Advisory Opinion

May 7, 1997

Mr. Douglas C. Stolte 
Deputy Commissioner of Insurance 
Virginia Bureau of Insurance 
P.O. Box 1157
Richmond, Virginia 23218


Dear Mr. Stolte:

This is in reply to your request for an advisory opinion regarding the applicability of Title I of the Employee Retirement Income Security Act of 1974 (ERISA). Specifically, you ask whether the health benefit program (the FACT Program) offered by the Federation of American Consumers and Travelers (FACT) to its members is a "multiple employer welfare arrangement" (MEWA) within the meaning of section 3(40) of Title I of ERISA.

You advise that FACT is a non-profit corporation incorporated in the District of Columbia and headquartered in Illinois. Its literature states that it enables "individuals from a variety of backgrounds to form a powerful buying group." As such, it provides diverse services, merchandise, and travel discounts to its members. FACT consists of two classes of members: Trustee Members and Regular Members. There are four Trustee Members. Any vacancy in a Trustee Membership is filled by a majority vote of the remaining Trustee Members and the limitation on Trustee Memberships may only be increased by a vote of three-fourths of the Trustee Members. The Trustee Members elect four members to the Board of Directors of FACT. The presence or proxy of a majority of the Trustee Members constitutes a quorum for any meeting. The other members of FACT are Regular Members. Regular Members elect one person to the Board of Directors of FACT. Regular Membership is open to any person, firm, or corporation in sympathy with the purposes and objectives of FACT. There is no indication that members of FACT need to have any commonality of employment or even that the members be employed at all. Other than the right to elect one director, the Regular Membership appears to have no function other than to select a variety of services and benefits offered to them. All officers of FACT are elected by the Board of Directors. The officers run the day-to-day operations of FACT.

In a telephone conversation with a representative of this Office, Ms. Michele Blackwell of the Virginia Bureau of Insurance stated that, to her knowledge, the health benefit program offered by FACT was not established and is not maintained pursuant to any collective bargaining agreement, that the participating employers are not a control group, and that no rural electric cooperative or rural telephone cooperative association is participating in the program.

Section 3(40)(A) of title I of ERISA defines the term "MEWA" to include:

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) 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,
(ii) by a rural electric cooperative, or
(iii) by a rural telephone cooperative association.

Section 3(40)(B) provides in pertinent part:

For purposes of this paragraph --

(i) two or more trades or businesses, whether or not incorporated, shall be deemed a single employer if such trades or businesses are within the same control group,
(ii) the term "control group" means a group of trades or businesses under common control.

Based upon the information you submitted, it is the position of the Department of Labor (the Department) that the FACT Program is a MEWA within the meaning of section 3(40). The FACT Program appears to cover the employees of two or more employers, is not maintained by either a rural electric cooperative or a rural telephone cooperative association, and is not maintained under or pursuant to any collective bargaining agreement.

Although section 514(a) of title I of ERISA provides that any state law or regulation that relates to an employee benefit plan covered by ERISA is preempted, section 514(b) of ERISA provides:

(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.

(B) The Secretary may, under regulations which may be prescribed by the Secretary, exempt from subparagraph (A)(ii), individually or by class, multiple employer welfare arrangements which are not fully insured. Any such exemption may be granted with respect to any arrangement or class of arrangements only if such arrangement or each arrangement which is a member of such class meets the requirements of section 3(1) and section 4 necessary to be considered an employee welfare benefit plan to which this title applies.

Although section 514(b)(6)(B) provides that the Secretary of Labor may prescribe regulations under which the Department may exempt employee benefit plans that are MEWAs from state regulation under section 514(b)(6)(A)(ii), the Department has previously stated that it did not see the need to prescribe regulations under section 514(b)(6)(B) to exempt such MEWAs from state regulation. The Department, at this time, has not changed its position. Accordingly, the Department is not providing such MEWAs exemptions from state regulation.

It is, therefore, the Department's position that the preemption provisions of ERISA do not preclude state regulation of the FACT Program at least to the extent provided in section 514(b)(6)(A), regardless of whether it is an employee benefit plan covered by title I of ERISA, because, under current law, it is a MEWA within the meaning of section 3(40) of that title. Accordingly, the FACT Program would be subject to state regulatory authority at least to the extent provided in section 514(b)(6)(A). Enclosed for your information is a copy of Opinion 90-18A (issued July 2, 1990), which discusses the scope of the states' authority to regulate MEWAs pursuant to section 514(b)(6)(A).

Because your request for an advisory opinion was concerned primarily with the issue of whether or not the FACT Program is subject to the applicable regulatory authority of the Commonwealth of Virginia's insurance laws or is saved from such authority under the general preemption provision of section 514(a) of title I of ERISA, and because of the opinion above, we have determined it is not necessary at this time to render an opinion as to whether the FACT Program is an employee welfare benefit plan within the meaning of section 3(1) of that title.

This letter constitutes an advisory opinion under ERISA Procedure 76-1.  Accordingly, it is issued subject to the provisions of that procedure, including section 10 thereof relating to the effect of advisory opinions.


Susan G. Lahne
Division of Coverage
Reporting and Disclosure
Office of Regulations and Interpretations


  1. Based on the fact that there is no requirement in the documents you submitted that members of FACT be employed by the same employer or belong a particular union, we are assuming for the purposes of this letter that the members of FACT include the employees of at least two employers.