Beginning in 2000, administrators of multiple employer welfare arrangements (MEWAs) are required to file an annual Form M-1 with the Department of Labor’s Pension and Welfare Benefits Administration. The form will include MEWA information from the previous calendar or fiscal year. Information for 1999 must be filed by May 1, 2000. In subsequent years, the filing deadline will be March 1. The background for the Form M-1 is detailed in interim PWBA regulations published in February 2000. The reporting requirements of these interim regulations are designed to allow earlier detection of unsound MEWAs and will reduce the risk of financial harm to these parties.

In general, the administrator of any MEWA that provides medical care to employees of two or more employers must file an annual M-1. An administrator of a MEWA that provides benefits consisting of medical care is required to report, whether or not the MEWA is a group health plan.

Collective Bargaining Exemption. A multiple employer plan that is collectively bargained in general is exempt from MEWA regulations. However, for purposes of Form M-1 reporting, an organization such as this, called an "entity claiming exemption" (ECE), must file each year for the first three years after the ECE is "originated." The reason for this is stated in the 2000 regulations: "The Department is aware that administrators of some MEWAs have sought to avoid State insurance regulation by mischaracterizing their arrangements as being established or maintained pursuant to collective bargaining agreements." In some cases, groups of professionals have set up in-name-only collective bargaining arrangements, and the DOL would like to scrutinize these.

Definition of Origination. An ECE is originated (and must file an M-1) if any of the following events occurs:

• The MEWA or ECE first begins providing coverage for medical care to two or more employers (including one or more self-employed individuals).
• The MEWA or ECE begins providing coverage after any merger of MEWAs or ECEs.
• The number of employees covered by a MEWA or ECE is at least 50% higher than the number covered on the last day of the previous calendar year.

An ECE may be "originated" more than once. Also exempt from filing an M-1 is a health insurance issuer licensed or authorized in every state in which it provides employee medical care coverage. Filers may request a 60 day extension for the M-1. All M-1 reports will be subject to a computerized review. However, there is no provision on the 1999 forms for electronic or automated filing.

Whether or not an entity is a MEWA or an ECE is determined by the administrator acting in good faith. Therefore, an administrator that makes a good faith determination that a filing is not required by an ECE does not need to file, even if the entity is later determined to be a MEWA. However, filings would be required for years after the determination that the entity is a MEWA.

Form M-1 is filed no later than March 1 following any calendar year in which a report is required. For the 1999 year, the M-1 is required no later than May 1, 2000. A one time 60-day extension is requested by the normal due date for the M-1.

If an administrator of a MEWA or an ECE fails to file an M-1, files an incomplete M-1, or files late, the DOL may impose up to $1,000 penalty for each day the administrator fails or refuses to file a complete report. For any M-1 filing required in the year 2000, however, the DOL does not intend to assess penalties in cases where there has been a good faith effort to file.

In addition to its own instructions to the Form M-1, the Department of Labor has developed filers’ guides that may be helpful in filing the Form M-1. These filers’ guides will be made available on the Pension and Welfare Benefits Administration’s Web site at www.dol.gov/dol/pwba.

Detailed below are a number of situations where further guidance or clarification is needed as to whether the Form M-1 is required to be filed.

In some instances, employers provide health care coverage with respect to individuals performing services for joint ventures. These arrangements are created for business reasons that are wholly unrelated to any health care benefits that are provided. The ownership interest of an employer in these situations varies, but can in many cases be less than 80%. The Department of Labor has regulatory authority to define the controlled group for purposes of the definition of a MEWA – authority that has not been issued to date. Depending on the particular facts of the case and differing reasonable interpretation of the law, these joint venture arrangements may or may not technically be MEWAs.

Where the health care coverage is provided by an employer that maintains a significant stake in the joint venture (e.g., 20% or more), reporting on the M-1 should not be required at this time. This is not the type of situation that the Department has historically found to raise concerns in the MEWA.

After a change of control transaction (e.g., merger, acquisition, etc.), there are often periods of time where employees from an acquired entity continue to be covered under the health plan of the predecessor employer. This type of arrangement can minimize the disruption for employees that results from the merger or acquisition and can improve the transition to the new arrangement. Because it is often impossible to avoid such short-term delays in integrating two plans, the Department should clarify that such coverage of employees in a merger and acquisition situation will not result in filing requirements under the M-1, provided that the arrangement is temporary in nature.

The scope of the entities required to file the Form M-1 clearly includes entities that are obviously not MEWAs, that may or may not be MEWAs depending on interpretations of the law, or that may or may not be MEWAs under varying state law definitions. We understand that the Department has intentionally broadened the scope of the M-1 filing requirement beyond entities that are MEWAs in order to ensure broad reporting. It is important, however, that the Department clarify that the filing of the Form M-1 does not create any inference or admission that an entity is a MEWA.

Clarifications and changes in the MEWA definition are included in section 302 of H.R. 2990-the House-passed "Patients’ Bill of Rights" legislation. That legislation would be effective as of the date of enactment. While it is unclear if these provisions will be enacted this year, the Department should clarify that single employers who determine that they would not be a MEWA if such provisions were enacted would be considered to be making a good faith determination that they do not have to file for the year 2000, pending any further guidance to the contrary from the Department. Although this might allow some potential filers to avoid filing the Form M-1 with respect to 2000 even if the legislation may not ultimately be enacted, those entities would still have to file in future years. Here again, the Department could take this action in the reporting area without creating any inference with respect to the current MEWA definition and without in any way endorsing the substance of the legislation that passed the House of Representatives.

Guidance and clarification regarding the issues discussed above should be implemented as soon as possible. In addition, there are undoubtedly many similarly sympathetic situations where relief from the current Form M-1 filing requirements would be appropriate. At present, many employers are still learning about the new Form M-1 requirements. In light of the ongoing education of plan sponsors, the Department should clarify that no penalties will be assessed if a filing or a request for an automatic extension is received after May 1. In addition, in order to give plan sponsors more time to become familiar and comply with the new requirements, an extension of the filing period should be provided for this year. Finally, because there is still considerable uncertainty regarding the interpretation of the Form M-1 requirements, plan sponsors should be permitted to rescind a previous filing if subsequent guidance clarifies that the plan sponsor was not required to file.