Advisory Opinion 2005-24A

Dear Mr. Opsal:

This responds to your request on behalf of the Wisconsin Association of Independent Colleges and Universities Benefits Consortium, Inc. (WAICU Benefits Consortium or Consortium) for an advisory opinion concerning the applicability of Title I of the Employee Retirement Income Security Act of 1974 (ERISA) to the WAICU Benefits Consortium Health Plan (Plan). Specifically, you ask whether the Plan is an "employee welfare benefit plan" within the meaning of section 3(1) of ERISA that is maintained by a "group or association of employers" within the meaning of section 3(5) of ERISA.

You provided the following facts and representations with your request. The Wisconsin Association of Independent Colleges and Universities (WAICU) is an organization of twenty independent institutions of higher learning in Wisconsin. WAICU's articles of incorporation provide that membership in the association is open to private regionally accredited four year colleges and universities in Wisconsin which offer a baccalaureate degree program. WAICU's bylaws provide that, among other higher-education related purposes, WAICU's purposes and activities include representing its members at state and national forums, encouraging cooperation among its members to utilize resources effectively, and encouraging collaboration with other institutions of higher learning for the benefit of Wisconsin citizens. WAICU's services to its members include professional development for officers, research, public relations, marketing, admissions support, and managing collaborative ventures among the members (e.g., WAICU Study Abroad Collaboration).

WAICU established the WAICU Benefits Consortium in 2003 as a collaborative venture available to WAICU members for the purposes of providing life, sickness, accident and similar benefits to their employees. The Consortium is controlled and managed by a Board of Directors. The Consortium's articles of incorporation and bylaws indicate that it is intended to constitute a "voluntary employees' beneficiary association"  within the meaning of section 501(c)(9) of the Internal Revenue Code (Code). The Consortium Board of Directors established the Plan, effective January 1, 2003, with coverage for employees commencing on October 1, 2003. The Board of Directors controls and manages the property, business, and affairs of the Plan, including entering into contracts with service providers, such as insurance companies and claims processors. Membership in the Consortium is limited to members of WAICU who elect to participate in the Plan and execute a Membership Agreement. The Membership Agreement, among other things, designates the employer as participating in the Plan. Employees of Consortium employer members (and their dependents) who meet the Plan's eligibility requirements may be enrolled and receive Plan benefits. The Consortium bylaws provide that the President of each employer member of the Consortium appoints one representative to the Board of Directors and may change such appointment at will. The bylaws also provide that at least annually the Board of Directors shall call a meeting where each employer member is entitled to one vote on each matter submitted to a vote at the meeting. To date, nine of the twenty WAICU members have become employer members of the WAICU Benefits Consortium and utilize the Plan to provide health benefits to their employees.

The term "employee welfare benefit plan" is defined in section 3(1) of Title I of ERISA to include, among others, "any plan, fund, or program . . . 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 . . . medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment . . . ."

Although the Plan provides benefits among those described in ERISA section 3(1), to be an employee welfare benefit plan the Plan must also, among other criteria, be established or maintained by an employer, an employee organization, or both. There is no indication that an employee organization within the meaning of section 3(4) of ERISA is in any way involved in the Plan.⁽¹⁾ Therefore, this letter will focus on whether the Plan sponsored by the WAICU Benefits Consortium is established or maintained by an "employer" within the meaning of section 3(5) of ERISA.

Section 3(5) of ERISA defines 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. The Department has taken the view, on the basis of the definitional provisions of ERISA as well as the overall statutory scheme, that, in the absence of the involvement of an employee organization, a single employee welfare benefit plan may, nevertheless, exist where a cognizable, bona fide group or association of employers acts in the interests of its employer members to establish a benefit program for the employees of member employers. See, e.g. Advisory Opinion 94-07A, Advisory Opinion 2001-04A.

A determination whether there is a bona fide employer group or association must be made on the basis of all the facts and circumstances involved. Among the factors considered are the following: how members are solicited; who is entitled to participate and who actually participates in the association; the process by which the association was formed, the purposes for which it was formed, and what, if any, were the preexisting relationships of its members; the powers, rights, and privileges of employer members that exist by reason of their status as employers; and who actually controls and directs the activities and operations of the benefit program. The employers that participate in a benefit program must, either directly or indirectly, exercise control over the program, both in form and in substance, in order to act as a bona fide employer group or association with respect to the program.

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, in the absence of any genuine organizational relationship between the employers, no employer group or association exists for purposes of ERISA section 3(5). See, e.g.  Advisory Opinion 96-25A. Similarly, where membership in a group or association is open to anyone engaged in a particular trade or profession regardless of their status as employer, and where control of the group or association is not vested solely in employer members, the group or association is not a bona fide group or association of employers for purposes of ERISA section 3(5).  See, e.g., id.;  Advisory Opinion 2003-13A.

In this case, you represented that participation in the Plan is limited to employers who are members of the Consortium and their employees. Employers eligible to become members of the WAICU Benefits Consortium are limited to WAICU members. WAICU membership is restricted to private regionally accredited four year colleges and universities in Wisconsin that meet certain accreditation standards. WAICU members have a history of organized cooperation on educational and administrative matters unrelated to the provision of welfare benefits to member employees, such as performing research, developing public relations programs, developing marketing strategies, providing admissions support services and managing collaborative ventures among the members. It thus appears the employer members of the Consortium have a commonality of interest and genuine organizational relationship beyond participation in the Consortium as a means to provide welfare benefits to their employees. The employer members also appear to control the WAICU Benefits Consortium and the Plan through their right to each appoint one member of the WAICU Benefits Consortium Board of Directors and their power to vote at member meetings of the Consortium.

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.

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. This letter relates solely to the application of the provisions of Title I of ERISA addressed in the letter. It is not determinative of any particular tax treatment under the Internal Revenue Code and does not address any issues arising under any other federal or state laws.