, that establishment of the Committee is
inappropriate. All meeting notices will be published in the Federal
Register.
V. Negotiation Procedures
When the Committee is formed, the following procedures and
guidelines will apply, unless they are modified as a result of comments
received on this notice or during the negotiation process--
A. Facilitator
The Committee will use a neutral facilitator. The facilitator will
not be involved with the substantive development of the regulation. The
facilitator's role is to chair the negotiating sessions; help the
negotiation process run smoothly; maintain the meeting minutes as
required under FACA; and help the Committee define and reach consensus.
B. Good Faith Negotiations
Participants must be willing to negotiate in good faith and be
authorized to do so.
C. Committee Expenses and Administrative Support
In most cases, Committee members are responsible for their own
expenses of participation. The Department may pay for certain expenses,
in accordance with Section 7(d) of the Federal Advisory Committee Act,
if (1) a member certifies a lack of adequate financial resources to
participate in the Committee; and (2) the Department determines that
such member's participation in the Committee is necessary to assure
adequate representation of the member's interest.
The Department will provide logistical, administrative, and
management support to the Committee. If deemed necessary, the
Department will provide technical support to the Committee in gathering
and analyzing data or information.
D. Schedule for Negotiation/Meetings
The Department has set a deadline of approximately five to six
months beginning with the date of the first meeting for the Committee
to complete work on development of the proposed rule. We intend to
terminate the activities of the Committee if it does not appear likely
to reach consensus within this time period.
Once the Committee has been established under the FACA, the
Department will publish a notice of the first Committee meeting in the
Federal Register. The purpose of the first meeting will be to discuss
in detail how the negotiations will proceed and how the Committee will
function. The Committee will:
<bullet> Agree to ground rules for Committee operation;
<bullet> Determine how best to address the principal issues; and
<bullet> If time permits, begin to address those issues.
The date, location, time and agenda for all Committee meetings will
be announced in advance in the Federal Register. These subsequent
Committee meetings will be held approximately every three weeks. Unless
announced otherwise, meetings are open to the public.
E. Committee Procedures
Under the general guidelines and direction of the facilitator, and
subject to any applicable legal requirements, members of the Committee
will establish the detailed procedures for Committee meetings that they
consider most appropriate.
F. Defining Consensus
The goal of the negotiating process is consensus. Under the NRA,
consensus means that each interest represented on the Committee concurs
in the result, unless the Committee (1) agrees to define ``consensus''
to mean general but not unanimous concurrence, or (2) agrees upon
another specified definition. The Department expects the Committee
participants to fashion their working definition of this term.
G. Failure of the Advisory Committee to Reach Consensus
If the Committee is unable to reach consensus, the Department will
proceed independently to develop a proposed rule. Parties to the
negotiation may withdraw at any time. If this occurs, the Department
and the remaining participants on the Committee will evaluate whether
the Committee should continue.
H. Record of Meetings
In accordance with FACA's requirements, minutes of all Committee
meetings will be kept. The minutes will be placed in the public
rulemaking record.
I. Other Information
In accordance with the provisions of Executive Order 12866, this
notice was reviewed by the Office of Management and Budget.
VI. Authority
This document was prepared under the direction of Olena Berg,
Assistant Secretary of Labor for Pension and Welfare Benefits, U.S.
Department of
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Labor, 200 Constitution Avenue, NW, Washington, DC 20210, pursuant to
Section 3 of the Negotiated Rulemaking Act of 1990, 104 Stat. 4969,
Title 5 U.S.C. 561 et seq.; and section 3(40) of ERISA (Pub. L. 97-473,
96 Stat. 2611, 2612, 29 U.S.C. 1002(40)) and section 505 (Pub. L. 93-
406, 88 Stat. 892, 894, 29 U.S.C. 1135) of ERISA, and under Secretary
of Labor's Order No. 1-87, 52 FR 13139, April 21, 1987.
Signed at Washington, DC, this 9th day of April 1998.
Olena Berg,
Assistant Secretary, Pension and Welfare Benefits Administration.
[FR Doc. 98-9952 Filed 4-14-98; 8:45 am]
BILLING CODE 4510-29-P
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