What Is a Multiple Employer Welfare Arrangement (MEWA)?

What Is a Multiple Employer Welfare Arrangement (MEWA)?

Let me explain what a Multiple Employer Welfare Arrangement, or MEWA, really is. It's essentially a system that lets multiple employers market health and welfare benefits to their employees. You might also hear it called a multiple employer trust, or MET. In this setup, a group of employers pools their contributions into a self-contributing benefits plan, all for the sake of their workers.

For this to function properly, you as an employer have to contribute based on how many employees you have and the projected costs per employee. MEWAs are especially useful if you're running a smaller company, as they let you offer benefits outside those government-run health insurance exchanges by spreading the risk around. They gained traction after the Patient Protection and Affordable Care Act came into play.

Key Takeaways on MEWAs

Here's what you need to grasp: A MEWA is how groups of employers can combine their resources to secure better health insurance options for their employees. In it, several employers merge their contributions into a self-contributing plan, with payments tied to employee counts and estimated costs. This is particularly handy for small businesses, giving them a way to provide benefits beyond government exchanges through shared risk.

How a Multiple Employer Welfare Arrangement (MEWA) Works

Under the Employee Retirement Income Security Act (ERISA), a MEWA is defined as an employee welfare benefit plan or similar arrangement set up to offer things like medical care, hospital benefits, or coverage for sickness, accidents, disability, death, unemployment, vacations, training programs, daycare, scholarships, or prepaid legal services. This is for employees of two or more employers, including self-employed folks, or their beneficiaries.

In essence, if you're a smaller employer, a MEWA is a solid option to access group health and other insurance benefits. By pooling contributions, you position yourself to negotiate better packages from insurers thanks to economies of scale. Plus, as a partner in the MEWA, you get a say in plan changes, which gives you more control than going solo.

Important Resources

If you want more details on MEWAs, check out the Department of Labor's ERISA page on Multiple Employer Welfare Arrangements. It covers the rules, fact sheets, filing requirements, news, amendments, public comments, and more.

Special Considerations for MEWAs

You should be aware of some financial aspects and potential pitfalls when considering a MEWA. Sometimes, these arrangements can't cover claims due to insufficient funding or reserves. In worse scenarios, poor management, fraud, or embezzlement can wipe out the funds entirely.

To mitigate this, most MEWA administrators and participants opt for stop-loss insurance, which covers errors, omissions, fidelity bonds, directors and officers liability, crime, cyber issues, and more. Remember, MEWAs must comply with ERISA, and they might face state insurance regulations too—these vary by state, with some being more supportive than others. For instance, New Jersey's Department of Banking and Insurance has stricter oversight. At the very least, expect to follow filing, reporting, and funding guidelines.

What Is the Difference Between a Multiple Employer Plan and a MEWA?

A multiple employer plan is a shared retirement setup adopted by two or more unrelated employers, helping them cut per-employee costs through scale—similar to a MEWA in concept. The key difference? It's for retirement, while a MEWA handles pooled health care and other employment benefits.

Who Is Responsible for Regulating Multiple Employer Welfare Arrangements (MEWAs)?

MEWAs are regulated federally by the Department of Labor under ERISA, the same framework that oversees retirement plans. On top of that, state regulators have jurisdiction too.

What Are the Benefits of a Multiple Employer Welfare Arrangement (MEWA)?

For small employers like yours, joining a MEWA means providing healthcare benefits at lower costs, without the hassle of directly insuring employees. You also benefit from reduced per-person expenses by insuring a larger group.

The Bottom Line

At the end of the day, a multiple employer welfare plan is a pooled benefit arrangement where unrelated companies combine resources to offer health care to employees. It's especially valuable for smaller outfits, enabling affordable health insurance.